Why It Matters
Washington State is on the verge of enacting its first income tax in nearly a century — a development that carries significant implications for the entire Pacific Northwest, including Idaho. The new 9.9% tax on households earning more than $1 million annually could reshape the region’s economic landscape, potentially influencing where high-income earners and business owners choose to live, invest, and operate.
For Idaho, the stakes are real. The Gem State has long benefited from its relatively business-friendly tax environment, and a major tax shift in neighboring Washington could accelerate migration patterns that have already brought tens of thousands of new residents — and their businesses — eastward across the border in recent years.
What Happened
Washington Gov. Bob Ferguson is expected to sign Senate Bill 6346 into law Monday, March 31, making Washington the first state in the region to impose a broad income tax on high earners. The legislation imposes a 9.9% tax on household income exceeding $1 million per year, with collections currently scheduled to begin in 2029.
The bill passed through the Democratic-controlled Washington State Legislature after months of debate following its emergence last fall. Supporters, including unions and progressive advocacy groups, rallied at the state Capitol in February to back the measure, framing it as a fix to Washington’s historically regressive tax structure, which relies heavily on sales taxes.
Opponents, however, are not waiting to mount their response. Legal challenges and ballot measure campaigns are already being organized, and their specific strategies are expected to be made public in the days immediately following the bill’s signing.
By the Numbers
- 9.9% — The tax rate that would apply to household income above $1 million annually under the new law.
- 2029 — The year Washington officials plan to begin collecting revenue under the new income tax, assuming it survives legal challenges.
- 1932 — The last time Washington voters approved an income tax, only to have the state Supreme Court strike it down one year later in a divided ruling.
- 2010 — The most recent year Washington voters rejected an income tax ballot measure, which targeted incomes above $200,000.
- 9 — The number of states, including Washington until now, that do not tax individual wage and salary income — a list that previously included Washington alongside states like Texas, Florida, and Nevada.
The Fight Ahead
Opponents are expected to file a lawsuit challenging the law’s constitutionality within days of the governor’s signature, citing the 1933 Washington Supreme Court ruling that struck down a previously voter-approved income tax. Rob McKenna, a former Washington attorney general and 2012 Republican gubernatorial candidate, is among those working to build the legal challenge.
Likely plaintiffs in the lawsuit include small business owners, family business operators, and technology entrepreneurs — not high-profile celebrity millionaires who have publicly voiced opposition. The suit would be filed in a county superior court, though observers expect all parties to ultimately appeal directly to the Washington State Supreme Court for a definitive ruling.
A separate electoral strategy is also being developed, though its timing remains less certain. Opponents are exploring the possibility of placing a repeal measure before voters, potentially in 2026 given its election cycle overlap. History suggests voters have been skeptical of income taxes — rejecting various forms of the idea multiple times over the past several decades.
“There’s a legal fight and a public relations battle shaping up on day one,” said Sandeep Kaushik, a partner with Seattle-based Sound View Strategies. “The signing of the bill is just the start of it.”
Zoom Out
Washington’s move represents a significant departure from the economic policy consensus that has long defined the Pacific Northwest and Mountain West. Nine states currently impose no income tax on individual wages or salaries, and that group has historically attracted high-income residents and business investment from higher-tax states.
Idaho, which already has seen substantial population and business growth from California and Washington transplants, could stand to benefit further if wealthy Washington residents and business owners choose to relocate. Real estate professionals and economic development officials in northern Idaho communities like Coeur d’Alene and Post Falls have already noted the trend of high-net-worth individuals crossing the state line.
What’s Next
Gov. Ferguson is expected to formally sign the bill into law Monday. Following the signing, opponents plan to make their legal and electoral strategies public within days. A constitutional lawsuit is the most immediate expected development, with a lower court ruling likely followed by a direct appeal to the Washington State Supreme Court. Any ballot measure campaign targeting a repeal would face its own timeline tied to Washington’s election calendar. Revenue collection under the law, if it survives all challenges, is not set to begin until 2029.
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