The millionaire tax isn’t just about taxing millionaires. It’s more about changing the constitutionality of progressive income taxes.

​In a private email revealed a few years ago on the capital gain tax, state senator Jamie Pedersen wrote:

”the more important benefit of passing the capital gains tax is on the legal side…The other side will challenge it as an unconstitutional property tax. This will give the Supreme Court the opportunity to revisit its bad decisions from 1934 and 1951 that income is property and will make it possible, if we succeed, to enact a progressive income tax with a simple majority vote.”

The capital gain tax survived, but court’s ruling didn’t give Jamie and income tax proponents the full legal win they really wanted which was the authority to enact progressive income taxes. This is another shot at that. The recently passed millionaire tax will face certain legal challenges up to the WA supreme court regarding the legislature’s ability to enact a graduated income tax.

The state constitution does not forbid an income tax, but it does place limits on property taxes: they must be uniform and no more than 1%. In a 1933 court decision (Culliton), the court ruled that income is a form of property so non uniform income taxes are not allowed (the 1% limit came later in 1972). This has been the limitation on Washington income taxes ever since.

Why would the court rule that income is property when other states don’t make the same determination? Because our state constitution defines property much more broadly than other states. The Washington constitution defines property as:

The word ‘property’ as used herein shall mean and include everything, whether tangible or intangible, subject to ownership.

In the 1933 Culliton case, the court in its majority ruling said:

It would certainly defy the ingenuity of the most profound lexicographer to formulate a more comprehensive definition of ‘property.’ It is ‘everything, whether tangible or intangible, subject to ownership.’ Income is either property under our Fourteenth Amendment, or no one owns it. If that is true, any one can use our incomes who has the power to seize or obtain them by foul means. There being no other classifications in our Constitution but real and personal property and intangible property, incomes necessarily fall within the category of intangible property. No more positive, precise, and compelling language could have been used than was used in those words of our Fourteenth Amendment. It needs no technical construction to tell what those words mean. The overwhelming weight of judicial authority is that ‘income’ is property and a tax upon income is a tax upon property.

As for other states ruling income isn’t property, the court said:

None of the decisions from other states have any bearing upon the law before us, because of our peculiarly forceful constitutional definition and the difference in their constitutional authorization or restriction

Since that 1933 decision that “income is property” there’s been 10 different public votes to either amend the constitution or enact an income tax including to explicitly carve out that income is outside the definition of property. All lost resoundingly. And as recently as 2024, there was an initiative to explicitly prohibit all income taxes in the state and the legislature enacted it rather than letting it go to a vote. But the new millionaire tax exempts itself from that law.

Critics of the 1933 Culliton decision have long argued they just needed to give the state supreme court another case to reverse the long standing precedent. They’ve been wrong on that so far. The 2017 Seattle “high earners” tax which impacted those making over $250K was rejected by the appeals courts based on the Culliton precedent and the supreme court didn’t even take it up. The 2021 capital gains tax also took aim at the Culliton decision, but the courts found a way to allow it without invalidating Culliton.

Maybe the 3rd time is the charm, but the burden to change prior court precedent (stare decisis) is high. The court has summed the burden up up in the Otton decision:

When a party asks this court to reject its prior decision, it “is an invitation we do not take lightly.” The question is not whether we would make the same decision if the issue presented were a matter of first impression. Instead, the question is whether the prior decision is so problematic that it must be rejected, despite the many benefits of adhering to precedent—“ ‘promot[ing] the evenhanded, predictable, and consistent development of legal principles, foster[ing] reliance on judicial decisions, and contribut[ing] to the actual and perceived integrity of the judicial process.’

There are two paths to overcome stare decisis in Washington:

-The prior decision was BOTH incorrect AND harmful

Or “more rarely”

-The legal underpinnings of the prior decision have disappeared.

These arguments played out before the courts recently in the Seattle high earners tax case (Kunath) and the capital gain case (Quinn). The Culliton “income is property” precedent survived both attacks, but now we will get another with the recently passed millionaire tax.

Have the legal underpinnings of Culliton eroded? Income tax proponents make the case that the 1933 decision relied upon other cases like Aberdeen that no longer apply, but the other side argues none of that matters since the 1933 decision was clearly based on the “particularly forceful“ definition of property in our state constitution. Reading the 1933 majority opinion quoted above, its hard to believe the legal underpinnings have disappeared since the case was primarily decided on the clear language of the constitution.

Was the 1933 decision incorrect and harmful? The incorrect part is very debatable. Is income property or is it a transaction to becoming property seems like something you can argue both ways.

The more interesting question is: was the 1933 decision “harmful.” The only real argument of harm is that the decision has led to a regressive tax structure (which the Quinn decision seems open to even though it didn’t change Culliton). But that’s a policy decision not a legal one.

Voters have been given the opportunity to affirm or reject the 1933 decision many times and have chosen to keep the income is property definition. And an amendment could be brought again if it’s harmful. Beyond that, the state has increased revenue tremendously in recent years, we have a low poverty rate compared to other states, and the state has boomed economically compared to our income taxing neighbors. Harm here seems very debatable. It would be more harmful to toss out the decisions of the voters who have repeatedly rejected amending the constitution for an income tax. Not to mention people and businesses have become reliant on the 1933 decision. Changing it through the courts and not the voter process, would be the real harm.

What will the court decide? Will they side with longstanding precedent or will it want to jump into the political fire and change their 90 year interpretation of the constitution? Up to this point the court has rejected all attempts overturn Culliton for good reason. The 1933 decision doesn’t sit by itself. It sits along side the voters affirming that decision many times, so the court jumping in now and overturning those votes would be something the it might want to avoid. But no one knows and it certainly will make the November supreme court elections much more important.

Regardless, those claiming “this only impacts millionaires!” are very mistaken and aren’t grasping the potential implications. The forthcoming court decision forced by the millionaires tax will shape this state’s entire tax policy for the coming decades. And that’s such a consequential decision, it’s one we should be having out in the open, transparently with voter input, and not through an opaque backdoor tactic.