Governor Bob Ferguson signed legislation into law Monday, creating Washington’s first income tax on households earning more than $1 million per year.
The revenue generated from the tax is earmarked for health care, education, public safety, and support for small-business owners.
Ferguson described the move as a necessary step to address the state’s tax structure.
“So Washington, as we know, has one of the most regressive tax systems in the country,” Ferguson said. “Asking the most for those with the least.”
Under the new law, the first $1 million of annual household income remains untouched by the state. The 9.9% rate applies only to every dollar earned beyond that threshold.
Terrence Jeffery Santos, a small-business owner, said the tax provides hope for those in the service industry who struggle with low profit margins.
“For anyone who has operated or owned a restaurant knows that we survive on slim margins, but with this millionaire’s tax, I have hope.”
Santos said republican leaders have criticized the measure and the data used by the governor’s office to support it.
Jim Walsh, chairman of the Washington State Republican Party, questioned the administration’s claims regarding the number of residents who will be impacted.
“They are still sticking to their fiction that this is only on half of a percent of the households in Washington,” Walsh said.
Several groups are already preparing for legal battles, arguing the tax violates Article 7 of the Washington state constitution.
Jackson Maynard, with the Citizen Action Defense Fund, said the nonprofit plans to file a lawsuit in the coming days.
Maynard noted that the constitution defines income as property, which places specific restrictions on how it can be taxed.
“And it specifically says that income is property and therefore it is subject to the restrictions in that constitutional provision,” Maynard said.
The Citizen Action Defense Fund has hired former Washington Attorney General Rob McKenna to serve as lead counsel for the challenge.
Maynard expressed concern that the tax will eventually be expanded to include more residents across the state.
“The reasonable fear that the legislature is not going to stop with the folks they’ve identified in this legislation now, but that they are going to have an income tax for everybody,” Maynard said.
Some high earners in the state’s technology sector have dismissed suggestions that the tax will cause a mass exodus of wealthy residents.
Bryan Kirshner, a tech executive, said he intends to stay in Washington despite the new requirements.
“For those saying us rich folks will leave if taxed, I can promise you we won’t pack up on mast,” Kirshner said. “And if any who leave will be replaced.”
The millionaire’s tax is scheduled to take effect in 2028. State officials expect the first payments under the new law to be due in April 2029.