Washington’s New Millionaire Tax Faces Constitutional Lawsuit
Washington’s just-enacted 9.9% millionaire income tax faces a constitutional lawsuit days after passage.
Why it matters: With major implications for high-net-worth clients and entities in Washington, the legal challenge could reshape tax planning, compliance, and litigation strategies for law firms advising top earners and corporate clients statewide.
- Gov. Bob Ferguson signed the 9.9% tax on income over $1 million into law on March 30, 2026.
- A lawsuit was filed April 9, 2026, claiming the tax violates the state constitution's uniformity clause.
- Rob McKenna, former Attorney General, represents plaintiffs challenging the law.
- Roughly 20,000 households—or less than 1% of Washingtonians—are expected to be affected.
Washington State has moved to impose a 9.9% income tax on annual earnings over $1 million, with the law signed March 30, 2026, by Governor Bob Ferguson and taking effect January 1, 2028. The tax—projected to raise $3.5 billion annually—will see first payments due in April 2029.
- A lawsuit filed in Klickitat County Superior Court on April 9, 2026, marks an immediate legal challenge to the measure. Plaintiffs, represented by former Attorney General Rob McKenna, argue the law breaches the state constitution's uniformity clause by imposing a targeted tax.
- Washington’s constitution has historically been interpreted to bar non-uniform property taxes—including income taxes—prompting similar legal fights with recent tax proposals. McKenna stated, “This law disregards both the plain language of the constitution and decades of consistent Supreme Court precedent.”
- The tax affects fewer than 1% of state households (about 20,000), all with incomes above $1 million. It features a standard deduction—$1 million per household, indexed for inflation—and excludes income from sales of real estate and family-owned small businesses.
- Revenue is earmarked for public programs like K-12 education, health care, human services, and child care via the Fair Start for Kids account. The law will also expand the Working Families Tax Credit to an additional 460,000 households starting in 2028.
Supporters, including Senate Majority Leader Jamie Pedersen, called the change historic and vital for balancing an “unfair system,” while critics stress constitutional and economic risks. The court’s response could set precedent on high earners’ tax obligations, directly impacting legal and tax strategies for affected entities and advisory professionals.
By the numbers:
- 9.9% — Tax rate on annual income above $1 million
- $3.5 billion — Estimated annual revenue from the tax, starting 2029
- 20,000 — Approximate number of households affected (less than 1% of state residents)
Yes, but: The timeline for court rulings on the lawsuit remains unclear, leaving significant uncertainty for planning.
What's next: Washington courts will consider the lawsuit against the tax, with broader tax planning implications hinging on constitutional interpretation.