New WA ‘Millionaires’ (Income) Tax Might Not Survive Courts–Why It’s Important

The much-argued millionaire's tax you've heard a lot about in WA State is something you need to pay attention to, if it survives expected court challenges.

  Here's Why It's Important To You

Senate Bill 6346 places a 9.9 percent tax on people who make $1 Million or more annually.  The tax also applies to couples whose combined income is over $1 million. It's slated to begin collections in 2029.  The tax would be the sixth highest in the US behind states like CA, (13.3 percent),  Hawaii (11.1), New York, (10.9) and others.

You might think, I don't make anywhere near that. But the way the bill is written, that million dollar threshold can be easily and quickly lowered during legislative sessions, and opponents say it could soon hit people who make 'only' $250-300,000 a year. The bill was written so the legislature could lower that level, without public vote or a referendum to the people.

  The Tax is Readly Triggering Business Departures

A number of businesses, those who can, are doing cost-benefit analysis to see if they can leave. Some can, some can't. But it has begun.  These migrations have a ripple effect on the rest of the economy, including other business, goods, services and prices.

   The Tax is Actually an Income Tax, Which is Illegal

The WA State Constitution, supported by a 1933 State Supreme Court Ruling, forbids any kind of income tax.  9 times in state history, including 1934, 1936, 1938, 1942, 1944, 1970, 1973, and as recently as 2010, voters have decisively rejected ballot measures to amend the Constitution and allow an income tax.   In 1932, they did pass a income tax, but a year later it was struck down by the State Supreme Court.

Former WA State Attorney General Rob McKenna, writing for The Center Square, says the new tax is illegal. 

   In a 'Normal' World, This Bill Would be Dead in The Water, But...

We don't know the exact number, but multiple lawsuits will be filed against the bill. Given the massive legal precedence against it, it should die a quick death.  But given the recent decisions by the State Supreme Court, we honestly don't know.

In 2022, the WA Capital Gains Tax went into effect. It was challenged in court because capital gains are considered a form of income, and therefore violated the State Constitution.  Capital gains are monies from the sale of stocks, bonds, jewelry, vehicles etc.  The IRS considers capital gains as income.

  It Was Challenged in Court

When lawsuits against the Cap Gains Tax were heard, the State Supreme Court ruled it was an excise, or transactional tax, NOT capital gains, and upheld it.  The decision made them the laughingstock of the national legal community. So, we have no idea how they will rule, but, the Income Tax will be fought in court.

  Why You Need to Pay Attention

Most of us may not make a million a year, but given all this information, it could very well, in the next couple of years, trickle down to us  and, whammy!