OLYMPIA -- The Washington Legislature has reignited one of the state's longest-running political debates this session with a proposal to tax high-income earnings for the first time, pairing a new state income tax on millionaires with a contentious "necessity clause" that could limit voters' ability to challenge the law at the ballot box.
The Washington Senate approved an income tax targeting those earning more than $1 million annually this week, but a provision shielding the measure from voter referendum has triggered a parallel fight over how, and whether, the public will get a say.
Senate Bill 6346, backed by Democratic leaders, would impose a 9.9% tax on personal adjusted gross income above $1 million beginning Jan. 1, 2028. First payments would be due in April 2029. Legislative staff estimate the tax would generate about $3.5 billion annually and affect roughly 30,000 taxpayers.
After revisions by Senate lawmakers, the bill would exempt businesses with $300,000 or less in gross revenue from the state's business and occupation tax and provide partial relief up to $600,000 -- changes supporters say would exempt more than 70% of small businesses from the B&O tax. The measure also doubles the charitable deduction to $100,000 and adjusts the $1 million income threshold annually for inflation beginning in 2029.
Democratic leaders say the tax will generate revenue for the general fund and that it is a long overdue remedy to a state tax system heavily reliant on regressive taxes.
Critics argue the tax could set a precedent for broader taxation beyond millionaires and fails to address the state's projected $4.3 billion shortfall in the 2027-29 biennium. They also point to Washington voters' history of rejecting income tax proposals at the ballot box, saying the Legislature should not sidestep that history.
But another flashpoint is a provision deep in the bill declaring the new tax "necessary for the support of the state government and its existing public institutions." Under the Washington Constitution, laws deemed necessary for government operations cannot be suspended by referendum for a public vote.
Instead, opponents would have to pursue a full initiative campaign to repeal the law after it takes effect -- a longer and more expensive process that requires roughly twice as many signatures to secure a statewide vote.
Senate Minority Leader John Braun, R-Centralia, argues the tax does not meet the standard of "immediate necessity," pointing to its delayed implementation, with first payments not due until April 2029.
"If there's one thing that they could change to go to the governor, it would be to take out the necessity clause so this could go to a vote of the people in a referendum like it should," Braun told reporters on Tuesday.
Republicans attempted to remove the clause during Monday's floor debate with an amendment sponsored by Sen. Drew MacEwen, R-Mason. It failed on a 28-21 vote.
The Senate passed the bill, with the clause retained, in a 27-22 vote.
Braun called the proposal the most consequential bill of the session -- "possibly even in the last decade" -- and said Democratic leaders are ignoring public sentiment and unfairly targeting businesses.
Sen. Jamie Pedersen, D-Seattle, the bill's prime sponsor, argued on the Senate floor Monday that including the necessity clause does not preclude a citizen's initiative, which he expects to appear on the November ballot.
"We fully expect that this is going to be in front of the voters for a determination by them,"
he said.
Gov. Bob Ferguson, who has expressed support for a so-called "millionaires tax," did not respond to request for comment about the bill's necessity provision.
Washington courts have historically given the Legislature broad discretion in determining what qualifies as "necessary," but critics argue the designation can be used to insulate controversial policies from voter review.
If enacted, Washington would no longer be one of nine states without a broad-based personal income tax on wages and salaries. The bill now moves to the House for consideration as the Legislature approaches its March 12 adjournment deadline.