Governor Bob Ferguson has signed a new “millionaires” income tax into law, marking a major shift in Washington’s tax policy and raising serious concerns for contractors and other businesses across the state, especially those operating as pass-through entities. AGC joined a broad coalition of business organizations that urged the Governor to veto ESSB 6346.
Despite being framed as a tax on households earning more than $1 million annually, many construction businesses fall directly in its path. A large share of contractors are structured as pass-through entities, meaning business income is reported on the owner’s personal tax return. This policy will impact contractors who are reinvesting in their companies, hiring workers, purchasing equipment, and expanding operations.
At a time when contractors are already facing higher taxes, rising costs, tight margins, and heavy regulatory pressure, this adds a new burden and injects further uncertainty into an already challenging environment. More broadly, it sets a troubling precedent. Washington has long rejected income taxes, and this move signals a clear step toward a broader income-based tax system where all people and businesses could be taxed.
AGC strongly opposes the Governor’s decision to sign this legislation despite clear warnings from the employer community about the risks to investment, job creation, and the state’s economic competitiveness.
This fight is far from over. Multiple lawsuits are expected to be filed challenging the constitutionality of the tax, and momentum is already building toward a statewide ballot measure to allow voters to vote overturn it.
The Citizen Action Defense Fund (CAFD) has retained former Attorney General Rob McKenna to lead its legal challenge and is expected to file suit within days.
AGC will remain fully engaged and continue pushing for a stable, predictable business environment. We will keep members informed as legal challenges move forward and as opportunities emerge for contractors to get involved.
If you have questions, contact AGC’s Michele Willms.