The path that brought Washington to this legislative milestone has been marked by strategic procedural maneuvering. In early 2024, the state legislature overwhelmingly approved a filed ballot measure declaring that neither the state nor any county, city, or local jurisdiction may tax any individual person on any form of personal income. Rather than allowing the measure to go directly to the voters for a traditional statewide referendum, lawmakers advanced the policy themselves.

This maneuver served a specific procedural purpose under Washington state law. Amending language previously adopted by a direct ballot measure requires a two-thirds legislative supermajority for the first two years. Had voters approved the prohibition in November 2024, lawmakers would have been constitutionally blocked from considering any form of income tax until the 2027 legislative session. By taking the measure off the ballot and enacting it themselves in early 2024, lawmakers effectively started the clock sooner. This allowed them to return during the 2026 legislative session to do precisely what the initial measure was meant to prohibit: adopt a targeted income tax.

To further insulate the policy from public pushback, lawmakers attached an emergency clause to the high-earner income tax bill. The clause asserted that the new tax—which does not go into effect until 2028, with the first tax filings due in 2029—was strictly necessary for the support of state government and its existing public institutions. In Washington, attaching an emergency clause effectively shields legislation from the state’s referendum process, blocking voters from using petition drives to challenge the tax at the ballot box. With that traditional avenue closed, opponents of the income tax mobilized an alternative strategy, successfully placing an initiative on this November’s ballot, known as Initiative 645, which seeks to reverse the legislature’s decision and prohibit state and local income taxes.

The legal and constitutional battles facing the new tax stem from Washington’s unique tax history. For generations, the state has operated without a broad-based personal income tax, and the state constitution has long been interpreted by legal scholars and courts as largely prohibiting income taxation, paving the way for the pending litigation that will soon see oral arguments.

If the tax survives constitutional scrutiny, high-earner residents—particularly those living in Seattle—could face a combined state and local top tax rate that ranks among the highest in the nation. For a high-earning Seattle resident, the cumulative tax burden could reach an eye-opening 18.037 percent, split across employers and employees. This staggering figure combines the state’s new 9.9 percent income tax with 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 payroll tax.

Designed to target individuals and joint filers with incomes exceeding $1 million, the tax will primarily impact small business owners, startup founders, and highly compensated technology sector employees. Because very few individuals earn straight annual salaries above $1 million, incomes at that level typically materialize through specific financial channels: capital gains and dividend income, pass-through business earnings, and the vesting of restricted stock units.

Restricted stock units, or RSUs, represent a particularly volatile flashpoint for workers in Washington’s massive tech sector. Under the structure of the tax, an employee who works at a startup for several years might see years of accumulated stock shares vest all at once, frequently occurring when a company undergoes an initial public offering. This sudden liquidity event can easily push an employee’s income above the $1 million threshold in a single tax year, even if their average annual earnings across those working years fell well below that mark.

Beyond tech employees, the policy strikes deeply at the heart of Washington’s entrepreneurial ecosystem through its impact on 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, or roughly 48.4 percent of the state’s total workforce. Imposing a 9.9 percent income tax on small business owners subjects them to one of the highest marginal income tax rates in the country. This comes on top of an already burdensome state tax code that features a high-rate gross receipts tax, known as the Business and Occupation Tax, and subjects an unusually high share of business operational inputs to the state sales tax.

Washington’s existing tax structure has long been heavily skewed toward business taxation, largely because the state historically lacked a broad-based individual income tax. However, unlike other states that forgo personal income taxes and maintain a low-tax, limited-government ethos, Washington does not scale back public spending or corporate tax burdens to compensate. Instead, local businesses have long been forced to shoulder a disproportionate share of the state’s fiscal responsibility. Critics argue that adding a high-rate income tax specifically targeting successful entrepreneurs creates the worst possible policy environment for small businesses, stifling long-term growth and undercutting job creation across the state.

The risk of unexpected tax liability extends far beyond tech workers and small business owners. Individuals who decide to sell a small business they spent decades building, or those who generate significant capital gains from the sale of a primary residence, could unexpectedly find themselves swept into the high-earner tax bracket during the specific year the transaction closes.

Adding to the controversy is the unusual structural design of the tax itself. The legislation includes a strict charitable deduction cap of just $50,000. Furthermore, the tax treats joint filers and single filers with identical thresholds, meaning that two single earners making $600,000 each would face zero tax liability, while a married couple with the exact same combined income would be taxed.

Perhaps most concerning to tax professionals and financial planners is the complete lack of a safe harbor provision for taxpayers who unexpectedly cross the income threshold. Under federal tax law and the codes of most other states, underpayment penalties are waived if taxpayers pay at least 90 percent of their current year’s liability or a specific percentage of their prior year’s liability through regular withholding or quarterly estimated payments. Washington’s new tax features no such safeguard, leaving taxpayers who misjudge their annual income or encounter unexpected capital gains vulnerable to severe penalties.

Even before the tax takes effect, policymakers are already signaling an appetite for expansion. One state lawmaker recently proposed lowering the income threshold from $1 million down to $250,000, raising alarms among taxpayers that the tax will eventually capture a much wider swath of the middle and upper-middle class.

Defeating the new tax through the upcoming November ballot measure presents a steep uphill battle for opponents. The challenge is compounded by contentious ballot language supplied by the state attorney general’s office, which warns voters that repealing the measure will force cuts to public education funding—despite the fact that the tax is not yet implemented and no state budget has incorporated its anticipated revenues.

Nevertheless, as debates continue over expanding the tax to lower income brackets even before the first collection cycle begins, many voters may ultimately choose a path familiar to Washington’s political history: decisively rejecting the establishment of a state income tax.