Washington’s Millionaires’ Tax Exempt From Referendum

The Washington Supreme Court has denied a taxpayer’s proposed ballot referendum on the state’s new so-called millionaires’ tax, saying the tax falls under an exception to the constitutional right to subject legislation to a popular vote.

Gov. Bob Ferguson signed S.B. 6346 in late March; the bill imposes a 9.9% tax on Washington annual taxable income exceeding $1 million per household. The first payments are due in 2029 for tax year 2028. (See our previous Alert, Washington Enacts Millionaires’ Tax, Changes to Estate Taxation.)

The tax’s constitutionality is unclear, and legal challenges have started. But the state’s high court denied taxpayer Brian Heywood’s petition to place the tax on the November ballot, citing the state constitution’s referendum power as support. The court said that power provides an exception for laws necessary to support state government, which include revenue-generating measures. The court noted that S.B. 6346 “undisputedly generates revenue for the state’s existing institutions” and that its justices have “long held that such laws are not subject to popular referendum.” While a referendum is off the table, the tax still could reach the ballot via the initiative process, which requires 308,911 signatures, about twice that of a referendum. 

Opponents of the tax have also filed suit in Petter v. Washington, arguing that the tax violates Article 7 of the state constitution requiring uniform taxation of property and a 1% maximum rate. They will argue that the state should follow Culliton v. Chase, 25 P.2d 81 (Wash. 1933), a landmark case holding that income should be considered property, thus invalidating a progressive income tax.