Washington millionaires’ tax survives early I-645 vote as Gov. Ferguson, Brian Heywood trade shots

Washington’s biggest tax fight in decades is shifting from the ballot box to the courtroom.

Early election results show voters rejecting Initiative 645, which sought to repeal the state’s new 9.9% income tax on earnings above $1 million.

As of Wednesday morning, about 58% of votes counted opposed the repeal effort, giving Washington Governor Bob Ferguson grounds to claim a political victory. But Brian Heywood, the hedge fund manager behind the initiative, is blaming the governor for what he predicts will be an exodus of businesses and high earners from Washington.

Meanwhile, Heywood is raising questions about campaign finance decisions involving the state’s Public Disclosure Commission and millions of dollars in union-backed political spending targeting Washington Supreme Court races.

The tax still faces a separate constitutional challenge led by former Attorney General Rob McKenna.

Ferguson and Heywood trade shots over millionaires’ tax

Ferguson celebrated the early election results Tuesday night, telling supporters Washington voters understood they shouldn’t give tax breaks to millionaires when those dollars could make life more affordable for working families.

Heywood, however, warned the governor would own the economic consequences if the tax remained in place.

“This is Bob Ferguson’s income tax. This is Bob Ferguson’s failed economy that’s going to be hitting everybody, and I think he has to wear it. He was cheerleading this thing, and I’m going to pin this on every job that leaves and leaves from this state,” Heywood said on election night. “I can’t prove the companies that don’t come here, but the slowdown in business. This is Bob Ferguson’s mess, and he owns it.”

Heywood has repeatedly argued the 9.9% tax will drive wealthy residents and businesses out of Washington and eventually be expanded to include people earning less than $1 million.

Wednesday Ferguson responded to Heywood’s remarks.

“Blame, blame, blame. That’s all the guy’s got. I’m sorry. He crashed and burned yesterday, and the voters are clear,” Ferguson told KIRO Newsradio. “From Okanogan County to Mason County to Spokane to Skamania to Clark, over and over again, they just said no to Initiative 645. So, I get that when you get wiped out like that, you’ve got to name-call, and you’ve got to blame folks. So, I’m not too worried about what Brian Heywood’s got to say.”

Initiative 645 trails as voters back keeping the tax

Initiative 645 was trailing 58% to 42% in early returns Tuesday night.

The opposition was particularly strong in King County, where 66.5% of voters were rejecting the repeal effort. The initiative was also trailing in Snohomish and Pierce counties.

As of 9 p.m. Tuesday, with 33 of Washington’s 39 counties reporting, the early results suggested voters were prepared to preserve the tax approved by the Legislature and signed by Ferguson in March.

Hundreds of thousands of ballots remained to be counted.

If the results hold, Washington will move away from its longstanding position as one of a handful of states without an individual income tax.

The 9.9% tax applies to household income above $1 million. Collections are scheduled to begin in 2029.

Heywood blames PDC decision and union money flowing into Supreme Court races

Heywood is also criticizing the Washington State Public Disclosure Commission, or PDC, after it suspended enforcement of certain limits on large campaign contributions less than two weeks before Election Day.

The decision, announced Oct. 23, lifted restrictions that had prohibited political committees from accepting more than $75,000 from one donor for statewide campaigns, or $7,500 for other campaigns, during the final 21 days before an election.

The PDC cited concerns about whether the restrictions could be constitutionally enforced. Deputy Director Kim Bradford said commissioners had been discussing the issue since June, with the matter appearing in September and October meeting agendas.

Heywood argued the timing benefited Democratic-aligned groups and public-sector unions seeking to influence five Washington Supreme Court races.

He specifically pointed to the Service Employees International Union, or SEIU.

On Oct. 27, SEIU 775’s Quality Care Committee contributed $250,000 to an independent political action committee called Beware the Attack on Our Courts.

“It would have been very easy for the PDC to say after the election, let’s revisit this rule or let’s change this rule,” Heywood said. “But to do it two weeks before the election, that is so suspect…. And even if it wasn’t dirty, it’s incredibly poor judgment, and it looks horrible.”

According to campaign finance figures cited by Heywood, the three unions had contributed $450,000 directly to Beware the Attack on Our Courts, with another $298,000 coming through New Direction PAC.

“I think it’s BFIC — Bob Ferguson’s income tax is what we should be like putting everywhere,” Heywood said. “He campaigned on no new taxes, and this one really feels like he’s being a sock puppet for the public unions, pushing this income tax because he seemed to say he was against it, and then suddenly he’s all for it. And I don’t know what happened to suddenly make him jump that way, but I can imagine.”

The PDC said its decision was based on legal concerns about the enforceability of the late-contribution restrictions. Standard contribution limits for candidates remained in place, and ballot-measure campaigns were already exempt from the same late-window restrictions.

Pedersen defends the tax

State Senate Majority Leader Jamie Pedersen, D-Seattle, was among those celebrating the early election results.

The architect of the millionaires’ tax described the vote as an opportunity to begin changing Washington’s tax system, which he said disproportionately burdens working people and small businesses.

“We have been saddled with an anchor around our neck, with a tax system that is bad for working people, that’s bad for small businesses, that’s bad for just about everybody except for the one percent,” Pedersen said Tuesday night.

Pedersen has previously said he welcomed the constitutional lawsuit because one of the goals of passing the tax was to get the state’s highest court to reconsider longstanding legal precedent.

His election-night remarks focused on the tax’s policy rationale rather than directly addressing Heywood’s allegations about union spending and the PDC.

Rob McKenna leads constitutional lawsuit, questions court’s ideological direction

Even if voters ultimately reject Initiative 645, the millionaires’ tax could still be struck down in court.

Former Washington Attorney General Rob McKenna is leading the legal challenge, arguing the tax violates the state constitution and nearly a century of Supreme Court precedent.

The lawsuit, filed in April by the Citizen Action Defense Fund and other plaintiffs, argues Washington courts have historically treated income as property. Under the state constitution, property taxes must be uniform and are subject to a 1% limit.

The state argues the new levy is an excise tax on the privilege of earning income, rather than a property tax.

The case could eventually land before the Washington Supreme Court, where five of the court’s nine seats were on the November ballot.

McKenna has also questioned the court’s ideological direction, telling KUOW that the justices have become increasingly liberal over the past two decades.

“The court has taken a notable turn to the left,” McKenna said, arguing that fewer contested elections and gubernatorial appointments have contributed to that shift.

McKenna and other Republicans formed Full Court Press to support conservative judicial candidates.

The outcome of the court races could shape the legal fight over the tax, although judicial candidates have not committed to how they would rule on the specific constitutional questions.

For now, the early election results suggest voters are prepared to keep the millionaires’ tax. But the final decision on its future could still belong to the courts.

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