Washington state’s newly signed income tax on high earners is already facing a legal challenge, with critics arguing it violates the state constitution and could hit small businesses.
The measure implements a 9.9% tax on income of $1,000,000 or more for individuals and households, marking a major shift for a state that has resisted traditional income taxes.
The law that established the tax was passed on March 11 and was signed by Washington Gov. Bob Ferguson on March 30.
While the tax was pitched as one that would hit “millionaires,” some critics argue the measure could impact small businesses, not just high-income individuals and major employers based in Washington, such as Amazon and Starbucks.
Curt Nuccitelli, the owner of Spirit Transport Systems, which has 14 employees, is one of the plaintiffs suing Washington over the tax.
Nuccitelli told Fox News Digital that the tax could directly impact his business, as his profits are taxed as personal income.
“Washington state is already very unfriendly to small businesses, as far as taxes go,” Nuccitelli said. He added that the new tax would impact his ability to invest in his employees and equipment for his business.
“If I give them a dollar an hour raise, that’s over $2,000 by the end of the year, so it really limits my ability to continue to grow my company and pay my team a livable wage,” Nuccitelli told Fox News Digital.
Washington has treated income as property, following a 1933 ruling by the state Supreme Court. This means that under the Washington state Constitution, income must be taxed uniformly and capped at 1%, far below the new law’s 9.9% rate.
Despite what critics have said, the Washington Attorney General’s Office has stood by the law, with deputy communications director Mike Faulk telling Fox News Digital, “We will be defending the constitutionality of this law in court and expect to prevail. We’ll preserve our legal arguments for the anticipated filings.”
Nuccitelli joined a lawsuit launched by Citizen Action Defense Fund (CADF), a watchdog group that helps Washingtonians hold state and local governments accountable.
Former Washington Attorney General Rob McKenna and former Washington state Sen. Phil Talmadge are working on the case with CADF.
“Our state’s constitution is really clear that if you’re gonna have an income tax, it’s got to be capped at 1%, and it’s gotta apply evenly to everybody in the state, uniformly, and this doesn’t do that,” Jackson Maynard, one of the attorneys on the CADF lawsuit, told Fox News Digital.
Maynard said he believes the lawsuit presents a “strong argument” against the tax based on the precedent set by the state Supreme Court.
Beyond the legality of the tax under the state constitution, Maynard told Fox News Digital that the law itself is bad policy, as it takes away a major advantage that has allowed the Evergreen State to be the home of massive companies.
“One of the reasons that Washington state has been such a part of the innovation economy, and we have tech and we have Starbucks and all these great companies, is that we don’t have an income tax. It’s been a huge competitive advantage for us and the fact that we’re giving that up and potentially expanding it to everybody in the state is going to be bad for business.”
Fox News Digital reached out to Ferguson’s office, but did not receive a response in time for publication.
