SEATTLE — Washington's new high-earners income tax drew an anticipated legal challenge Thursday as opponents filed a lawsuit arguing the law violates the state constitution.

The lawsuit was filed in Klickitat County Superior Court on behalf of several business owners and organizations represented by former Washington Attorney General Rob McKenna and former state Supreme Court Justice Phil Talmadge.

In an online news conference Thursday morning, McKenna said the tax clearly flies in the face of the constitution, of precedent and of voter will." He pointed to a series of court decisions dating back to 1933 that have banned graduated income taxes as illegal taxes on property.

The Citizen Action Defense Fund, a conservative nonprofit, is spearheading the legal challenge, which the group's executive director Jackson Maynard called "one of the most significant cases in the history of our state."

The 17-page lawsuit complaint filed Thursday says the case is about upholding key constitutional limits on the Legislature's taxing authority.

"When these limits are transgressed, liberty suffers," the complaint stated, quoting the farewell address of George Washington, who warned of political power grabs as "the customary weapon by which free governments are destroyed."

Gov. Bob Ferguson signed what backers have labeled a "millionaires tax" on March 30, enacting a 9.9% tax on income of more than $1 million a year. If the law survives the lawsuit and an expected ballot initiative, tax collections are set to begin in 2029.

The new tax will generate an estimated $3 billion to $4 billion a year, with most of the proceeds dedicated to the state operating budget, though lawmakers also directed hundreds of millions to tax cuts for residents and businesses.

State Attorney General Nick Brown's office will represent the state in seeking to uphold the tax.

"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," said Mike Faulk, a spokesperson for Brown, in an email.

The lead plaintiffs in the lawsuit are Benjamin and Lauren Petter, who own a Chelan County construction business and make enough money to pay the new tax. Other individual plaintiffs include a Klickitat County farmer and a Kent trucking company owner, who also would be subject to the tax.

Also joining the lawsuit are a coalition of several Seattle area ethnic chambers of commerce, the Building Industry Association of Washington, the Yakima Klickitat Farm Association and the National Federation of Independent Business.

The state Department of Revenue and its director John Ryser were named as defendants.

At stake in the legal dispute is a new levy that supporters say will bring in billions of dollars to fund important services while reforming a state tax system that has let the wealthiest residents off lightly.

Opponents argue that the tax, if upheld, will kill Washington's competitive advantage, lead wealthy entrepreneurs to relocate and eventually get expanded to apply to many more residents.

The legal arguments will revisit a Depression-era legal ruling that has long made it much more difficult to impose graduated income tax similar to the federal tax that has higher rates for wealthier taxpayers.

In the 1933 Culliton v. Chase decision, the state Supreme Court struck down a progressive income tax approved by voters, ruling that income is property and therefore can only be taxed at a low, flat rate.

That 5-4 decision has set a binding legal precedent for nine decades and has never been overturned.

McKenna said Thursday that the legal question is simple. The state constitution defines property broadly and says it can only be taxed at a flat rate of up to 1%.

The right way to enact a progressive tax like the so-called "millionaires tax" is to propose a constitutional amendment — like several past Legislatures and governors have attempted, Talmadge said.

"I support the idea of tax reform in Washington that could include an income tax," Talmadge said, but "the bottom line here is the Legislature has to enact this kind of change in the law by a constitutional amendment."

But Democrats and some legal experts have long argued that the Culliton decision was flawed and has made Washington an outlier among states in treating income as property.

Before the signing of the high-earners income tax, Washington was one of nine states with no income tax.

State Sen. Jamie Pedersen, D-Seattle, the prime sponsor of the new tax law, has said part of the goal is to get the court to reverse the Culliton ruling, allowing Washington to build a tax system less reliant on taxes that disproportionately hit the poor.

Invest in Washington Now, a labor-backed coalition supporting the high-earners income tax slammed the lawsuit as an attempt to kill tax reform that will benefit many working-class families.

"The truth is the Millionaires Tax is very popular with Washingtonians, but these extremist groups are doing everything they can to shield billionaires and mega-millionaires from paying what they owe our communities, said the emailed statement from the group's spokesperson Lexi Koren.

McKenna, a Republican, served as Washington's attorney general from 2005 to 2013. Talmadge, a Democrat, served in the Legislature and on the state Supreme Court from 1995 to 2001. They previously teamed up successfully on efforts to block a Seattle income tax.

The lawsuit will start in Klickitat County, with an initial decision from a superior court judge and then likely working its way to the state Supreme Court for a final judgment next year, Talmadge said.

That may put extra attention on five open state Supreme Court races this November, with a round of retirements bringing major turnover to the nine-member court.

Last month, Ferguson appointed Theo Angelis, a longtime attorney at K&L Gates, to a vacancy created by the retirement of Justice Barbara Madsen. Angelis will have to stand for election this fall to retain the seat for a full term.

Other court seats up for grabs this fall include: the position held by Justice Colleen Melody, appointed by Ferguson earlier this year; Justice Raquel Montoya, who is not seeking reelection; Associate Chief Justice Charles Johnson, who is required by state law to retire due to age and Chief Justice Debra Stephens, whose term is up this year.

Besides the lawsuit, opponents of the tax are weighing a ballot initiative this year or next year.

Washington voters approved an income tax during the Great Depression in 1932, which was struck down by the Culliton decision.

But since then, ten income tax measures on the ballot have all been voted down, most recently in 2010.

Supporters of the new tax say attitudes have shifted and the public is now ready to raise taxes on the wealthy, pointing to the overwhelming 2023 vote in favor of the state's new capital gains tax on stock and other investment profits.

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