Ferguson signs ‘historic’ income tax as efforts to stop it begin

OLYMPIA — As a sea of supporters celebrated inside the State Reception Room on Monday morning, Gov. Bob Ferguson signed a personal income tax on millionaires to end the most closely watched legislative discussions in state politics in recent history.

“It’s been a long journey to get here,” Ferguson said Monday morning. “But because of so many folks, it’s a historic day for Washingtonians.”

While Washington is currently one of only nine states without an income tax, the bill would impose a 9.9% tax on income for joint filers or individuals with incomes above $1 million starting in 2029, with the money used to cut other kinds of taxes, as well as boost spending.

The tax is estimated to bring in around $3.5 billion a year to the state when it takes effect until 2029.

“I’m proud to be here today to celebrate the most substantial progressive tax reform in our state’s history,” primary sponsor and Senate Majority Leader Jamie Pedersen, a Democrat from Seattle, said Monday. “A broad coalition of labor, business and progressive stakeholders came together to bring to life a reform that will make life better for everyone in our state.”

The governor has repeatedly noted that less than 0.5% of residents would pay the tax, and said a significant portion of the revenue would go back to residents in the form of rebates and tax cuts.

Ferguson said Monday that in the first year of the tax, “more than 40% of the revenue collected will go directly back to Washingtonians.”

Ferguson cited many of the provisions – including an expansion to the Working Families Tax Credit, universal free school meals for K-12 students, sales tax exemptions on diapers and over-the-counter medicine, cuts to small business taxes and an increased tax cut for small businesses – as key pieces of tax relief that got him to support the legislation.

“In addition, of course, to sending money back to Washingtonians and small business owners, this bill will be making important investments, and that’s an understatement, into affordable healthcare, long term care, quality K-12 education, all of the key programs that make Washington state great,” Ferguson said. “This is, truly, a historic step forward on rebalancing our tax code. It’s the right thing to do for Washington’s working families, it’s the right time to do it and it’s the right policy.”

While Ferguson and Democratic lawmakers have touted the benefits that the bill will provide, conservatives in the state have repeatedly argued the tax directly violates the state’s constitution.

Ahead of the bill signing, Senate Republican leadership urged the governor to veto the legislation, writing that the tax is “unconstitutional, unlawful, unpopular, unnecessary and unfair.”

“Today is a dark day in our state’s history. Republicans have said all along that an income tax on anyone in our state will become an income tax on everyone,” Senate Minority Leader John Braun, a Republican from Centralia, said in a statement.

Opponents also announced several challenges to legislation Monday, both at the ballot box and in the courtroom.

On Monday, the Citizens Action Defense Fund announced it is preparing a lawsuit against the tax, which will be filed in court “in the coming days.” The law firm has retained former Attorney General Rob McKenna, a Republican who preceded Ferguson in the office, to lead the challenge.

“Washington’s constitution is clear, and the courts have been equally clear for nearly a century – income is property, and progressive income taxes are unconstitutional under existing law,” McKenna said in a statement. 

Brian Heywood, who founded Let’s Go Washington, announced Monday the organization had filed a referendum against the tax.

“We are filing this referendum to repeal Governor Ferguson’s unconstitutional income tax because unlike King Bob, we believe that the framers of our state’s constitution meant it when they wrote that ‘all political power is inherent in the people and governments derive their just powers from the consent of the governed’,” Heywood said in a statement.