The legislative path that brought Washington to this juncture has been marked by intricate procedural maneuvering. In early 2024, the state legislature overwhelmingly approved a filed ballot measure stipulating that neither the state nor any county, city, or other local jurisdiction in Washington may tax any individual person on any form of personal income. By adopting the measure directly rather than sending it to the ballot, lawmakers executed a calculated procedural move. Under state guidelines, amending language originally adopted by a ballot measure requires a two-thirds legislative supermajority for the first two years.
Had voters been allowed to approve the initiative in November 2024, lawmakers would have been constitutionally blocked from considering any form of income tax until at least the 2027 legislative session. By intercepting the measure and passing it themselves in early 2024, the legislature successfully started the clock much sooner. This allowed lawmakers to return during the 2026 session and do precisely what the initial measure was meant to prohibit: adopt a targeted income tax on high-income residents.
To further insulate their policy from public pushback, Washington lawmakers incorporated an emergency clause into the high-earner income tax legislation. Supporters asserted that the new tax was urgently necessary for the support of the state government and its existing public institutions. This designation effectively shielded the measure from a provision in Washington law that ordinarily grants voters the right to review major tax changes through a referendum. With that traditional avenue of opposition blocked, frustrated opponents of the income tax organized and successfully qualified their own initiative for the upcoming November ballot, known as Initiative 645, which seeks to repeal the legislature’s decision and prohibit state and local income taxes.
The unfolding battle carries immense financial implications in a state that historically prided itself on having no individual income taxation. Washington’s constitution has long been interpreted by legal scholars and courts as largely prohibiting income taxes, a foundational principle that is now at the center of the pending litigation. Under the newly enacted framework, some high earners in Seattle could face a combined state and local top tax rate reaching 18.037 percent, split across employer and employee obligations. This staggering figure combines the new 9.9 percent state-level tax with the 5 percent Seattle Social Housing Tax, the 2.557 percent Seattle JumpStart Tax, and the 0.58 percent WA Cares tax, giving Seattle some of the highest combined marginal tax rates in the entire nation.
The primary targets of the 9.9 percent tax are individuals and married couples with annual incomes exceeding $1 million. In practice, this threshold will fall heavily on small business owners and highly compensated technology sector workers. Because very few salaried workers earn straight incomes over $1 million, wealth at this level typically flows through three distinct financial channels: capital gains and dividend income, pass-through business earnings, and restricted stock unit vesting events.
The latter channel creates unique timing vulnerabilities for tech employees. When a startup company finally goes public, an employee may experience years’ worth of accumulated stock vesting all at once. An individual might work for a growing firm for five years with a modest salary, only to have a single liquidity event push their annual income well above the $1 million threshold, even though their average earnings over those five years were significantly lower.
Pass-through businesses, which include sole proprietorships, partnerships, and S corporations, face similar exposure. According to data from the U.S. Small Business Administration, Washington is home to more than 672,000 small businesses. These enterprises employ roughly 1.4 million people, accounting for nearly half of all workers in the state. Imposing a 9.9 percent income tax on the owners of these businesses levies one of the highest personal income tax rates in the country on entities that are already navigating a punishing state tax environment. Washington relies heavily on a high-rate gross receipts tax—known as the Business and Occupation Tax—and subjects an unusually high share of everyday business inputs to the retail sales tax, creating economic distortions that economists warn can stifle growth.
Washington’s broader tax structure has long been skewed toward business taxation precisely because the state has traditionally avoided a broad-based personal income tax. However, unlike other states that also lack an individual income tax, Washington does not operate under a low-tax, limited-government philosophy. This mismatch forces local businesses to shoulder a disproportionate share of the overall public revenue burden. By layering a high-rate income tax specifically onto high earners and small business owners, critics argue the state has created the worst of both worlds, limiting commercial expansion and undercutting long-term job creation.
The structural risks extend beyond tech workers and business owners. Individuals who sell a family business after decades of labor, or those who generate significant capital gains from the sale of a primary residence, can easily find themselves unexpectedly pushed across the $1 million threshold in a single calendar year, triggering massive tax liabilities.
Furthermore, tax policy analysts have pointed out several unusual and potentially punitive design flaws within the legislation. The law features a charitable deduction that is strictly capped at $50,000. It also treats joint filers and single filers with little structural equity: income for joint filers is taxed above $1 million on the exact same terms as single filers, meaning two unmarried individuals earning $600,000 each would face zero tax liability, while a married couple with the exact same combined income would be taxed.
Compounding these concerns, the legislation includes no safe harbor provisions for taxpayers who inadvertently cross the threshold due to volatile income spikes. Under federal guidelines and the tax codes of most states, underpayment penalties are waived if taxpayers remit a designated percentage of their current or prior year’s tax liability through quarterly estimated payments or payroll withholding. Washington’s new law lacks any such safeguard, exposing taxpayers who misjudge their liability or fail to anticipate a sudden windfall to severe penalties.
While supporters of the tax argue that it promotes equity and secures vital long-term funding for public programs, repealing the measure via the ballot box remains an uphill battle for opponents. The challenge is further complicated by the contested language printed directly on the November ballot. Under a 2022 state law, the attorney general is authorized to supply a fiscal impact statement for ballot measures. The statement attached to Initiative 645 warns voters that repealing the tax would necessitate immediate cuts to education funding, even though the tax is years away from taking effect and no state budget has yet incorporated its projected revenues.
Despite these hurdles, the debate continues to intensify. With state lawmakers already openly discussing proposals to lower the tax threshold—such as a recent legislative pitch to drag earners making $250,000 into the bracket—many Washington voters may ultimately respond the way electorates have historically responded to similar proposals across the state’s history: by pushing back against the introduction of an income tax.
