First lawsuit filed over Washington’s millionaires tax

OLYMPIA, Wash. - On Friday, a prominent group filed a lawsuit against the state for rejecting a referendum over Washington’s new income tax.

Conservative PAC Let’s Go Washington (LGW) filed a lawsuit against Secretary of State Steve Hobbs after their filing for a voter referendum to repeal the ‘millionaires tax’ was rejected.

LGW claims the Secretary of State’s Office cited the state Constitution but made subtle changes to its language to justify the rejection using the "necessity clause."

The backstory:

That clause was included in Senate Bill 6346 stating the bill is necessary for the state government.

Much like an emergency clause, Democrats behind the bill are using the "necessity clause" to shield the tax from a referendum.

"If simply declaring something ‘necessary’ is enough to block a referendum, then there are effectively no limits," said Let's Go Washington founder Brian Heywood.

Heywood’s group provided this example of why they believe the meaning of the Constitution was altered by the Secretary of State’s Office.

The Constitution the SOS cited:

"…except those laws deemed necessary for the immediate preservation of public peace, health, or safety, or for the support of the state government and its existing public institutions."

The Constitution as actually written:

"…except such laws as may be necessary for the immediate preservation of the public peace, health or safety, support of the state government and its existing public institutions."

LGW says the state inserted the phrase "or for" that does not appear anywhere in the Constitution. They say by doing so it converts one single standard into two independent exemption grounds.

"By putting this ‘or for’ it’s completely changed the meaning of it, giving them more power that they are not given by the Constitution," Heywood said.

Helen Smith with the Secretary of State’s Office responded to those claims with this statement:

"Our original letter was correct and based on decades of the Washington State Supreme Court's interpretation of the Washington State Constitution. The court has consistently held that the ‘immediate preservation of the public peace, health, and safety’ clause and the ‘support of state government and its existing public institutions’ clause are independent. This interpretation was reaffirmed as recently as last November."

LGW’s lawsuit is a plea to the state Supreme Court to take up the issue. While the legal fight simmers, Heywood told FOX 13 Seattle during an interview this week that the fallout from the millionaires tax is already happening.

What they're saying:

"I know a bunch of people who have already left, there are huge amounts of wealth that has already left the state. They can say it won’t happen — it already has," Heywood said.

Heywood is a multi-millionaire himself who has funded initiatives that overturned laws passed by the legislature.

"I don’t want to give them hope that they will get rid of Brian Heywood that easily," Heywood said.

He has no personal plans of leaving the state yet, and Heywood says the issue goes far beyond millionaires arguing this is not about rich guys in yachts.

"This is the farmer who owns a big chunk of land in Yakima, a restaurant owner who is successful enough to have two to three sites," Heywood said.

Heywood says it’s simply an income tax with the threshold now at $1 million with the ability to lower that limit.

"Voters understand this is not a tax on millionaires, it’s going to be a tax that can impact everybody," Heywood said.

The other side:

Supporters of the tax say it will only apply to less than half of 1% of Washingtonians while redirecting the money to help average Washingtonians and small business owners.

Senator Jamie Pedersen, (D-Seattle) Rep. April Berg (D-Mill Creek) and Rep. Joe Fitzgibbon (D-West Seattle) played key roles in getting the millionaires tax to the finish line.

Governor Ferguson, flanked by Democratic colleagues, celebrated and called the millionaires tax historic during the signing of the bill.

They applauded how the money would be spent:

• Free school meals for all K-12 students.
• Doubling the number of families who qualify for Working Families Tax Credit by 460,000 families, who will get a yearly tax refund anywhere from $300 to $1,300 — bringing the total number of families who qualify to around 810,000.
• Reduce or eliminate B&O taxes for 138,000 small business.
• Eliminating sales taxes for baby diapers, hygiene products and over-the-counter medications.
• Allocating around $320 million into subsidizing childcare in the first full biennium.

"With this bill, we’re going to begin to right a historic wrong that has plagued our state for nearly 100 years, and made our tax system one of the worst and most regressive in the entire country," Sen. Jamie Pedersen said.

The 9.9% tax on income over $1 million will take effect in 2028, and it is expected to generate more than $3 billion annually.

What's next:

But the law remains in limbo with more legal challenges expected in court outside of Heywood’s fight.

As Heywood fights to get a voter referendum on the ballot this November. He also will pursue the initiative process which can also challenge the law on the ballot.

A referendum simply asks voters to approve or reject an existing law, whereas an initiative can overturn or create new legislation.

A referendum is easier to get on the ballot with around 200,000 signatures needed, while an initiative needs twice as many signatures at around 400,000 signatures.

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