Legal Battle Erupts Over Washington's New "Millionaires Tax"

A coalition of taxpayers, small business groups, and farm organizations has initiated a lawsuit against Washington's newly enacted income tax, commonly referred to as the "millionaires tax." Signed into law by Governor Bob Ferguson on March 30, 2026, the law imposes a 9.9% tax on household income exceeding $1 million annually. This legal challenge, filed in Klickitat County Superior Court, argues that the tax violates the Washington Constitution and nearly a century of established court precedent.

KUOW NPRKONG - Everett NewsLawsuit filed to block Washington’s new income taxWashington State StandardLawsuit Claims Washington’s 9.9% Income Tax Violates State ConstitutionWashington income tax lawsuit: McKenna, Talmadge say it's unconstitutionalKCPQ - Fox 13 - Seattle

The lawsuit is spearheaded by former Washington Attorney General Rob McKenna and former state Supreme Court Justice Phil Talmadge, who assert that the tax structure is unconstitutional. They argue that income is classified as property under state law, meaning it must be taxed uniformly and cannot exceed a 1% rate. The plaintiffs contend that the graduated nature of the tax—taxing income above $1 million at a significantly higher rate while leaving lower income untaxed—contradicts these constitutional requirements. The complaint cites a 1933 ruling in the case of Culliton v. Chase, which established that income should be treated as property for tax purposes.

KONG - Everett NewsWashington income tax lawsuit: McKenna, Talmadge say it's unconstitutionalKUOW NPRLawsuit Claims Washington’s 9.9% Income Tax Violates State ConstitutionLawsuit filed to block Washington’s new income taxMyNorthwestKCPQ - Fox 13 - SeattleWashington State Standard

The legal battle is expected to escalate, with the case potentially reaching the Washington Supreme Court. McKenna has expressed confidence that the courts will strike down the tax, stating, “This law disregards both the plain language of the Constitution and decades of consistent Supreme Court precedent.” The lawsuit is backed by various organizations, including the National Federation of Independent Business and the Building Industry Association of Washington, which argue that the tax could destabilize the economic environment for small businesses and entrepreneurs.

Lawsuit filed to block Washington’s new income tax

Supporters of the tax, including Governor Ferguson and Senate Majority Leader Jamie Pedersen, argue that the tax is necessary to address Washington's regressive tax system, where lower-income families often pay a higher percentage of their income in taxes compared to wealthier individuals. They assert that the tax will generate approximately $3 billion annually, which would be allocated to fund public services such as education and healthcare. Pedersen has welcomed the legal challenge as an opportunity to clarify the legality of progressive taxation in Washington.

KUOW NPR

The lawsuit is part of a larger narrative regarding income tax policies in the United States, where several states are grappling with similar issues. Washington has historically been one of the few states without an income tax, and the introduction of this tax marks a significant shift in its tax structure. The case is expected to unfold over the coming months, with potential implications for future tax legislation in Washington and beyond.

KUOW NPR

Critics of the tax, including business leaders and conservative groups, argue that it threatens Washington's competitive advantage as a no-income-tax state and could drive businesses out of the region. Conversely, proponents maintain that the tax is a necessary step toward a fairer tax system that ensures wealthier individuals contribute their fair share.

KUOW NPR

The lawsuit is set to be argued in court, with expectations that it may reach the state Supreme Court by early next year. Additionally, a parallel referendum effort could emerge, allowing voters to weigh in on the tax's future. The outcome of this legal battle will likely have lasting implications for Washington's tax policy and economic landscape.

Washington State Standard