The roots of this ongoing battle trace back to early 2024, when the Washington 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 proceed to a general vote where the public could weigh in directly, lawmakers bypassed the electorate. Under Washington state rules, amending a voter-approved initiative requires a two-thirds legislative supermajority for the first two years.

By taking the measure off the ballot and passing it themselves in early 2024, lawmakers effectively started the clock much sooner. This procedural maneuver allowed them to return during the 2026 legislative session—rather than waiting until 2027—and do precisely what the initial measure was designed to prevent: adopt a personal income tax.

To insulate their actions from further public pushback, Washington lawmakers employed another strategic procedural move by attaching an emergency clause to the high-earner income tax legislation. Proponents asserted that the new levy, which does not go into effect until 2028 with a first tax filing date in 2029, was necessary for the support of state government and its existing public institutions.

This legislative shield successfully blocked opponents from utilizing a standard provision in Washington law that ordinarily allows voters to challenge and review tax changes through a referendum. With that traditional avenue temporarily closed, opponents of the income tax mobilized and filed their own citizen initiative to repeal the tax entirely, successfully securing a spot on the upcoming November ballot as Initiative 645.

Washington has historically maintained a reputation as a state without a broad-based personal income tax, a stance reinforced by its state constitution, which has long been interpreted by legal scholars and courts as largely prohibiting such levies. This longstanding legal tradition is at the heart of the pending litigation, with oral arguments now scheduled in the constitutional challenge against the new law.

If the tax survives judicial scrutiny and is implemented, some high earners residing in Seattle could face an unprecedented tax burden. According to policy analysts, these taxpayers could confront a combined state and local top rate reaching 18.037 percent, split across employer and employee obligations. This staggering figure combines the state’s new 9.9 percent income tax with 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 married couples with annual incomes exceeding $1 million, the tax will primarily impact successful small business owners, high-earning corporate employees, and tech workers. Because very few salaried workers earn straight wages above $1 million annually, incomes at that level typically flow through specific, volatile financial channels. These include capital gains and dividend income, pass-through business earnings, and the vesting of restricted stock units (RSUs).

The mechanics of RSU vesting can create significant financial cliff effects for employees in the tech sector and startup ecosystem. For instance, an individual might work at a startup for five consecutive years while earning a modest salary, only to have years’ worth of accumulated stock options vest all at once when the company goes public. This single event can push their taxable income well above the $1 million threshold for that specific year, even though their average earnings across the multi-year employment period were substantially lower.

Beyond tech workers and corporate executives, the tax directly impacts pass-through businesses, which include sole proprietorships, partnerships, and S corporations. Data from the U.S. Small Business Administration indicates that Washington is home to 672,472 small businesses, the vast majority of which operate as pass-through entities. These small enterprises employ 1.4 million people, accounting for roughly 48.4 percent of the state’s entire workforce.

Imposing a 9.9 percent tax on small business owners subjects them to one of the highest individual income tax rates in the nation. This new burden arrives in a state that already levies a heavy gross receipts tax—known as the Business & Occupation Tax—and applies sales taxes to an unusually broad share of fundamental business inputs.

Washington’s broader tax code is heavily skewed toward business taxation, largely because the state forgoes a traditional broad-based individual income tax. However, unlike other states that also lack an income tax, Washington does not maintain a low-tax, limited-government ethos. As a result, businesses are forced to shoulder a disproportionate share of the overall public funding burden. By introducing a high-rate income tax narrowly targeted at high earners, critics argue that Washington has created the worst of all possible worlds for small business owners, restricting their capacity for financial growth and undercutting local job creation.

The vulnerability to this tax extends far beyond traditional wage earners and RSU recipients. Individuals who decide to sell a small business they spent decades building, or homeowners generating significant capital gains from the sale of a primary residence or real estate holdings, could unexpectedly find themselves pushed into the taxable bracket during a single calendar year.

Adding to the controversy is the unconventional structural design of the tax itself. The legislation features a strict charitable deduction cap set at $50,000. Furthermore, joint filers face the exact same tax thresholds as single filers, creating a marriage penalty where two single earners making $600,000 each would owe no tax liability, while a married couple with the exact same combined income would be subject to the tax.

The framework also lacks any administrative safe harbor provisions for taxpayers who unexpectedly cross the income threshold due to sudden financial windfalls. Under federal tax law and in most other states, underpayment penalties are waived if taxpayers pay at least 90 percent of their current year liability or 100 to 110 percent of their prior year liability through withholding or quarterly estimated payments. Washington’s new statute includes no such safe harbor, meaning individuals who misjudge their liability or do not anticipate becoming filers could face severe state penalties.

Repealing the tax via the upcoming ballot measure represents an uphill political battle for opponents, a challenge complicated by official ballot language. Critics point out that the state attorney general’s fiscal impact statement warns voters that repealing the tax would necessitate cuts to public education funding, even though the tax is not yet active and no state budget has incorporated those speculative future revenues.

Nevertheless, as state lawmakers already begin discussing proposals to lower the tax threshold and expand the levy to more residents before it even takes effect, many voters may feel inclined to follow a historical precedent. Time and again in Washington elections, voters have consistently turned to the ballot box to reject the implementation of a state income tax.