Legal Challenges Emerge Against Washington’s Income Tax on High Earners
The newly implemented income tax on high-income earners in Washington state is already facing opposition. Detractors claim it breaches the state constitution and may negatively impact small businesses.
Set at 9.9%, this tax applies to individuals and households earning $1 million or more—a significant departure for states that have typically shunned conventional income taxes.
The legislation was passed on March 11 and subsequently signed into law by Governor Bob Ferguson on March 30.
While supporters argue it targets the “very wealthy,” some critics suggest that it could also affect small businesses alongside major employers like Amazon and Starbucks.
Kurt Nuccitelli, who heads Spirit Transport Systems with 14 employees, is among the plaintiffs challenging this tax. He explained that his business profits are taxed as personal income, which could have direct repercussions.
“Washington state is already quite tough on small businesses regarding taxes,” Nuccitelli remarked, noting that this new tax will impact his employees and hinder investments in company equipment.
He elaborated, “Giving them a $1 hourly raise would total over $2,000 by year’s end. This really limits my capacity to grow the company and provide my team a livable wage.”
Historically, Washington state has treated income as property, a stance reinforced by a 1933 Supreme Court ruling. Consequently, the state constitution mandates that income tax must be uniformly applied and capped at 1%, a far cry from the 9.9% rate established by the new law.
In defense of the law, the Washington Attorney General’s Office remains firm. Deputy Director of Communications Mike Faulk stated, “We will defend the constitutionality of this law in court and expect to prevail.” They aim to uphold their legal points against the forthcoming lawsuits.
Nuccitelli has joined a lawsuit initiated by the Citizen Action Defense Fund (CADF), a watchdog organization focused on holding state and local governments accountable.
Prominent figures, such as former Attorney General Rob McKenna and ex-Senator Phil Talmadge, are collaborating with CADF on this case.
Jackson Maynard, an attorney involved with CADF, commented that the state constitution clearly mandates a 1% cap on income tax that must be applied equally across all residents. He believes there’s a robust argument against the tax rooted in previous state Supreme Court decisions.
Furthermore, Maynard criticized the law not only for its legality but also as poor policy, as it undermines a significant advantage for Washington in attracting large businesses.
“Our lack of an income tax is a major reason Washington is a hub for innovation, attracting companies like Starbucks and numerous tech firms. Giving that up would ultimately be detrimental for business,” he said.
Attempts to reach Ferguson’s office for comment were unsuccessful before publication.
