Washington’s newly enacted income tax targeting high earners may not officially take effect until 2028, but the controversial policy has already triggered a firestorm of political, legal, and legislative activity across the state. Even before the tax collects its first dollar, a date has been finalized for oral arguments in a high-stakes constitutional challenge. Simultaneously, lawmakers are moving to expand the policy’s reach, while voters prepare to weigh in on a major November ballot measure that could halt the tax entirely before it ever begins.

The journey toward this tax landscape has been marked by complex procedural maneuvers in Olympia. In 2024, the state legislature overwhelmingly approved a filed ballot measure stipulating that neither the state nor any county, city, or other local jurisdiction in Washington could tax any individual person on any form of personal income. Rather than allowing the measure to go directly to the voters, the legislature adopted it themselves. This was largely a strategic procedural move designed to alter the rules governing state law. Amending language adopted directly by a 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 an income tax until the 2027 legislative session. By taking the measure off the ballot and passing it themselves in early 2024, the clock started ticking much sooner. This tactical maneuver allowed lawmakers to return during the 2026 session—rather than waiting until 2027—to pursue the very policy the measure was ostensibly created to prevent: the adoption of a personal income tax.

To further insulate their policy choices, Washington lawmakers utilized another procedural tool by adding an emergency clause to the high-earner income tax legislation. The state asserted that the new tax—which remains dormant until 2028, with its first formal tax filing date arriving in 2029—was immediately "necessary for the support of the state government and its existing public institutions." This specific clause effectively shielded the measure from a long-standing provision in Washington law that ordinarily grants voters the right to review major tax changes through a referendum. With the referendum avenue blocked, opponents of the income tax mobilized and successfully placed their own initiative, Initiative 645, on the upcoming November ballot to repeal the legislature’s decision entirely.

The debate over the tax unfolds against the backdrop of Washington’s unique fiscal history. The state historically had no personal income taxation, and its state constitution has long been interpreted by legal scholars and courts as largely prohibiting income taxation, which explains the ongoing litigation. Under the new framework, however, some high-earning residents in Seattle could face a combined state and local top rate that ranks among the highest in the entire country.

The figures highlight a substantial cumulative tax burden. The state’s new 9.9 percent income tax can be combined with existing municipal and local levies in Seattle, including the 5 percent Seattle Social Housing Tax, the 2.557 percent Seattle JumpStart Tax, and the 0.58 percent WA Cares tax. When split across employers and employees, the combined state and local top rate for top earners in the city could reach an eye-opening 18.037 percent.

The tax itself is structured to target individuals or married couples with adjusted annual incomes exceeding $1 million. In practice, this threshold means the policy will fall heavily on small business owners and highly compensated tech sector workers. Because very few salaried workers earn cash wages exceeding $1 million annually, incomes at that stratospheric level typically flow through three primary financial channels: capital gains and dividend income, pass-through business earnings, and restricted stock unit vesting events.

The mechanism surrounding restricted stock units, or RSUs, has emerged as a major point of contention. When a technology startup goes public, employees often find that years’ worth of granted shares vest simultaneously. An employee might spend five years working for a modest salary at an emerging firm, only to have accumulated stock vest all at once during an initial public offering. That single event can push their taxable income well above the $1 million threshold in a single year, even though their average annual compensation over the multi-year vesting period was substantially lower.

Pass-through businesses face similar structural vulnerabilities under the new tax. 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 such as sole proprietorships, partnerships, or S corporations. These enterprises employ roughly 1.4 million workers, accounting for 48.4 percent of the state’s entire workforce.

Critics argue that slapping a 9.9 percent income tax on small business owners imposes one of the nation’s heaviest tax burdens on entrepreneurial income. This comes on top of an already burdensome state tax code that features a high-rate gross receipts tax—known formally as the Business & Occupation Tax—and subjects an unusually high share of essential business inputs to the retail sales tax, leading to severe tax pyramiding.

Washington’s existing tax structure has long been heavily skewed toward business taxation, partly because the state traditionally avoided a broad-based individual income tax. However, unlike other states that also lack an individual income tax, Washington has historically lacked a low-tax, limited-government ethos. This combination forces businesses to shoulder a disproportionate share of the overall public revenue burden. By layering a high-rate income tax exclusively on high earners, critics contend the state is creating the worst possible environment for small business owners, dampening their capacity to expand operations and stunting job creation.

Beyond tech workers with vesting RSUs, the tax net threatens to catch taxpayers who experience a single, anomalous financial windfall. Individuals selling a family-owned business they spent decades building, or those generating significant capital gains from the sale of a primary residence, could unexpectedly find themselves thrust into the top tax bracket for a single tax year.

The policy’s design has also drawn scrutiny from tax experts for several unusual and potentially punitive structural features. Notably, the tax includes a strict charitable deduction cap set at $50,000. Furthermore, joint filers face the same income thresholds as single filers, creating a marriage penalty where 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.

Compounding these issues, the tax structure lacks any safe harbor provisions for taxpayers who unexpectedly cross the threshold or misjudge their liability. Under federal tax law and the statutes of most other states, underpayment penalties are typically waived if taxpayers pay at least 90 percent of their current year’s liability or 100 to 110 percent of their prior year’s liability through regular withholding or quarterly estimated payments. Washington’s new law includes no such safe harbor, meaning individuals who fail to anticipate their tax status can be hit immediately with harsh statutory penalties.

Even before the constitutional challenges are heard in court or the implementation date arrives, political battles are intensifying. One state lawmaker recently proposed lowering the taxable threshold from $1 million down to $250,000, signaling to opponents that the tax could soon expand to cover a much broader segment of middle- and upper-middle-class families.

At the same time, repealing the tax via Initiative 645 this November remains an uphill battle for opponents. The challenge is compounded by contentious ballot wording supplied by the state. Under a 2022 law, the state attorney general provides a fiscal impact statement for ballot measures. The statement attached to the repeal initiative warns voters that eliminating the tax would require steep cuts to public education funding, even though the tax is not yet operational and no state budget has incorporated those speculative future revenues.

Nevertheless, as lawmakers openly discuss expanding the tax to lower income brackets before the first collection cycle even begins, many voters may find themselves motivated to follow a historical pattern in Washington politics of rejecting proposals for a personal income tax.