Coming soon: Lawsuit challenging Washington state's 'millionaires tax'

Washington's "millionaires tax" was largely expected to pass its state Legislature this year. It was just as certain that a lawsuit would follow, challenging its constitutionality.

On the heels of Gov. Bob Ferguson signing the tax into law Monday morning, the Citizen Action Defense Fund intends to file such a lawsuit.

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“Since lawmakers and the Governor have chosen to ignore both the constitution and decades of settled case law, we will act,” said Jackson Maynard, executive director of the Citizen Action Defense Fund, in a statement. “This lawsuit is about upholding the rule of law and ensuring that Washingtonians are not subjected to an unconstitutional tax scheme.”

Maynard told KUOW the CADF intends to file its lawsuit over the coming week. Former Washington State Attorney General Rob McKenna is representing the group.

Senate Bill 6346 — or the "millionaires tax" as it was branded by state Democrats — places a 9.9% income tax on residents earning more than $1 million annually (it does not tax the first million earned). It is slated to kick in at the start of 2028. About .5% of Washington households will be affected by the tax, according to the bill. Revenue will be aimed at funding education, health care, the working families tax credit, and other essential services.

The tax passed mostly along party lines with the majority of Democrats supporting it, and Republicans against (11 Democrats joined Republicans in opposition to the tax).

Opponents argue that the tax violates Washington's state constitution. This goes back to a 1933 Washington State Supreme Court decision. The court concluded income is property, and property must be taxed uniformly across all residents.

" That case law is well established; it's been relied on for years," Maynard said. "This is a unconstitutional tax. It's also, frankly, bad policy."

There have been multiple efforts to allow income taxes since the Supreme Court's decision. All were rejected by voters.

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The inability to set tax rates according to income level is one reason why Washington is often said to have the most regressive taxes in the United States.

“Washington’s constitution is clear, and the courts have been equally clear for nearly a century —income is property, and progressive income taxes are unconstitutional under existing law,” McKenna said. “If the State proceeds with the new income tax, it will create a direct conflict with binding precedent and the constitutional protections that safeguard taxpayers. We are preparing to challenge the tax in court.”

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The CADF won't be alone challenging the tax. Jim Walsh, a state representative and chairman of the state Republican Party, has said the local GOP will file three separate legal challenges to the "millionaires tax." One of those challenges will be based on the "necessity clause" written into the tax bill. This clause prevents voters from challenging the law via the referendum process. This lawsuit could come sooner than the constitutional challenge.

The Citizen Action Defense Fund is a non-profit organization that promotes itself as a watchdog group working for "all Washingtonians," often focused on challenging the constitutionality of local government actions. In the past, it has filled lawsuits generally in favor of conservative causes.