The roots of this modern fiscal battle trace back through a complex sequence of procedural plays by the state legislature. In early 2024, lawmakers overwhelmingly approved a previously filed ballot measure stipulating that neither the state nor any county, city, or local jurisdiction in Washington could tax personal income in any form. Rather than allowing the measure to proceed to a public vote, the legislature adopted it directly. This maneuver was largely procedural: under Washington state law, amending language adopted directly by a ballot measure requires a two-thirds legislative supermajority for the first two years.
Had the issue gone to a public vote in November 2024 as originally intended, lawmakers would have been constitutionally blocked from considering an income tax until at least the 2027 legislative session. By intercepting the initiative and passing it themselves in early 2024, lawmakers effectively started the clock sooner. This tactical choice allowed them to return during the 2026 session and do precisely what the original citizen measure sought to prohibit: establish an income tax.
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 take effect until 2028, with its inaugural filing date arriving in 2029—was immediately necessary for the support of the state government and its existing public institutions. This designation effectively shielded the measure from a standard provision in Washington law that ordinarily grants voters the right to review tax changes through a referendum. With the referendum avenue blocked, opponents of the tax organized and filed their own citizen initiative, designated as Initiative 645, which successfully qualified for the upcoming November ballot to repeal the legislature’s decision and prevent the tax from ever taking effect.
The controversy unfolds against the backdrop of Washington’s unique constitutional history. The state has traditionally lacked an individual income tax, and its state constitution has long been interpreted by legal scholars and jurists as largely prohibiting income taxation, setting the stage for the pending litigation that will test the new law in court. For high earners residing in cities like Seattle, the cumulative fiscal impact could be staggering. Some taxpayers in the state’s largest city could face the highest combined state and local top income tax rate in the entire nation, reaching 18.037 percent when split across employer and employee obligations. This record-setting figure combines the state’s new 9.9 percent tax with a stack of local levies, including a 5 percent Seattle Social Housing Tax, a 2.557 percent Seattle JumpStart Tax, and a 0.58 percent WA Cares tax.
Designed to apply to individuals or married couples with annual incomes exceeding $1 million, the tax will inevitably concentrate its burden on small business owners and highly compensated tech sector employees. Very few salary earners in the state cross the $1 million mark through standard wages alone. Instead, incomes at that elite level typically flow through three primary channels: capital gains and dividend income, pass-through business earnings, and restricted stock unit vesting events.
The latter mechanism creates unique financial complexities. When a technology startup goes public, employees who have held restricted stock units for years may see multiple years of accumulated shares vest simultaneously. Such an event can easily push an employee’s income above the $1 million threshold in a single calendar year, even though their average annual earnings across those accumulated years were substantially lower. Beyond tech workers, the tax threatens to catch individuals who sell a family business built up over decades, or those who realize significant capital gains from selling a primary residence during a booming real estate market.
The legislation also extends its reach directly into the state’s entrepreneurial ecosystem by targeting pass-through businesses. According to data from the U.S. Small Business Administration, Washington is home to 672,472 small businesses—the vast majority of which operate as pass-through entities—employing 1.4 million people, which accounts for 48.4 percent of the state’s entire workforce. Imposing a 9.9 percent tax on the income of small business owners subjects them to one of the highest top marginal rates in the country. This burden is particularly acute because Washington already levies a heavy gross receipts tax, known as the Business and Occupation Tax, and subjects an unusually high share of everyday business operating inputs to the state retail sales tax.
Critics argue that Washington’s existing tax structure is heavily skewed toward business taxation precisely because the state has historically eschewed a broad-based individual income tax. However, unlike other states that also lack an income income tax, Washington has not cultivated a low-tax, limited-government ethos. Instead, its tax policy forces businesses to shoulder a disproportionate share of the public revenue burden. By layering a high-rate income tax exclusively on high earners, analysts suggest the state creates a policy environment that undercuts local entrepreneurship, stifles business growth, and discourages job creation.
Compounding these economic concerns are several unusual design features embedded within the new tax statute. Notably, the tax caps its allowable charitable deduction at $50,000, creating a potential disincentive for major philanthropic contributions within the state. Furthermore, joint filers face the exact same tax thresholds as single filers. Under this structure, two single individuals earning $600,000 each would have zero tax liability, whereas a married couple combining those exact same earnings would be hit with the tax simply for filing jointly.
The policy also lacks any safe harbor provisions for taxpayers who unexpectedly find themselves subject to the tax due to volatile or sudden spikes in income. Under federal tax law and the statutes of most states with income taxes, underpayment penalties are waived if taxpayers remit at least 90 percent of their current year liability or 100 to 110 percent of their prior year liability through withholding or quarterly estimated payments throughout the year. Washington’s new tax includes no such mechanism, meaning individuals who misjudge their liability or do not anticipate crossing the $1 million threshold can face severe statutory penalties.
Reversing the tax via the ballot box presents a formidable challenge for opponents, a difficulty magnified by contentious ballot language. The official fiscal impact statement, supplied by the attorney general’s office under a 2022 law, warns voters that repealing the tax would necessitate cuts to public education funding—despite the fact that the tax is not yet operational and no state budget has incorporated its prospective revenues. Critics argue this wording is politically slanted to protect the measure. Nevertheless, as state lawmakers continue to discuss proposals to expand the tax to lower income brackets even before the original statute takes effect, many voters may ultimately choose a path familiar to Washington electorates across generations: rejecting the introduction of a state income tax.
