Bottom line: IP26-645 does not repeal Washington's capital gains tax. Certified for the November 3, 2026 ballot as Initiative 645, the measure — if voters approve it — kills the new 9.9% income tax before it ever takes effect in 2028 — but the capital gains excise tax under chapter 82.87 RCW stays on the books, and it applies to your 2026 stock sale either way.
Status (as of August 24, 2026): Washington's 9.9% tax on income above the $1 million standard deduction remains law, effective January 1, 2028, unless voters repeal it or the courts strike it down. Initiative 645 is on the November 3, 2026 ballot and would repeal that tax if it passes; it would not repeal the capital gains excise tax (chapter 82.87 RCW), which the Washington Supreme Court upheld in Quinn v. State. No court has enjoined the income tax. Plan as though it arrives on schedule — treat repeal or a court win as a tail benefit, not a plan.
The confusion is everywhere right now, and it's understandable. The initiative's own text defines "income" to include gains from capital. But read the whole thing and the answer is clear: the capital gains tax survives. What the initiative actually does is set up a future court fight over it. Here's the breakdown.
The ballot language litigation is resolved for November. On August 20, 2026, a Washington Supreme Court commissioner denied Arthur West's emergency motion for a preliminary injunction, and the disclosure appears on ballots as drafted. The order decided no constitutional merits: it held that the superior court's order affirming the PIID is final under RCW 29A.72.028 (Kreidler), and left the RAP 2.2 / 2.3 appealability and RAP 4.2 retain-or-transfer questions open. Every filing and ruling is logged on the Initiative 645 litigation and status tracker. The background is below; none of it changes the analysis that follows.
What IP26-645 actually repeals
Section 2 of the initiative is an express repeal list — 66 enumerated sections, every one of them from chapter 238, Laws of 2026. That's ESSB 6346, the bill Governor Ferguson signed on March 30, 2026 imposing a 9.9% tax on income above $1 million starting January 1, 2028.
The repeal list is surgical. It takes out the income tax itself while leaving in place the parts of ESSB 6346 that cut taxes: the Working Families Tax Credit expansion, the small-business B&O relief, and the sales tax exemptions for diapers, hygiene products, and over-the-counter drugs.
What's not on the list: chapter 82.87 RCW — the capital gains excise tax enacted in 2021 and upheld by the Washington Supreme Court in Quinn v. State, 1 Wn.3d 453, 526 P.3d 1 (2023). The drafters wrote 66 express repeals. They knew how to add a 67th. They didn't.
So why does everyone think it kills the capital gains tax?
Because Sections 3, 4, and 6 of the initiative read like they were written with the capital gains tax in mind — and they probably were.
Section 3 defines "income," for all of Title 82 RCW, as "any gain or benefit measured in money derived from an individual's capital, labor, property, or other source." A capital gain is, on that definition, income. And the capital gains tax is codified in Title 82.
Section 4 then prohibits any tax "imposed on individual income, the receipt of individual income, or measured by an individual's income, regardless of the source" — binding the state, counties, cities, and every other local jurisdiction.
Section 6 adds a liberal-construction clause: the prohibition "is to be liberally construed to prohibit any form of individual income tax."
The "measured by" language is the tell. In Quinn, the Supreme Court upheld the capital gains tax by characterizing it as an excise on the privilege of selling capital assets — a tax on the transaction, merely measured by the gain — rather than a tax on income or property. Section 4 is drafted to close exactly that door. This is not sloppy drafting. It's a statutory trap laid for chapter 82.87.
Why the capital gains tax survives anyway (probably)
If IP26-645 passes, someone will sue, arguing the capital gains tax is now a prohibited tax "measured by an individual's income." That argument is real, but it's uphill, for three reasons.
First, repeals by implication are disfavored in Washington. A later act repeals an earlier one only where the two are so clearly inconsistent and repugnant that they cannot, by fair and reasonable construction, be reconciled and both given effect. Abel v. Diking & Drainage Improvement District No. 4, 19 Wn.2d 356, 142 P.2d 1017 (1943). Here, the drafters' own 66-item express repeal list — which conspicuously omits chapter 82.87 — is strong evidence the initiative was not intended to repeal the capital gains tax. The omission cuts hard against the challengers.
Second, we've run this experiment before. Initiative 2111, approved by the legislature in 2024, already prohibits state and local personal income taxes. The capital gains tax has continued operating under it without interruption, because under Quinn it isn't an income tax. IP26-645's broader definition and "measured by" language make the argument stronger than it was under I-2111 — but the baseline is a tax that has already survived one statutory income tax ban.
Third, even a winning statutory argument is not a constitutional one. IP26-645 is a statute. Under article II, section 41 of the Washington Constitution, the legislature can't amend or repeal it for two years except by a two-thirds vote of each house — but after that, a simple majority can carve the capital gains tax out of the prohibition explicitly. A statutory ban is a speed bump, not a wall.
Could a court read Sections 3, 4, and 6 to invalidate the capital gains tax? It's possible — the liberal-construction clause exists to push courts in that direction. But no founder should make a planning decision that depends on it.
Ballot language and the disclosure litigation
How the disclosure was settled
Thurston County Superior Court Judge Chris Lanese upheld the public investment impact disclosure on August 7. Ruling from the bench, he held that the challenger had not carried his burden of showing the disclosure statute unconstitutional, found the Initiative 645 disclosure language appropriately neutral, and denied a preliminary injunction against the statute. The disclosure quoted below will appear on the November ballot as drafted.
The ruling ended both cases at once. The sponsors' separate statutory appeal — the one asking the court to swap "decrease" for "increase" — was set for a hearing before a different judge later that same day. That hearing was canceled once Judge Lanese's ruling resolved the disclosure's validity, so the sponsors never argued their case.
West appealed on August 10; his emergency motion was denied on August 20, 2026. The disclosure appears on the ballot as drafted.
The disclosure and the fiscal impact statement
The Attorney General filed the public investment impact disclosure for Initiative 645 on July 23, the statutory deadline under RCW 29A.72.027(5). The disclosure — which appears on the ballot itself — reads: "This measure would decrease funding for public K-12 education, higher education (including universities and community colleges), and human services (primarily healthcare)."
The Office of Financial Management's fiscal impact statement, posted the same day, estimates an $11.4 billion reduction in state revenue over fiscal years 2027–2031 if the measure passes. Two details matter for planning: the initiative's effective date is December 3, 2026, and it applies prospectively — the 9.9% tax would simply never take effect on January 1, 2028.
The K-12 reference was the flashpoint, and two separate actions followed in Thurston County Superior Court — both resolved by the August 7 ruling above. The measure's sponsors filed a statutory appeal on July 27 seeking to replace "decrease" with "increase," arguing the disclosure should describe the immediate effect on the current budget rather than projected effects on future ones. Separately, a third party has challenged the disclosure requirement itself as an unconstitutional infringement on the initiative power, heard August 7.
The distinction matters. Under RCW 29A.72.027(7), the disclosure is not part of the ballot title and is not subject to the legal requirements that govern ballot titles, so neither action is a ballot title challenge. The sponsors’ appeal runs on a separate track created by 2022 c 114 § 6, which gives the court five days to decide and makes its decision final. Only the constitutional challenge can reach the Supreme Court.
None of this changes the analysis below: the capital gains tax stays on the books either way, and the income tax remains law, effective January 1, 2028, unless voters repeal it in November or the courts strike it down.
What this means for your planning
Your 2026 sale is taxed either way. Long-term gains above the standard deduction remain subject to the two-tier capital gains excise tax — 7%, and 9.9% on the portion of gains above $1 million — regardless of what happens in November. See our Washington State capital gains tax guide for the current numbers.
QSBS is still the cleanest answer. Gains excluded under IRC § 1202 stay out of Washington's capital gains tax base. SB 6229, which would have added excluded QSBS gains back, died in the 2026 session. If your stock qualifies, the exclusion works at both the federal and state level.
The 2028 income tax is genuinely in play. Let's Go Washington submitted 511,408 signatures on July 2, and the Secretary of State certified the measure for the November 3, 2026 ballot on July 15 — it will appear as Initiative 645. If voters approve it, the 9.9% income tax is repealed before it ever collects a dollar. But until the votes are counted, plan as if it takes effect. The ballot mechanics are covered here, and the full pre-2028 planning picture is on the Washington Founder Exit Map.
Domicile planning is unchanged. If leaving Washington is on the table before a liquidity event, the analysis in our domicile strategy guide applies with or without IP26-645.
If you're a Washington founder or executive approaching a liquidity event and want to talk through how the initiative affects your specific situation, schedule a 20-minute call.
This post is for general information and is not legal or tax advice for your specific situation.
