The path that brought Washington to this juncture has been marked by aggressive procedural maneuvers by state lawmakers and deep-seated ideological divisions over taxation. Historically, Washington has prided itself on being one of a handful of states without a broad-based personal income tax. The state constitution has long been interpreted by legal scholars and previous court rulings as largely prohibiting income taxation, a foundational principle that is now being put to the test in ongoing litigation. A date has already been set for oral arguments in a major constitutional challenge designed to strike down the new law before it can ever be implemented.
The legislative strategy that birthed the tax began in earnest in 2024. Lawmakers overwhelmingly approved a measure stipulating that neither the state nor any county, city, or other local jurisdiction could tax any individual person on any form of personal income. Rather than allowing the measure to go to a direct vote of the people, the legislature enacted it themselves. This was largely a procedural mechanism: under state law, amending language adopted by a ballot measure requires a two-thirds legislative supermajority for the first two years.
Had voters approved the prohibition in November 2024, lawmakers would have been barred from considering an income tax until the 2027 legislative session. By taking the measure off the ballot and passing it themselves in early 2024, lawmakers started the clock sooner. This allowed them to return during the 2026 session and do precisely what the original measure sought to prohibit: adopt a targeted income tax on high earners.
In another strategic procedural move, Washington lawmakers attached an emergency clause to the high-earner income tax legislation. They asserted that the new tax—which does not go into effect until 2028, with the first tax filing date scheduled for 2029—was immediately 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 allows voters to review tax changes through a referendum. With that traditional avenue of opposition blocked, opponents of the income tax mobilized and successfully placed their own initiative, Initiative 645, on the ballot for this November. Initiative 645 seeks to reverse the legislature’s decision entirely and prohibit state and local income taxes.
The stakes for taxpayers, particularly in urban centers like Seattle, are exceptionally high. Under the new framework, combined state and local tax burdens could soar to unprecedented heights. Certain high earners in Seattle could face the highest combined state and local top rate in the country, reaching an estimated 18.037 percent when split across employers and employees. This staggering figure combines the new 9.9 percent state income tax with local levies, including the 5 percent Seattle Social Housing Tax, the 2.557 percent Seattle JumpStart Tax, and the 0.58 percent WA Cares tax.
Imposed on individuals or couples with annual incomes exceeding $1 million, the tax will disproportionately impact small business owners and highly compensated technology workers. Because very few individuals earn straight salaries over $1 million, incomes at that level typically flow through three primary channels: capital gains and dividend income, pass-through business earnings, and the vesting of restricted stock units (RSUs).
The mechanics of RSU vesting mean that the tax could easily ensnare workers who do not consider themselves ultra-wealthy on a day-to-day basis. For instance, an employee working at a tech startup for five years might see years’ worth of accumulated stock vest all at once, particularly when the company goes public. That single event could yield a total income above $1 million for that specific year, even though the employee’s average annual compensation over the multi-year period was well below the threshold. A similar unexpected liability could face someone selling a small business they spent decades building or generating significant capital gains from the sale of a home.
Pass-through businesses, which include sole proprietorships, partnerships, and S corporations, will also bear a heavy burden. According to data from the U.S. Small Business Administration, Washington is home to more than 672,000 small businesses. These enterprises employ 1.4 million people, accounting for nearly half of all workers in the state.
Tax analysts note that imposing a 9.9 percent income tax on small business owners establishes one of the highest tax rates in the nation on their personal income. This comes in a state that already levies a high-rate gross receipts tax—known as the Business and Occupation Tax—and subjects an unusually high share of business operational inputs to the retail sales tax, leading to tax pyramiding.
Washington’s broader tax code has long been heavily skewed toward business taxation, largely because the state forgoes a broad-based individual income tax. However, unlike other states that also lack an income tax, Washington has historically lacked a low-tax, limited-government ethos. This dynamic forces businesses to shoulder a disproportionate share of the state’s tax burden. By superimposing a high-rate income tax specifically on high earners, critics argue that the state has created the worst of all possible worlds for its small business community, potentially constraining business growth and chilling job creation.
Beyond its economic footprint, the tax has drawn criticism for its unusual structural design. The policy features a charitable deduction that is strictly capped at $50,000. Furthermore, the income threshold for joint filers is set identically to that of single filers at $1 million. Under this structure, two single earners making $600,000 each would face zero tax liability, whereas a married couple with the exact same combined income filing jointly would cross the threshold and owe the tax.
The policy also lacks any safe harbor provisions for taxpayers who unexpectedly find themselves subject to the tax due to volatile income fluctuations. Under federal law and in most other states with income taxes, underpayment penalties are waived if taxpayers remit a designated percentage of their current or prior year’s tax liability through withholding or quarterly estimated payments. Washington’s new tax features no such safe harbor, meaning individuals who misjudge their liability or do not anticipate crossing the threshold could face severe financial penalties.
Even before the tax takes effect, political momentum to alter its parameters is already building. One state lawmaker recently proposed lowering the income threshold from $1 million down to $250,000, raising concerns among business groups that the tax net will inevitably widen over time to encompass a much larger share of the middle and upper-middle class.
Defeating the tax via this November’s ballot measure presents a formidable challenge. Opponents face an uphill battle complicated by official ballot language warning voters that repealing the measure would require immediate cuts to public education funding, despite the fact that the tax is not yet active and has not been integrated into any adopted state budget. A 2002 law permits the state attorney general to supply fiscal impact statements to ballot measures, and critics have sharply questioned the framing of a statement that forecasts funding cuts from a revenue source that does not yet exist.
As the legal challenges proceed toward oral arguments and voters prepare to weigh in on Initiative 645, the debate over Washington’s tax future echoes decades of prior political history. Whether the state’s longstanding aversion to an individual income tax will prevail once more remains to be decided by the courts and the electorate.
