Washington Gov. Bob Ferguson backs an income tax. Will it finally gain traction 94 years after voters once backed it?
OLYMPIA – Ahead of the November 1932 election, organizers in Washington gathered enough signatures to place an initiative on the ballot asking whether the state should adopt a graduated tax on personal and business income to fund schools and other government programs. If approved, the plan called for the state’s property tax to be cut as a way to balance the state’s tax code.
Supporters wrote in the 1932 voters guide that the state was “experiencing the most critical tax crisis in her history.” At the time, land valuations had decreased by 50%, tax delinquencies had increased 35% and the effective property tax rate hovered around 3%.
“This is not only an emergency measure – this is an economically sound step in a long-term tax revision program,” the argument states. “It would compel all to pay taxes for the support of state and local governments in proportion to their ability to pay.”
Voters agreed with the message.
Of the nearly 460,000 residents who submitted their ballots that November, more than 70% voted in favor of the initiative. With the vote, Washington became the 21st state to establish an income tax.
While 21 additional states have established a similar tax since the 1932 initiative, a 1933 state Supreme Court case and more than 90 years of election results have left Washington’s tax system as an outlier compared to most states. Washington is one of nine states without an income tax.
“The Supreme Court, in a decision not replicated anywhere else in the country, ruled that income was property. And under the Washington state constitution, property has to be taxed equally for everybody,” said T.M. Sell, a Seattle-area author and political science professor at Highline College. “So an income tax is not unconstitutional, and the court case that stopped an income tax is questionable.”
In their 5-4 ruling, the justices found that the state must impose a uniform tax rate among payers, rather than a gradual tax that taxes higher-income residents a higher rate.
“You’d just have to have a flat tax. So if the income -tax rate is 10%, everybody pays 10%,” Sell said. “That’s still regressive, in that 10% for a low-income person just means more than for a high-income person. But you’d still generate pretty fair revenue, even with just a flat tax.”
Since the Supreme Court ruling, voters have been asked 10 times whether Washington should establish either a personal income tax or a corporate income tax, ideas that have never received more than 43% of the vote, according to data from the Secretary of State’s office.
Ahead of the 2024 legislative session, more than 440,000 residents signed on to an initiative to the Legislature that prohibited the state, cities and counties from adopting an income tax. The initiative was subsequently overwhelmingly passed by both chambers of the Legislature.
However, it appears some Democratic lawmakers, and Gov. Bob Ferguson, think voters may again be open to the message behind the 1932 initiative.
“From my standpoint, I think the issue is clear. I think the choice is clear for members of the Legislature, and I think the public is ready for this conversation,” Ferguson said during a news conference at the state Capitol on Dec. 23. “And so, I think the time is now. And I’m optimistic it will happen.”
As he released his supplemental budget proposal, Ferguson said he would support a 9.9% income tax on those who make more than $1 million in income a year. Ferguson said the tax would target those making more than $1 million a year in income, not assets, and estimated it would apply to fewer than 0.5% of state residents.
If approved, Ferguson said money from the tax would not fix the state’s current budget shortfall, and would likely not be available until 2029. When implemented, the tax could bring in $3 billion a year to the state.
The proposal, he said, would be tied to reducing sales taxes on baby and hygiene items, expanding the working families tax credit, increasing K-12 school funding and lowering the key tax rate for small businesses.
Ferguson also said he would support writing the income level requirement into state law to ensure that the threshold would not be lowered in future years to apply the tax to more residents.
According to Ferguson, the new “millionaires’ tax” would overhaul the state’s tax system and make it fairer for those with lower incomes. The governor said that, while families in the 20th percentile of income pay 13.8% of their income in taxes, those in the top 1% pay 4.1% of their income.
“That is untenable,” Ferguson said. “We are facing an affordability crisis. It is time to change our state’s outdated, upside-down tax system, to serve the needs of Washingtonians today.”
Ferguson said he knows the tax proposal likely would prompt lawsuits. He also knows that at some point, voters will have the opportunity to weigh in. But he’s confident this time around, the idea will ultimately survive.
“I wouldn’t be supporting a proposal unless I felt confident that we could navigate that path, and also, there’s going to be a public conversation. If this goes forward, there’s going to be a public conversation, there’s no doubt about that, and the people will have their chance to weigh in on it as well,” Ferguson said.
Part of the benefit of allowing voters to decide, Sell said, is that it would both provide cover to politicians who support it and potentially increase buy-in from Washington residents.
“If you didn’t put it on the ballot, it would be political suicide, right?” Sell said. “Something that big, you’re going to want voters to buy in.”
Current tax system
More than half of the revenue the state brought in between July 2024 and June 2025 was through the sales tax, which is among the highest in the country, according to data from the Department of Revenue.
The state’s business and occupation tax brought in the second most, accounting for about 20% of revenue. The tax is based on a business’s gross revenue, rather than its profits, and is charged if a business has $100,000 in combined gross receipts sourced or attributed to Washington or has a physical presence in the state.
The B&O tax includes a flat rate schedule and approximately 200 tax preferences through credits, deductions, exclusions, exemptions and preferential rates, for various industries.
The state’s reliance on a sales tax, Sell said, makes the budget more susceptible to economic downturns.
“It’s either feast or famine. If the economy is doing well, the state collects a lot of money, particularly in sales tax,” Sell said. “But if the economy is not doing well, people stop buying durable and nondurable goods. They cut back their spending, and so the sales tax revenue falls. And then we’re scrambling about how we’re going to still pay for everything.”
The system, Sell said, also means that lower-income residents pay a disproportionate amount of their money into tax.
“We have such a regressive tax system. I mean, the poor pay a much higher share of their income in taxes than do the wealthy. So, they’re understandably hoping to address that,” said Sell, who published the book “Washington State Politics and Government” in 2023. “The problem the Democrats face, I think, is pushing things too far. Like every political movement, they don’t know when to say when.”
Why now?
Part of the reason this idea has found an increasing level of support appears to be a numbers game. With a 20-seat majority in the House of Representatives, Sell said Democrats may feel empowered to make another push.
“I think that Democrats, given such a large House majority, are kind of feeling their oats and thinking ‘We can get away with this. Now is the time,’ ” Sell said.
Another reason, Ferguson said, is the time it will take to actually implement the plan. According to the governor, the state Department of Revenue said it would take until at least 2029 to implement the tax.
“You’ve got to stand up a system, from how I understand it, right? And that’s complicated and takes some time,” Ferguson said. “So, it’s time to start that process.”
Any initiative approved by voters would also almost assuredly result in a flurry of litigation challenging its constitutionality. The time would allow the lawsuits to work their way through the court system without the risk of billions in revenue being removed from the budget, should the courts ultimately rule against the tax.
“I would not be supporting it, if they relied on it. In other words, if they said ‘Hey, we’re going to assume $3 billion in revenue, and we’re going to fund K-12 with that in their base budget. No, because it might not survive a court challenge,” Ferguson said. “I’m confident it will, but it’s not a guarantee.”
What do lawmakers think?
Those who oppose establishing the tax argue, among other things, that it would be expanded, despite assurances from the governor that threshold would be written into state law and never lowered.
In an interview Friday, state Rep. Travis Couture, R-Allyn, the ranking member on the House Appropriations Committee, said his reaction was to “pretty much roll my eyes” when he heard the proposal.
“My top two concerns with the income tax is that, one, it’s unconstitutional, and voters have rejected it over and over and over again, and my second concern is that an income tax on millionaires will soon … become a tax on the rest of us,” Couture said. “I can’t point to a single tax in Washington state that has ever gone away. And I have pretty much zero faith that Democrats, or specifically, the legislature, would lower the sales tax, B&O tax, or other taxes as a result of the income tax.”
If the tax were to be challenged in the state court system, Couture said he does not have “a lot of faith” that the state Supreme Court would rule based on the constitution and state law.
“Because they have a track record of making decisions based on ideology,” Couture said.
State Rep. Jim Walsh, a Republican from Aberdeen and the chair of the state Republican party, sponsored and authored the 2024 initiative that banned the income tax.
In an interview Friday, Walsh said the plan to establish a “millionaires’ tax” is “illegal and unconstitutional.”
“Clearly, what Mr. Ferguson and his supporters in the Legislature are trying to do is create a test case,” Walsh said. “They want to do something illegal and unconstitutional, and then have the court system test their illegal and unconstitutional proposal and come up with some invariably convoluted ruling that says what is unconstitutional is OK.”
While the plan would result in a near-immediate challenge in state court, Walsh believes there “may be a couple of legal theories” that could move the lawsuits to the federal court system, where he thinks “the courts are likely to be less of a rubber stamp to bad ideas as the state Supreme Court is currently.”
Walsh also thinks voters will ultimately reject the idea when given the chance.
“I think it will be negative. I think the governor has proved that he is a poor barometer of what people think about tax policy,” Walsh said.
Following Ferguson’s announcement, Republican legislative leaders signaled than any proposal likely would be passed along party lines.
State Sen. Chris Gildon, R-Puyallup, the Republicans’ budget leader, said in an interview that he “would predict that it not get any Republican support.”
“To caveat that a little bit, if they wanted to remove the sales tax or property tax and swap it for this particular tax, then maybe we can have some discussions along those lines,” Gildon said. “But just as far as adding a new tax to Washington state, I think that’s just a nonstarter for Republicans.
Supporters, however, say the lack of the tax makes the state’s tax system more regressive and forces lower-income earners to pay a disproportionate amount of their money through a high sales tax.
“The reason we rely heavily on sales tax, property tax and business and occupation tax is because there is a tool missing that 41 other states use, which is that they have an income tax,” House Majority Leader Rep. Joe Fitzgibbon, D-Seattle, said during a recent panel discussion. “I recognize that’s been a politically hot topic in Washington for a long time. The last time it was in front of voters was the year I was elected, 2010, and the voters did not support it then. That said, I think it’s a big enough missing piece of our tax code that could make our tax code more sustainable, more fair and, honestly, less reliant on business taxes than it is today, that I think we should be willing to have a tough conversation about that.”
In a recent interview, Rep. Natasha Hill, D-Spokane, said she wants lawmakers to explore the idea in the upcoming session.
“I think, just that big picture of ‘What could an income tax look like and what could it do?’ That’s the great part of the fact that we don’t have one yet,” Hill said. “We get to figure that out and decide for Washington and Washingtonians across our state.”
