Understanding Washington State’s New “Millionaire Tax”
- Feb 9
- 4 min read
Article Update (July 2026)
Editor's Note: This article was originally published in February 2026 , while Washington's proposed "Millionaire Tax" was still under consideration by the Legislature.
Since the original publication, Senate Bill 6346 has been passed by both the Washington State House and Senate, signed by Governor Bob Ferguson on March 30, 2026, and enacted as Chapter 238, Laws of 2026. The law is scheduled to take effect on January 1, 2028 , with the first tax filings anticipated in 2029.
The discussion below has been preserved to provide context surrounding the proposal as it was originally introduced. For readers seeking the most current information, we encourage reviewing the official legislative history, enacted bill, and implementation guidance using the resources below.
Washington State is poised to make one of the most significant changes to its tax system in decades. Historically known for having no state income tax, Washington has relied heavily on sales, property, and excise taxes—structure critics call regressive because lower-income households pay a higher percentage of their earnings than wealthier residents. That’s about to change.
What Is the “Millionaire Tax”?
In early 2026, the Washington State Legislature advanced Senate Bill 6346, commonly called the Millionaire Tax. The proposal would create a new personal income tax on households earning more than $1 million per year. Under the plan:
A 9.9% tax applies only to income above $1 million. That means if a household makes $1.2 million in a year, only the $200,000 over the threshold is taxed at 9.9%.
Households earning $1 million or less would pay no tax under this law.
Proponents estimate the tax would seem to affect less than 1% of Washington households—fewer than 30,000 filers statewide.
Once collections are fully underway, bill proponents suggest revenue might total between $3.4 billion to $3.7 billion annually.
This would be a historic shift: Washington currently has no personal income tax, and voters have repeatedly protected that fact through initiatives and constitutional provisions. The tax’s supporters argue this narrowly defined structure is legally permissible because it targets only the highest earners.
When Will It Take Effect?
If the bill becomes law:
The tax wouldn’t take effect until January 1, 2028.
The first tax collections would begin in 2029, as returns for the 2028 tax year are filed.
This timeline reflects both legislative process and administrative setup—Washington has no existing income tax infrastructure, so new systems must be built from scratch.
What Will the Revenue Pay For?
Lawmakers pitching the millionaire tax present it as part of a broader effort to modernize Washington’s tax code:
Funding Priorities:
Public education (K–12 and early learning)
Healthcare and child care services
Public safety and defense services at the county level
Bolstering the state general fund to address long-term budget shortfalls
Tax Relief and Other Offsets:
Supporters also plan to use portions of the revenue for targeted tax reductions and credits, including:
Eliminating sales tax on personal hygiene products like shampoo and deodorant beginning in 2029.
Expanding and enhancing tax credits such as the Working Families Tax Credit for lower-income households.
Business tax relief, including exemptions for small businesses with lower gross receipts from the Business & Occupation (B&O) tax starting in 2029.
These complementary proposals are designed to balance the impact of the new income tax and make the overall system less regressive.
How This Differs From Other Washington Taxes
It’s important to distinguish the millionaire tax from Washington’s capital gains tax, which has already taken effect:
Capital gains tax: A separate excise tax on profits from selling certain investments (stocks, business interests). Gains over $1 million are now taxed at 9.9% (7% base rate + 2.9% surcharge).
That tax is collected annually and affects individuals realizing large gains, but it’s not an income tax in the traditional sense and has already impacted the investment planning landscape in the state since 2025.
The new millionaire tax, by contrast, would be a broader personal income tax—much more akin to what exists in other states.
What It Means for High Earners and Investors
For High-Income Residents:
Households with annual income above $1 million would see a significant new state tax liability starting with 2028 income.
This could influence decisions about compensation structures (such as stock options and RSUs), retirement planning, and timing of income realization.
For Investors:
While the millionaire tax primarily targets wage and other income, changes to the capital gains tax already influence selling strategies on investments worth more than $1 million in gains.
Investors may need to reassess holding periods and consider tax-efficient asset allocation both within and outside of Washington.
Legal and Political Challenges
Because Washington’s state constitution traditionally bans broad personal income taxes, this new tax will almost certainly face legal scrutiny and potential challenges before it’s finalized and implemented. Legislators have worked to structure it narrowly to withstand those challenges.
Political opposition remains strong, particularly among business groups and Republicans who argue the tax could drive high-income residents to other states and weaken Washington’s economic competitiveness.
Conclusion
If enacted, Washington’s millionaire tax would transform the state’s tax landscape. It reflects a growing political willingness to rethink long-standing tax norms in favor of revenue that pays for public services and tax relief for lower-income families. However, high earners and investors will need to carefully plan for these changes as the implementation timeline approaches.
Additional Resources
Final Note
As with any major tax proposal, details may evolve through amendments, legal review, or voter action. Reviewing primary sources and monitoring updates directly from the Legislature and Department of Revenue will provide the most accurate and timely information.
*This content is for informational purposes only and is not intended as personalized investment, legal, or tax advice. Any strategies or planning concepts discussed are general in nature and may not be appropriate for your individual circumstances.
Financial planning and investment recommendations, if provided, are based on information supplied by the client and are subject to change. No guarantee is made that any strategy will be successful or that any specific outcome will be achieved.
While we strive to provide advice in a fiduciary capacity, conflicts of interest may exist, including but not limited to compensation arrangements, affiliations, or third-party relationships. Additional information regarding these relationships is available upon request.
