Washington state voters will decide the fate of Initiative 645 in November. The measure would eliminate a forthcoming 9.9% levy on earnings that carries a statutory exemption of one million dollars and is scheduled to take effect in 2028.

The Washington State legislature enacted the tax measure during the current session, attaching an emergency clause that blocked a public referendum. That action came despite prior state Supreme Court rulings that had found such a levy to be unconstitutional. After the referendum pathway was closed, opponents of the new income tax collected sufficient signatures to place Initiative 645 on the ballot for a public vote. An independent constitutional challenge to the income tax legislation is also proceeding through the judicial system.

Ballot measures to establish a state income tax have been defeated ten times by Washington voters. The Washington State Supreme Court has held for close to a century that residents' earnings constitute personal property. Implementing a tiered income tax structure — one that is non-uniform and exceeds one percent of assessed value — would require an amendment to the state constitution under that precedent. The income tax targeted by I-645 was passed through ordinary legislation rather than a constitutional amendment, meaning assertions that the tax and its rate would remain limited to current taxpayers cannot be independently verified.

Across much of the country, income taxes have historically begun by targeting higher earners before gradually broadening to encompass a wider share of the population. Sen. Pedersen, who sponsored the new income tax legislation, described the 2024 voter-approved I-2111 ban on state and local income taxes as a commitment that was always intended to be reversed, likening it to what the fictional Mary Poppins character called a "pie crust promise" — one that is readily made and just as readily abandoned. That provision was written into law and remains open to amendment at any time.

Washington state had previously highlighted the tax advantage its residents and businesses held by operating without a personal income tax. In 2012, the state's Department of Commerce ran a nationwide promotional campaign positioning Washington as a location offering business advantages unavailable in most other states. The jurisdiction now levies both a tax on investment earnings and one on individual earnings.

The Association of Washington Business, represented by president Kris Johnson, contended that Washington state already imposes a heavy financial load on households and employers, and that adding an income tax would diminish one of the few areas where the state holds a competitive edge, potentially increasing costs for small and medium-sized businesses, including those structured as S-corporations and pass-through entities. Those who favour repealing the tax argue that keeping it in place would increase the financial burden on those affected, leaving fewer resources for expansion, equipment, hiring, and employee compensation.

The Association of Washington Business expressed its support for voter approval of I-645 and called on legislators to develop a state economic growth plan. A separate AWB employer survey conducted that summer found that Washington businesses remained downbeat about the state's economic outlook, with taxation ranked as their primary concern and expansion activity increasingly directed toward other states. Forty-five percent of AWB survey respondents — and 22% who were undecided — indicated they anticipated the proposed income tax would affect their operations, despite proponents' assertions that the measure would apply only to those earning at least one million dollars annually.

Those who back the revised tax legislation argue that eliminating it would reduce funding for existing public services. The proposed 9.9% income tax rate would not take effect until 2028, pending any constitutional legal challenges, with revenue collection beginning the following year. Legislators have a multi-year window to align future spending plans with revenue streams projected to be available from current sources by 2029.

Approval of I-645 would remove the state personal income tax and, according to its backers, boost investor and business confidence in Washington. If voters reject I-645, the proposed 9.9% income tax — which currently carries a statutory exemption threshold of one million dollars — would nonetheless remain subject to legal disputes, given that state Supreme Court precedent spanning roughly a century has held that this category of income tax requires a constitutional amendment to be enacted.