(The Center Square) – On the same day Washington Gov. Bob Ferguson is signing the income tax bill into law, opponents have announced they are filing a legal challenge.
Former Attorney General Rob McKenna is leading efforts for the Citizen Action Defense Fund, a nonprofit billing itself as “helping to ensure that state and local governments play by the rules and that the public’s constitutional rights are protected.”
The nonprofit says the proposal expected to be signed before lunchtime is unconstitutional.
ESSB6346 would create a 9.9% tax on annual income above $1 million.
Following the release of a legal memorandum during the legislative session authored by McKenna outlining the measure’s constitutional defects, Citizen Action Defense Fund retained McKenna.“Washington’s constitution is clear, and the courts have been equally clear for nearly a century – income is property, and progressive income taxes are unconstitutional under existing law,” said McKenna in a release Monday.“What’s sad is that the governor is using hungry kids who need lunch as pawns in a gambit to pass an unconstitutional tax,” Executive Director Jackson Maynard told The Center Square Monday. “If the governor and Legislature really wanted to help kids who need a free lunch at school, they would make it the first priority in the budget instead of risking it on funding that is not reliable.”He noted that the capital gains excise tax generated way less revenue than expected.“And the estate tax was so bad that the legislature repealed it in a year,” he said. “Why would they bet on a risky income tax if they actually wanted to help hungry kids?”Ferguson is expected to sign legislation Monday morning.The tax, should it survive a legal challenge, and a potential initiative repeal effort, would be applied starting in calendar year 2028.
Seven percent of the revenue would be dedicated to revenues for city and county public defense services. Some proceeds would expand the Working Families Tax Credit and to increase the business and occupation tax credit for small businesses.
Some hygiene products including diapers would be sales tax exempt, and sales taxes on certain specified services, which were enacted in 2025 in ESSB5814 would be repealed.
The rest of the profits would go into the general fund.
Opponents, including McKenna, told The Center Square if the legislation is upheld by the courts, it will most certainly expand to include taxing income of much less than a million dollars, and eventually all earned income.
“There’s really nothing new here,” McKenna told The Center Square in February, explaining that up until now, lawmakers have attempted to get a constitutional amendment passed, so they could impose an income tax, as Washington’s constitution states income is property. “Every 10 to 20 years we go through this process where a group of legislators decide we just can’t live without a state income tax.
“To pretend income is not property, just doesn’t pass the laugh test. Voters will think that’s crazy.”
Somewhere between 20,000 and 30,000 households in Washington are expected to pay the proposed “millionaires’ tax,” to generate roughly $3.5 billion annually.
Business groups have also sounded the alarm about businesses leaving the state to avoid the tax.
Morgan Irwin, government affairs vice president for the Association of Washington Business, said, “We did a couple of different surveys at AWB, and in our last quarterly update we asked our members how many are considering moving their domicile, where their taxable address is outside of the state of Washington. About 500 employers responded and 44% of the respondents said yes.”
Irwin said the numbers are even higher on the other side of the state.
“If you look at just eastern Washington, the percentage flips with 56% of business owners saying they plan to move their domicile,” she said.
