Lawsuit Claims Washington’s 9.9% Income Tax Violates State Constitution
A group of Washington taxpayers and business organizations has filed a lawsuit challenging the state’s newly enacted income tax, arguing the law violates the state constitution’s limits on taxing income.
The case, filed in Klickitat County Superior Court shortly after the measure was signed on March 30, 2026, targets a statute that applies a 9.9% tax to income above $1 million while leaving income below that threshold untaxed. The tax is set to take effect in 2028, with payments beginning in 2029.
The case was brought by individual taxpayers and business groups, including construction and farming operators, a trucking company owner, and trade associations representing small businesses across the state. They argue the tax will directly affect their earnings and operations once it is implemented.
The challenge focuses on how Washington law defines income for tax purposes. Under the state constitution, property is defined broadly to include nearly anything that can be owned, and courts have long held that income falls within that definition. That means taxes on income must follow the same rules as property taxes, which are required to be applied at a uniform rate and cannot exceed 1% annually. The complaint argues the new law violates both requirements by taxing some income at 0% and income above $1 million at 9.9%, well above the constitutional cap.
That framework comes from decades of court decisions, beginning with a 1933 ruling in which the Washington Supreme Court struck down a graduated income tax. Courts have reaffirmed that interpretation over time and have rejected similar efforts to impose graduated income taxes under the same reasoning. The case also highlights the state’s history at the ballot box, where voters have rejected proposals to authorize or impose an income tax ten times, including a 2010 initiative that was defeated by a wide margin.
Lawmakers approved the measure earlier this year after renewed efforts to introduce a tax on high earners. The statute applies only to income above $1 million, includes adjustments tied to inflation, and requires those subject to the tax to file returns with the state. It also sets penalties for failing to comply.
The case also challenges how the law was passed. It points to a provision declaring the measure necessary for the support of state government, a designation that can limit the public’s ability to challenge new laws through referendum. According to the complaint, that step prevents voters from seeking to overturn the tax despite past statewide votes on similar proposals.
Business groups named in the lawsuit argue the tax could affect businesses with uneven or seasonal income, particularly those that rely on strong years to offset weaker ones. They claim that applying a high rate in profitable years could reduce reserves and limit investment.
The lawsuit seeks a court order declaring the law invalid and preventing it from taking effect.
