Opponents sue to block Washington's new 'millionaires tax'

Jim Brunner, The Seattle Times on Apr 9, 2026

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SEATTLE — Washington’s new high-earners income tax drew an anticipated legal challenge Thursday as opponents announced a lawsuit arguing the law violates the state constitution.

The lawsuit was filed in Klickitat County Superior Court on behalf of several business owners and organizations represented by former Washington Attorney General Rob McKenna and former state Supreme Court Justice Phil Talmadge.

In an online news conference Thursday morning, McKenna said the tax “clearly flies in the face of the constitution, of precedent and voter will.” He pointed to a series of court decisions dating back to 1933 that have banned graduated income taxes as illegal taxes on property.

The Citizen Action Defense Fund, a conservative nonprofit, is spearheading the legal challenge, which the group’s executive director Jackson Maynard called “one of the most significant cases in the history of our state.”

Gov. Bob Ferguson signed what backers have labeled a “millionaires tax” on March 30, enacting a 9.9% tax on income of more than $1 million a year. If the law survives the lawsuit and an expected ballot initiative, tax collections are set to begin in 2029.

The new tax will generate an estimated $3 billion to $4 billion a year, with most of the proceeds dedicated to the state operating budget, though lawmakers directed some proceeds to tax cuts for state residents and businesses.

State Attorney General Nick Brown’s office will represent the state in seeking to uphold the tax.

“We will be defending the constitutionality of this law in court and expect to prevail. We’ll preserve our legal arguments for the anticipated filings,” said Mike Faulk, a spokesperson for Brown, in an email.

The lead plaintiffs in the lawsuit are Benjamin and Lauren Petter, who own a Chelan County construction business and would be subject to the new tax. Other plaintiffs include a Klickitat County farmer and a Kent trucking company owner, who also would be subject to the tax.

The state Department of Revenue and its director John Ryser were named as defendants.

At stake in the legal dispute is a new levy that supporters say will bring in billions of dollars to fund important services while reforming a state tax system that has let the wealthiest residents off lightly.

Opponents argue that the tax, if upheld, will kill Washington’s competitive advantage, lead wealthy entrepreneurs to relocate and eventually get expanded to apply to many more residents.

The legal arguments will revisit a Depression-era legal ruling that has long made it much more difficult to impose graduated income tax similar to the federal tax that has higher rates for wealthier taxpayers.

In the 1933 Culliton v. Chase decision, the state Supreme Court struck down a progressive income tax approved by voters, ruling that income is property and therefore can only be taxed at a low, flat rate.

That 5-4 decision has set a binding legal precedent for nine decades and has never been overturned.

McKenna said Thursday that the legal question is simple. The state constitution defines property broadly and says it can only be taxed at a flat 1% rate.

The right way to enact a progressive tax like the so-called “millionaires tax” is to propose a constitutional amendment — like several past Legislatures and governors have attempted, Talmadge said.

“I support the idea of tax reform in Washington that could include an income tax,” Talmadge said, but “the bottom line here is the Legislature has to enact this kind of change in the law by a constitutional amendment.”

But Democrats and some legal experts have long argued that the Culliton decision was flawed and has made Washington an outlier among states in treating income as property.

Before the signing of the high-earners income tax, Washington was one of nine states with no income tax.

State Sen. Jamie Pedersen, D-Seattle, the prime sponsor of the new tax law, has said part of the goal is to get the court to reverse the Culliton ruling, allowing Washington to build a tax system less reliant on taxes that disproportionately hit the poor.

McKenna, a Republican, served as Washington’s attorney general from 2005 to 2013. Talmadge, a Democrat, served in the Legislature and on the state Supreme Court from 1995 to 2001. They previously teamed up successfully on efforts to block a Seattle income tax.