The Washington Supreme Court ruled on May 4 that the state’s new income tax on high earners—which imposes a 9.9% levy on annual income exceeding $1 million per year starting in 2028—wouldn’t have to be approved via a ballot initiative or popular referendum.
The decision relied on the interpretation of Washington’s referendum power and that the tax laws generating revenue to support the government aren’t subject to popular referendum, so it may have little precedential effect in other jurisdictions. But the defeat of the petitioner’s request to submit the tax to a referendum via a ballot initiative this coming November may have impact elsewhere.
“This ruling states that the people cannot challenge via referendum any tax imposed by the legislature, removing any guardrails from the people on runaway spending,” the petitioner said in a statement. The measure’s backers “now have a blank check to spend beyond their means and raise taxes later, and the people don’t get to weigh in” he added.
But perhaps ballot initiatives deserve more scrutiny. Typically, legislators debate, evaluate, and pass legislation, which becomes law upon the state governor’s signature. This process has historically worked regardless of the subject of legislation. However, supporters of controversial tax proposals recently have turned to another mechanism to secure passage: the ballot initiative.
Which process is fairer? Which is more democratic?
In our system of government, which is famous for employing checks and balances, a purely legislative process appears superior because it allows for repeal or judicial condemnation. But a ballot initiative theoretically provides greater taxpayer endorsement because its adoption is predicated on achieving a numerical test, whether it be a majority or a higher level of all registered voters.
However, if a ballot initiative is used to impose a wealth tax on a very small, wealthy subset of the general population, does that process entail a “ganging up” on the few by the many? If a ballot initiative is structurally discriminatory to the minority, should it be banned as a method of securing passage of unprecedented tax proposals?
Wealth taxes or surtaxes on high income earners have been introduced in California, New York, Maine, Massachusetts, and Illinois. But no proposal has produced more controversy or attention than the proposed wealth tax in California. The 2026 California Billionaire Tax Act supported by the Service Employees International Union, if approved in November, would impose a one-time 5% tax on net worth over $1 billion, excluding real estate, pensions, and retirement accounts.
Critics of the tax include prominent tech entrepreneurs such as Google co-founder Sergey Brin. These individuals are supporting their own ballot initiative that could negate much of the effect of the SEIU’s proposal. The competing campaigns are spending millions to gather signatures and spread their messages.
But why did the proponents of the billionaire’s tax choose a ballot initiative to secure passage of their proposal? After all, this isn’t the first time that California has proposed a controversial and unprecedented wealth tax. In the recent past, the legislative process was used to debate and advance tax schemes that focused on the ultrarich. Assembly Bill 259 was passed by both houses in the state assembly in 2023 but never signed into law by the governor. That bill, for taxable years beginning on or after Jan. 1, 2026, would have imposed an annual tax of 1% on a resident’s worldwide net worth in excess of $50 million.
Regardless of the SEIU’s rationale, a ballot initiative creates a shield for state legislators. They don’t have to vote against a popular but controversial piece of legislation and risk incurring the wrath of those who support the proposal. It also avoids a veto by a governor.
Some may argue that California’s ballot initiative is the equivalent of taxation without representation, because taxpayers opposed to the initiative can’t petition or complain to their legislator. It therefore converts what was intended to be taxation with representation through debate and evaluation by duly elected legislators into a new realm of taxation based on who can run the most effective campaign to solicit signatures and votes.
Lastly, should the taking of a person’s property outside the 16th Amendment’s taxation of income be entitled to “due process”? Does the question, “Are you in favor of taking money from billionaires to support public assistance programs: yes or no,” constitute due process? How many non-billionaires would vote no?
Despite the rhetoric, supporters of a controversial and unprecedented wealth tax in California have embraced a new technique to advance their point of view. Whether permitted by a state constitution or not, such a method deserves close judicial scrutiny so that it doesn’t allow the many to trample on the rights of the few.
This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law, Bloomberg Tax, and Bloomberg Government, or its owners.
Author Information
Robert F. Mancuso is a former SEC attorney and CEO of Capri Capital Partners.
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