The AGC Board of Trustees recently took an official position in support of the initiative to repeal the income tax legislation recently passed by the Legislature and signed into law by Governor Ferguson.
AGC strongly opposed the legislation as it wound through the legislative process and expressed particular concern about the new tax’s impact on pass-through businesses such as S Corps and LLCs.
Signatures to get the initiative, known as “Initiative Measure No. IP26-645”, on the November ballot are underway. Let’s Go Washington, the organization leading the signature gathering, notes that about 165,000 signatures have been collected already; about 400,000 need to be collected by July 2 for it to qualify for the ballot.
Interested AGC members are urged to visit the Let’s Go Washington website and order and share signature sheets or to find locations to sign a petition. AGC will work to have petitions available for signing at pertinent AGC events.
Meanwhile, legal challenges to the income tax law are underway. The new law imposes a 9.9% tax on household earnings above $1 million, a significant policy shift that would impact passthrough businesses, including many in the construction industry. The new income tax is scheduled to take effect on January 1, 2028, with collections beginning in 2029.
On April 9, the Citizen Action Defense Fund (CADF), represented by former Attorney General Rob McKenna and former State Senator and Supreme Court Justice Phil Talmadge, filed a lawsuit in Klickitat County Superior Court challenging the constitutionality of the new income tax.
The complaint argues that the income tax violates Article VII of the Washington Constitution in two keyways:
- It creates a non-uniform property tax by applying different rates to similar income; and
- It exceeds the constitutional 1% limit on property taxes, with a rate reaching 9.9%.
In addition to these constitutional arguments, the lawsuit notes that Washington voters have rejected income tax proposals ten times over the past 92 years, highlighting a long history of public resistance to such measures. The case is expected to go to the Supreme Court but will take many months if not years to conclude.
For more information about the income tax law or the initiative to repeal it, contact AGC Lobbyist Michele Willms.