Comment: Proposed tax would hinder construction businesses

Published 1:30 am Saturday, March 7, 2026

By Roy Swihart / For The Herald

From Everett to Lynnwood, contractors like me are helping build Snohomish County’s future: housing for growing families, new schools, health care facilities and the infrastructure that keeps our economy moving. Most people see the finished projects. What they don’t see is the financial reality behind it.

That’s why the state’s proposed “millionaires’ income tax,” Senate Bill 6346, gives me pause.

Supporters describe it as a tax on the wealthy. But for many contractors structured as pass-through businesses, LLCs, partnerships and S corporations, it would land squarely on the working capital that keeps our companies operating.

Unlike large publicly traded corporations, most construction firms are locally owned businesses where company earnings pass through to the owner’s individual tax return. On paper, that income can look substantial in a strong year. In practice, much of it is already committed to the next project.

Construction is not a steady, predictable business. It is cyclical and capital-intensive, with relatively thin margins. We invest heavily in equipment, technology, safety programs, insurance and workforce development. We maintain bonding capacity so we can compete for public and private projects. All of that depends on maintaining adequate working capital.

Revenue also doesn’t show up evenly. A contractor may work for months, sometimes years, before closing out a large job. When that happens, income is recognized all at once. That single-year spike can push reported earnings above $1 million, even though those funds are needed to replenish reserves, pay down debt, and finance upcoming work.

The proposed 9.9% tax would apply to that reported income, either at the business level or through the owner’s personal return. Regardless of the mechanism, the dollars come from the same place: the company’s operating cash.

And in construction, cash flow is critical.

We cover payroll every week. We purchase materials well in advance of reimbursement. We finance heavy machinery that must be maintained whether projects are plentiful or scarce. Meanwhile, it’s common to wait weeks or months for payment. Retainage is often withheld long after work is complete.

Those delays mean contractors effectively finance projects upfront. The cushion that allows us to do that is our working capital.

If that cushion shrinks, so does our flexibility. Bonding capacity can decline, limiting the size of projects we can pursue. Hiring decisions become more cautious. Growth plans are postponed. For small and mid-sized firms, particularly those without easy access to credit, the impact can be immediate.

Here in Snohomish County, demand for housing and infrastructure continues to grow. Local contractors are essential to meeting those needs. Policies that reduce available working capital risk slowing that progress.

This debate is not about whether successful people should contribute to the state’s priorities. It’s about recognizing the difference between accumulated personal wealth and the capital required to run a business in a high-risk industry.

For construction companies like mine, a so-called “millionaires tax” would not fall on idle wealth. It would fall on the financial reserves that allow us to keep crews employed, bid new work, and continue building the communities we call home.

Understanding how construction businesses operate is essential to crafting sound tax policy. In our industry, cash flow isn’t excess; it’s the foundation that keeps everything standing.

Roy Swihart is president and owner of Interwest Construction Inc., based in Burlington and Everett.