Washington's Millionaires' Tax: The Dual Showdown of Initiative 645 and Constitutional Litigation

Washington's Millionaires' Tax: The Dual Showdown of Initiative 645 and Constitutional Litigation

Washington State has become a primary battleground for progressive taxation in 2026. Following the enactment of a landmark progressive tax on high earners, the state faces a simultaneous electoral repeal campaign and a high-stakes constitutional lawsuit that could overturn nearly a century of state tax precedent.

The 9.9% Millionaires' Tax

In early 2026, Washington's Democratic-controlled legislature passed, and the Governor signed, a 9.9% graduated income tax on individual and household earnings exceeding $1 million per year (widely termed the "Millionaires' Tax"). Income below the $1 million threshold is taxed at 0%.

The Electoral Showdown: Initiative 645

In immediate response to the tax, the conservative political action committee Let's Go Washington—sponsored and led by multimillionaire Brian Heywood—launched a massive signature-gathering campaign for Initiative Measure No. I-645 (originally filed as IP26-645).

• Certification: On July 2, 2026, Let's Go Washington submitted over 500,000 signatures to the Secretary of State's office, nearly double the required amount. The measure was officially certified on July 16, 2026, for the November 3, 2026 ballot.
• The Repeal Mandate: If approved by voters, I-645 would:
  1. Repeal the 9.9% Millionaires' Tax on income over $1 million.
  2. Prohibit all state and local governments from imposing any taxes measured by individual income or the receipt of individual income.
  3. Define "income" strictly to block future progressive tax workarounds.
  4. Preserve lower-income tax credits and breaks established under the original law.
• Fiscal Impact: Opponents of the repeal (including the No on 645 coalition, Millionaire's Tax Washington, and the Washington Education Association) argue that repealing the tax would create a $13 billion budget deficit over several years, cutting billions in funding for K-12 public schools, childcare, and higher education. Proponents of the repeal argue that Washingtonians have rejected income taxes ten times historically and that the tax is a slippery slope to a broad-based middle-class income tax.

The Legal Battle: Constitutional Litigation

Parallel to the ballot fight, a major constitutional lawsuit was filed on April 9, 2026, in Klickitat County Superior Court by the Citizen Action Defense Fund (CADF), alongside former Republican Attorney General Rob McKenna and former Democratic Supreme Court Justice Phil Talmadge.

• The Core Argument: The plaintiffs argue that the 9.9% Millionaires' Tax is unconstitutional under Washington's state constitution. Historically, the Washington Supreme Court's 1933 precedent in Culliton v. Chase defined income as "property." Under the state constitution, property taxes must be uniform (levied at the same rate on all taxpayers) and are capped at 1% annually. Because the Millionaires' Tax is graduated (0% under $1 million and 9.9% above) and exceeds the 1% cap, CADF argues it is illegal on its face.
• The Defense: Proponents of the tax argue that the state supreme court's recent validation of the 7% capital gains tax as an "excise tax" rather than an income tax paves the way for modernizing the state's tax structure, which has long been criticized as the most regressive in the nation.

Empirical Context: The 7% Capital Gains Tax Precedent

The ongoing battle over the Millionaires' Tax is heavily informed by the empirical performance of Washington's 7% capital gains tax on gains exceeding $250,000 (enacted in 2021 and upheld by the state supreme court in 2023).

According to an April 2025 report by the Institute for Policy Studies (IPS) and the State Revenue Alliance:

• The capital gains tax successfully raised over $1.2 billion in its first years of collection, funding school construction and early childhood education.
• Despite warnings of a "wealth exodus," the number of millionaires (by net worth) in Washington grew by 46.9% between 2022 and 2024, rising from 463,000 to 681,000 individuals.
• Their collective wealth increased by 45.2% (an increase of over $748 billion), demonstrating that the introduction of high-wealth taxes did not trigger a catastrophic flight of capital or taxpayers.

The outcome of the November 2026 vote on I-645 and the CADF litigation will ultimately decide whether Washington can sustain this progressive revenue model or if it will be constitutionally shut down.