Legal challenges to the Legislature’s 2026 income tax law (ESSB 6346) are underway, with more likely to follow. 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 key ways:
- 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.
Additional legal challenges may be filed.
Let’s Go Washington filed a referendum earlier this month, but the Secretary of State blocked it due to the “necessity clause” included in the legislation, a provision intended to prevent certain laws from being subject to referendum. Let’s Go Washington has appealed that decision, and the Washington State Supreme Court is scheduled to hear the case on April 30 to determine the scope of the necessity clause, particularly given that the income tax provisions do not take effect for nearly two years.
If Let’s Go Washington prevails, it will have until June 10, 2026, to gather 155,455 valid signatures to place the referendum on the November 2026 ballot. If the effort is unsuccessful, the group has indicated it will move forward with an initiative instead, either in 2026 or 2027.
An initiative to the people would require 308,911 valid signatures by July 2, 2026. Alternatively, an initiative to the Legislature would require the same number of signatures by December 31, 2026. If the Legislature doesn’t take action on the initiative, then it would go on the ballot in November 2027.
Taken together, these legal and political efforts underscore that the fight over Washington’s income tax law is far from settled. The outcome will carry significant and lasting implications for taxpayers and businesses across the state.
AGC opposed this legislation throughout the legislative process and remains engaged in efforts to overturn it. The association continues to support the ongoing legal challenges to advocate for a fair and constitutionally sound tax structure that protects Washington’s taxpayers and employers.
For more information or how you can get involved, contact AGC’s Michele Willms.