Washington State’s newly enacted income tax targeting high earners may not officially take effect until 2028, but it has already triggered a fierce multi-front battle involving constitutional litigation, a contentious upcoming ballot measure, and legislative proposals to drastically expand its reach.
While the tax remains years away from implementation, the political and legal landscape surrounding it is moving rapidly. A formal date has already been set for oral arguments in a major constitutional challenge contesting the validity of the law. Meanwhile, state lawmakers are actively debating how to broaden the tax code further, with one legislator recently proposing a dramatic reduction of the tax threshold from $1 million down to $250,000. Adding to the volatility, voters will head to the polls this November to decide on Initiative 645, a ballot measure designed to overturn the legislature’s decision and block the income tax from ever taking effect.
The road to the current legislative clash dates back to early 2024, when state lawmakers bypassed voters to pass a measure that closely mirrored a filed citizen initiative. The original citizen initiative, which had been overwhelmingly approved for the ballot in 2024, sought to establish a permanent prohibition across the state, stipulating that neither the state nor any county, city, or local jurisdiction could tax individuals on any form of personal income.
Rather than allowing the matter to be decided by the electorate, the legislature stepped in with a procedural maneuver. Amending language adopted directly by a ballot measure requires a two-thirds legislative supermajority for the first two years. Had voters approved the measure in November 2024, lawmakers would have been legally barred from considering an income tax until the 2027 legislative session. By taking the measure off the ballot and enacting it themselves early in 2024, lawmakers effectively started the clock sooner. This tactical move enabled them to return during the 2026 legislative session—rather than waiting until 2027—to implement the exact policy the original measure sought to prevent: a state income tax.
To insulate the new tax from further public pushback, lawmakers employed yet another procedural mechanism. They attached an emergency clause to the legislation implementing the high-earner income tax. The clause formally asserted that the new tax—despite not taking effect until 2028, with a first filing date in 2029—was immediately necessary for the support of the state government and its existing public institutions.
This legislative shield successfully blocked opponents from using Washington’s traditional referendum process, which normally allows voters to petition for a review of newly enacted tax changes. With that specific avenue of recourse blocked, income tax opponents pivoted to the initiative process, successfully gathering enough support to place a repeal measure on the upcoming November ballot.
The stakes of the legislative maneuver are particularly high in Washington, a state that historically had no individual income taxation and whose constitution has long been interpreted as largely prohibiting income taxes—a central argument in the pending litigation. Under the newly designed framework, some high earners residing in Seattle could face a combined state and local top marginal tax rate reaching 18.037 percent, split between employers and employees. This eye-opening figure is the result of stacking the new 9.9 percent state income tax on top of existing 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.
The primary target of the 9.9 percent state tax is individuals or married couples with adjusted incomes exceeding $1 million. In practice, this tax will fall heavily on small business owners and highly compensated technology sector workers. Because very few individuals earn straight salaries surpassing $1 million annually, income at this level typically flows through three distinct channels: capital gains and dividend income, pass-through business earnings, and restricted stock unit (RSU) vesting events.
The RSU vesting mechanism, in particular, creates significant structural volatility for tech employees. When a private startup company eventually goes public, an employee may experience a scenario where years of accumulated, granted stock shares vest all at once. An individual might work steadily at a startup for five years, only for all five years of accumulated stock to vest simultaneously during an initial public offering. This single event can easily push their annual income above the $1 million threshold, even though their average earnings over those five years were substantially lower.
Beyond technology workers, the tax carries profound implications for pass-through businesses, which include sole proprietorships, partnerships, and S corporations. According to data from the US Small Business Administration, Washington is home to 672,472 small businesses, the vast majority of which operate as pass-through entities. These businesses collectively employ 1.4 million people, accounting for 48.4 percent of all workers in the state.
Critics of the policy point out that imposing a 9.9 percent tax on the income of small business owners places one of the nation’s highest tax burdens on private enterprise in a state that already maintains a high-rate gross receipts tax—known as the Business and Occupation Tax—and subjects an unusually broad share of business inputs to the retail sales tax.
Washington’s broader tax architecture has long skewed heavily toward business taxation, largely because the state lacks a broad-based individual income tax. However, unlike other states that forgo an income tax while maintaining a low-tax, limited-government philosophy, Washington does not follow that model. This structural reality forces businesses to carry a disproportionate share of the overall public revenue burden. By layering a high-rate income tax exclusively on high-earning individuals who also operate or own businesses, critics argue the state creates a compounding tax penalty that restricts business growth and undercuts job creation.
Furthermore, the vulnerability to the tax extends beyond tech workers with vesting shares and traditional small business owners. Individuals who decide to sell a business they spent decades building, or those generating significant capital gains from the sale of a primary residence, can unexpectedly find themselves pushed into the millionaire tax bracket during a single calendar year.
Independent analysts have also highlighted several unusual design features within the tax legislation. Notably, the tax features a charitable deduction that is strictly capped at $50,000. In addition, the structure treats joint filers and single filers with little regard for household size parity; income for joint filers is taxed above $1 million in the exact same manner as single filers. Under this structure, two single earners making $600,000 each would face zero tax liability, while a married couple earning those exact same individual amounts combined would trigger the tax.
The law also lacks any form of safe harbor provision for taxpayers who unexpectedly cross the threshold due to volatile income spikes. Under federal tax law and the codes of most other states, underpayment penalties are waived if taxpayers remit at least 90 percent of their current year tax liability or 100 to 110 percent of their prior year liability throughout the year via withholding or quarterly estimated payments. Washington’s new tax features no such safe harbor, meaning taxpayers who fail to anticipate their liability or misjudge a sudden financial windfall could face immediate, severe penalties.
Repealing the tax via the upcoming ballot measure remains an uphill political battle. The challenge is complicated by the specific ballot language voters will encounter, which includes a fiscal impact statement warning that repealing the tax would necessitate immediate cuts to public education funding—despite the fact that the tax is not yet active and has not yet generated any revenue. Under a 2022 state law, the attorney general is authorized to supply fiscal impact statements to ballot measures. However, critics have sharply questioned the inclusion of language predicting funding decreases for a tax that does not yet exist and has not been integrated into an enacted state budget.
Nevertheless, as state lawmakers continue discussing proposals to expand the tax to lower income brackets even before the original measure takes effect, many voters may find motivation to follow a long-standing historical pattern in Washington politics: rejecting attempts to establish a state income tax.
