Billy Hamilton (Tax Notes): Washington State’s Odd Place in the Millionaire’s Tax Debate

Flying in the face of this long history of failure, the Democrat-controlled Legislature is taking another swing at the elusive income tax this year, but they’re proposing not a general income tax, but one that targets the state’s richest taxpayers: a millionaire’s tax.

Washington has no income tax and instead relies heavily on consumption taxes — essentially having achieved what many conservatives now see as the holy grail for state tax systems. But the state leans heavily Democratic, a direction at odds with its tax policies, which have historically skewed toward what is now the red end of the political spectrum.

According to a 2024 analysis by ITEP, Washington has the second most regressive tax system in the country — meaning, according to ITEP, its tax system “requires a much greater share of income from low- and middle-income families than from wealthy families.”

Washington lawmakers have tried without success to enact an income tax for decades, whether to address the tax system’s regressivity — or simply to tap a new revenue source. Efforts to enact the tax have been rejected by voters 10 times since 1932. Democratic and Republican legislatures have both tried and failed. Presumably seeing the writing on the wall, the Legislature adopted Initiative 2111 in 2024 to add a prohibition on income taxes into the state constitution, part of the state’s long, colorful history of deciding major fiscal issues at the ballot box. Predictably, the measure was easily approved by lawmakers.

The reason behind the state’s frequent ballot initiatives on the income tax — until Initiative 2111, at least — was the state constitution. The constitution’s definition of property for tax purposes is extremely broad: “All taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax and shall be levied and collected for public purposes only. The word ‘property’ as used herein shall mean and include everything, whether tangible or intangible, subject to ownership.”

This definition of property wasn’t part of the state’s original constitution but instead was adopted by the voters in 1930. Then in 1933, in Culliton v. Chase, the state supreme court ruled that a graduated net income tax, which had been approved by voters in 1932, was unconstitutional. 

Despite widespread support — 70 percent of voters favored the ballot measure — business interests took the tax to court, and the court, in a surprise 5-4 decision, held that income is considered “property” and therefore a graduated tax violated the state constitution’s requirement that property taxes be uniform.

All subsequent attempts to implement a personal net income or corporate net income tax were stymied by the state supreme court’s interpretation until voters adopted Initiataive 2111. Consequently, any attempt to implement an income tax in Washington has been assumed to require a constitutional amendment, and since 1932, voters have consistently rejected various ballot initiatives and constitutional amendments aimed at implementing a personal or corporate income tax in Washington. The only real progress was the enactment of a 7 percent capital gains tax in 2021, which was allowed to stand because the courts ruled the tax an excise tax rather than a property tax.

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In mid-February, the state Senate approved its version of the millionaire’s tax, S.B. 6346. The bill would impose a 9.9 percent tax on annual personal income over $1 million. The tax applies to household income, meaning married couples and registered domestic partners with combined earnings over that amount would pay.

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Presumably, the delay in starting the tax is designed to allow enough time to fight the tax’s validity through the courts, because if it does pass, it almost certainly will be litigated. The legislation itself states the income tax prohibition “does not apply to the tax” described in the legislation and carefully lays out the reasoning behind the need for the tax in a 2½-page statement of intent.

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Public reaction to the tax is likely to be positive. Most taxpayers will see at least a small tax cut, and polling has shown that Washingtonians generally favor the tax.

Related Coverage:

Bloomberg Law: Massachusetts Loses Billions in Income After Millionaire Tax

• Residents exiting Massachusetts took a net of $4.2 billion in adjusted gross income with them in 2023, after a tax on millionaires took effect.
• The state’s millionaires-tax collections have increased every year since 2023 and so far in fiscal 2026 have jumped 19% year-over-year to $1.3 billion.