OLYMPIA, Wash. — Washington lawmakers are expected to adjourn their 2026 session Thursday night after approving a new “millionaires tax” that supporters say will rebalance the state’s tax code, and critics call an unconstitutional step toward a broader income tax.
The measure would impose a 9.9% tax on annual income above $1 million. Democratic Gov. Bob Ferguson has championed the proposal and said he plans to sign it.
Ferguson argues the tax is narrowly targeted and paired with new affordability measures. In a televised interview Thursday morning, he said the tax “only applies if you literally make more than a million dollars in a year” and would affect “less than one-half of one percent” of Washington residents. He said the revenue would fund rebates and other programs aimed at helping families.
Among the items Ferguson highlighted are expanded tax rebates for working families, with payments ranging from $300 to $1,300, and universal free school breakfasts and lunches for K-12 students.
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Senate Majority Leader Jamie Pedersen, the bill’s prime sponsor, described the measure as a long-term policy decision rather than a short-term fix. In an interview on the session’s final day, Pedersen said lawmakers were “planting a seed for the future” to address a budget shortfall projected three years from now. He noted the new tax would not address the fiscal year 2027 gap, which begins July 1.
What happens next is likely to unfold in courtrooms and at the ballot box as much as in the Legislature.
Ferguson said he expects a legal challenge and called that “appropriate,” adding that the state Supreme Court would ultimately decide the issue. He also predicted a political battle with voters, describing it as a case for “the court of public opinion” as opponents seek repeal.
Pedersen acknowledged that possibility. Asked what would happen if the tax were blocked by litigation or repealed through an initiative, he said future lawmakers would again face the same options: deeper spending cuts or alternative revenue sources.
Opponents are already outlining their strategy.
Initiative sponsor Brian Heywood, who has financed several conservative ballot campaigns in recent years, called the session “shameful” and accused Democrats of knowingly passing measures “against the Constitution.” He said lawmakers lacked the support to pursue a constitutional amendment and send an income tax proposal to voters directly.
RELATED: Washington House passes millionaires tax 52-46 after day-long debate
Heywood said he is considering several options, including launching an initiative campaign, but may first focus on the November elections by targeting lawmakers who supported the tax. He also said the bill’s emergency clause makes a referendum difficult and described evaluating several strategies for mounting a response.
Business groups said they are preparing for a prolonged debate over the state’s economic direction.
Rachel Smith, president of the Washington Roundtable, said voters are concerned about affordability and warned against the state becoming a tax “outlier.” She welcomed lawmakers’ decision to roll back last year’s estate tax increase, calling it positive for family-owned businesses, but criticized what she described as a broader trend of layering major taxes.
Smith said her organization expects a legal challenge and will continue advocating for “economic competitiveness,” “budget sustainability,” and broader tax reform, regardless of whether the new tax withstands scrutiny.
Lawmakers also approved an estate tax rollback, lowering the top rate to 20% from 35%, which had been the highest in the nation. Pedersen said the change was part of broader negotiations surrounding the millionaire’s tax, even though it created political tension in his district. He said the previous estate tax increase had made Washington an “outlier” and encouraged tax-avoidance behavior, more so than the new income tax proposal is likely to.
