Washington enacts tax on income over $1 million, sets up constitutional fight

March 31, 2026 – Washington state has moved closer to adopting a graduated income tax, after Gov. Bob Ferguson signed legislation Monday creating a 10% levy on income above $1 million beginning in 2028.

The measure applies only to high earners, but $1 million is not what it used to be, especially in Washington state, about one third of whom are concentrated in King County.

The broader implications extend far beyond millionaires and raise the question about whether this is the starter pack for expanding the income tax to other Washingtonians. Washington is one of the few states without a personal income tax, and repeated attempts to impose one have run headlong into the state constitution.

Some in the Alaska Legislature are making a similar play, to reenact an income tax on Alaskans. Alaska repealed its income tax in 1980 and remains, to this day, the only state to ever repeal an income tax.

In Washington, Article VII, Section 1 of the state constitution requires that taxes on property be uniform across the same class. In a landmark 1933 decision, the Washington Supreme Court ruled in Culliton v. Chase that income qualifies as property, meaning a graduated income tax, where higher earners pay higher rates, violates the uniformity requirement.

The case arose after voters approved a graduated income tax during the Great Depression. The court struck it down, concluding that because income is property, it must be taxed uniformly, not progressively. That ruling has remained the controlling interpretation for more than 90 years, with courts repeatedly reaffirming it and voters rejecting income tax proposals at the ballot box multiple times.

Under that framework, a graduated income tax, such as Washington’s new 9.9% tax on income above $1 million, would appear to conflict with the constitution unless the constitution itself is amended.

Supporters of the new law argue that recent court decisions have opened a pathway. In 2023, the Washington Supreme Court upheld the state’s capital gains tax by classifying it as an excise tax on transactions rather than an income tax, allowing it to sidestep the Culliton precedent.

Critics say that decision effectively redefined income in order to avoid constitutional limits, creating a template for broader taxation. By applying a new tax structure to high earners, opponents argue lawmakers are attempting to impose an income tax without going through the voter-approved constitutional amendment process.

Washington Democrats have pursued an income tax for decades, but prior efforts failed either in court or at the ballot box. The constitution’s uniformity clause, requiring taxes on property to be applied equally, has been the central obstacle.

Because the constitution defines property broadly to include “everything, whether tangible or intangible, subject to ownership,” income has historically fallen within that definition. That interpretation is what made graduated rates unconstitutional under existing precedent.

The newly signed law is expected to face legal challenges before it takes effect in 2028. Opponents argue the measure directly conflicts with long-standing constitutional protections, while supporters believe recent court rulings signal a shift in how Washington’s judiciary may interpret tax authority.