Washington state’s newly established income tax on high earners may not officially take effect until 2028, but it has already triggered a firestorm of legislative maneuvering, legal challenges, and high-stakes political battles that could reshape the state’s fiscal landscape for decades to come.
Even though the tax remains years away from implementation, a date has already been locked in for oral arguments in an ongoing constitutional challenge that questions the fundamental legality of the measure. At the same time, the debate surrounding the policy has rapidly expanded. One state lawmaker recently proposed lowering the taxable income threshold dramatically, from the original $1 million mark down to as low as $250,000. Meanwhile, voters across the state are preparing to weigh in directly this November through Initiative 645, a ballot measure designed to reverse the legislature’s decision entirely and prevent the controversial tax from ever taking effect.
The road that led to the enactment of Washington’s high-earner tax was marked by a series of swift and calculated procedural moves by state lawmakers. In early 2024, the legislature overwhelmingly approved a filed ballot measure declaring that neither the state nor any county, city, or local jurisdiction in Washington may tax any individual person on any form of personal income. Rather than allowing that measure to proceed directly to a public vote, lawmakers took matters into their own hands.
This preemption was largely procedural. Under Washington state law, amending language originally adopted by a ballot measure requires a two-thirds legislative supermajority for the first two years following its adoption. Had voters been allowed to approve the measure in November 2024, lawmakers would have been legally barred from considering any form of personal income tax until at least the 2027 legislative session. By taking the initiative off the ballot and passing the restrictive language themselves early in 2024, lawmakers effectively started the clock much sooner. This allowed them to return during the 2026 session and do precisely what the measure was initially designed to guard against: adopt a targeted income tax.
To further insulate the legislation from public pushback, Washington lawmakers employed another procedural safeguard by attaching an emergency clause to the high-earner income tax bill. The legislation asserts that the new tax—which will not take effect until 2028, with actual tax filings due in 2029—is necessary for the support of the state government and its existing public institutions.
By declaring an emergency, the legislature successfully shielded the measure from a provision in Washington law that routinely allows citizens to challenge and review tax changes through a public referendum. With that traditional avenue blocked, opponents of the income tax mobilized and filed their own citizen initiative to repeal the tax. That effort successfully cleared the necessary hurdles to secure a spot on the upcoming November ballot.
The stakes for Washington taxpayers are exceptionally high. Historically, Washington has operated without a broad-based personal income tax, and its state constitution has long been interpreted by legal scholars and courts as largely prohibiting income taxation—a legal precedent that sits at the heart of the pending litigation. Under the new framework, some high-earning residents in Seattle could soon face the highest combined state and local top income tax rate in the entire United States.
When factoring in the new 9.9 percent state tax alongside existing local levies, high earners in Seattle could face a combined rate of 18.037 percent, split across both employers and employees. This staggering total combines the 9.9 percent state tax with the 5 percent Seattle Social Housing Tax, the 2.557 percent Seattle JumpStart Tax, and the 0.58 percent WA Cares tax.
The tax itself is officially imposed on individuals or married couples with annual incomes exceeding $1 million. In practice, the burden will fall heavily on small business owners and highly compensated tech sector workers. Very few individuals earn traditional W-2 salaries above the $1 million threshold. Instead, incomes at that magnitude 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 can create significant volatility for taxpayers. Under typical circumstances, employees at tech startups or established firms may receive stock grants that take years to vest, often culminating all at once when a company officially goes public. An employee might spend five years working at a startup, only to see years of accumulated stock vest simultaneously during an Initial Public Offering. That single financial event can easily push their income above the $1 million threshold for that specific year, even though their average annual earnings over the five-year period were substantially lower.
Beyond individual tech workers, the tax carries profound implications for Washington’s extensive network of 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. Together, these businesses employ 1.4 million people, representing 48.4 percent of the state’s total workforce.
Imposing a 9.9 percent tax on the income of small business owners subjects them to one of the highest tax rates in the nation. This comes on top of an already burdensome state tax environment that features 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 state sales tax.
Washington’s broader tax code is heavily skewed toward business taxation, largely because the state has historically forgone a broad-based individual income tax. However, unlike other states that also lack an individual income tax, Washington does not maintain a low-tax, limited-government ethos. This structural imbalance forces local businesses to shoulder a disproportionate share of the state’s overall tax burden. By superimposing a high-rate income tax specifically on high earners, critics argue that Washington has created the worst of all possible worlds for its small business community, dampening their capacity for expansion and undercutting local job creation.
The financial vulnerability created by the tax extends beyond RSU holders and small business owners. Residents who decide to sell a small business they spent decades building, or those who generate significant capital gains from the sale of a residential home, can similarly find themselves unexpectedly pushed into the high-earner tax bracket for a single tax year.
Compounding these concerns is the unique and rigid design of the tax structure itself. The legislation features a charitable deduction that is strictly capped at $50,000. Furthermore, joint filers face the exact same tax threshold as single filers, meaning their income is taxed above the $1 million mark without any adjustments for marital status. Under this structure, two single earners making $600,000 each would have zero tax liability, whereas those exact same two individuals filing jointly would be subject to the tax.
Additionally, the tax lacks any safe harbor provisions for individuals who unexpectedly find themselves subject to the levy when their income spikes above the threshold in a given year. Under federal tax law and in most other states, underpayment penalties are waived if taxpayers pay at least 90 percent of their current year tax liability or 100 to 110 percent of their prior year liability through regular withholding or quarterly estimated payments. Washington’s new tax includes no such safe harbor, exposing taxpayers who misjudge their liability or fail to anticipate crossing the income threshold to severe financial penalties.
Repealing the tax via the ballot box remains an uphill battle for opponents, a challenge compounded by contested ballot language. Voters reviewing Initiative 645 will encounter official explanatory language warning that a repeal of the measure would necessitate cuts to public education funding, even though the tax is not yet operational and has not generated a single dollar of revenue. A 2022 state law permits the attorney general to supply a fiscal impact statement for ballot measures, but critics of the statement attached to this initiative argue that it is misleading to speak of decreasing funding for a tax that does not yet exist and has not been integrated into any adopted state budget.
Even with these hurdles, the ongoing push by lawmakers to expand the tax to an even broader segment of the population before it officially takes effect may galvanize voters. Many residents may ultimately choose a path familiar to Washington electorates in past decades: decisively rejecting the implementation of a state income tax.
