Washington approves 9.9% "millionaires' tax," faces legal and fiscal hurdles

Washington lawmakers this session approved a 9.9% tax on households with more than $1 million in annual income, a package the Legislature expects will raise about $3 billion a year to fund education, child care, expansion of the Working Families Tax Credit and some sales-tax reductions.

Panelists on Seattle Channel'9s City Inside Out described the measure as politically and legally precarious. "There's going to be a fight in the courts about whether it's constitutional or not," said Paul Queary, editor of The Washington Observer, pointing to a long-standing constitutional debate over income taxation in the state. Sarah Mizes-Tan, state government reporter for KUOW/KNKX, said, "I think absolutely we're going to be expecting court challenges." The program also noted the tax will not generate revenue for several years under the enacted timetable.

Journalists on the panel highlighted how the bill changed in ways that complicate plans for some services. Shauna Sowersby of The Seattle Times said the package initially included an earmark for public defense (first discussed as a 5% carve-out and later a 7% carve-out) but that a late amendment offered by Rep. April Berg removed those dedicated funds. "They replaced that with some kind of all-purpose money for local governments," Sowersby said, and she warned that the state still lacks a clear, long-term plan to shore up public defense funding.

Panelists also discussed short-term budget moves tied to the package. The session'9s budget used several one-time measures and a transfer from the LEOFF 1 pension fund described in the discussion as roughly $3 billion to balance near-term books; however, panelists warned the budget is projected to be in deficit again by 2028, with one cited projection above $800 million. Paul Queary said legislators made some spending commitments in anticipation of revenue that will not arrive for years.

What happens next is likely to be a combination of court fights and political contests. Panelists said the bill includes provisions intended to limit a standard referendum mechanism, and they also expected repeal efforts or initiative campaigns. The panel noted the outcome could be decided in courts and, potentially, by voters in coming elections.

The package significantly reshaped priorities in Olympia this session but left outstanding questions about funding for public defense, the durability of projected revenues and the political consequences for lawmakers who supported the measure. The next steps to watch are legal filings, any ballot initiatives seeking repeal and how lawmakers and local governments manage the near-term budget shortfalls.