Key Takeaways:
- Washington voters will decide the future of the state’s new 9.9% tax on annual taxable income above $1 million after a repeal initiative qualified for the November ballot.
- The ballot measure follows an earlier Washington Supreme Court ruling that prevented opponents from challenging the tax through the referendum process.
- The tax also remains subject to constitutional litigation, creating continued uncertainty for potentially affected taxpayers.
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Washington voters will decide the future of the state’s new millionaires’ tax this November after an initiative to repeal the tax qualified for the ballot.
The Washington Secretary of State certified Initiative 645 for the November ballot after opponents of the tax submitted more than 500,000 signatures. The initiative effort followed a Washington Supreme Court decision denying an earlier attempt to challenge the tax through the state’s referendum process.
Gov. Bob Ferguson signed S.B. 6346 in late March. The bill imposes a 9.9% tax on Washington annual taxable income exceeding $1 million per household. The first payments are due in 2029 for tax year 2028.
The ballot initiative represents a separate path from the referendum effort previously rejected by the Washington Supreme Court. The court denied taxpayer Brian Heywood’s petition to place the tax on the November ballot through a referendum, citing the state constitution’s referendum power and its exception for laws necessary to support state government, including revenue-generating measures.
The court noted that S.B. 6346 “undisputedly generates revenue for the state’s existing institutions” and that its justices have “long held that such laws are not subject to popular referendum.”
Following that decision, opponents pursued the initiative process, which required substantially more signatures than a referendum. The campaign submitted more than 500,000 signatures, and the Secretary of State certified Initiative 645 for the November ballot.
The tax’s future also remains subject to legal challenge. Opponents have filed suit in Petter v. Washington, arguing that the tax violates Article 7 of the state constitution, which requires uniform taxation of property and establishes a 1% maximum rate. They argue that the state should follow Culliton v. Chase, 25 P.2d 81 (Wash. 1933), a landmark case holding that income should be considered property, thus invalidating a progressive income tax.
Insight
- The Washington Supreme Court’s decision closed off the referendum route for opponents of the millionaires’ tax, but the successful initiative effort means voters will now have an opportunity to weigh in on the tax in November.
- The ballot initiative is not the only source of uncertainty. Constitutional litigation remains ongoing, including Petter v. Washington, which challenges the tax under Washington’s constitutional restrictions on property taxation.
- With both a November vote and constitutional litigation potentially affecting the tax’s future, taxpayers who may be subject to the tax should continue to monitor developments and evaluate their potential exposure before the tax is scheduled to take effect for the 2028 tax year.
How MGO Can Help
Washington’s evolving tax landscape may create significant planning considerations for high-income individuals, families, business owners, and investors. With the millionaires’ tax now headed to voters and constitutional litigation continuing, taxpayers don’t need to wait for a final outcome to begin assessing how the law could affect their broader tax strategy.
Our tax professionals can help you evaluate your potential exposure to Washington’s new millionaires’ tax, model the impact under different scenarios, and assess residency and domicile considerations as part of a comprehensive state and local tax strategy. We can also help our clients monitor legislative and legal developments and adjust their planning as additional guidance becomes available.
Contact us to discuss how Washington’s changing tax environment could affect you and the steps you can take now to prepare.