Washington State Millionaire Tax Faces Legal Challenge

Why It Matters

The ruling will decide if Washington can broaden its revenue base without eroding its reputation as a business‑friendly state, setting a potential template for other states that lack income taxes.

Key Takeaways

• Washington's new 9.9% tax targets income over $1 million, effective 2028
• Plaintiffs argue tax violates uniform‑rate clause and 1% cap in state constitution
• Law aims to fund school meals, family credits, and diaper tax exemption
• Critics warn the tax could drive high‑earners and businesses out of state
• Case could set precedent for income‑tax limits in other non‑tax states

Pulse Analysis

Washington’s tax landscape has been shaped by a 1930 constitutional amendment that barred graduated taxes on property, including money. The state Supreme Court reinforced that stance in 1933, striking down a voter‑approved progressive income tax on the grounds that income is property and must be taxed uniformly at no more than 1%. Decades later, Senate Bill 6346 breaks that tradition by imposing a 9.9% levy on earnings above $1 million, a move designed to diversify revenue and fund social programs.

The lawsuit, led by former Attorney General Rob McKenna and former Supreme Court Justice Phil Talmadge, argues the new tax contravenes the uniform‑rate clause and exceeds the constitutional 1% ceiling. Plaintiffs, including high‑earning individuals and business‑friendly trade groups, contend the measure undermines Washington’s long‑standing appeal to entrepreneurs and could trigger an exodus of wealth and jobs. The state Attorney General’s Office, however, maintains the tax’s constitutionality, emphasizing its targeted nature and the public benefits it promises.

If upheld, the millionaire tax would generate funds for free breakfast and lunch programs, expand a working‑family tax credit, eliminate sales tax on diapers and hygiene products, and reduce business and occupation taxes for roughly 138,000 small firms. Beyond the fiscal impact, the case could reshape the legal boundaries of tax policy in the nine states without a general income tax, influencing debates in places like Texas and Florida. Conversely, a court defeat could reaffirm the strict limits on graduated taxation, preserving Washington’s low‑tax image but leaving a sizable revenue gap unfilled.