Washington becomes the latest state to go after millionaires’ money

Lawmakers approve a 9.9% millionaires tax

Washington state just did something it has never done in its history: pass an income tax. On March 12, lawmakers approved Senate Bill 6346, a 9.9% tax on personal income above $1 million.

The bill, called the “millionaires tax,” now heads to Gov. Bob Ferguson, who has promised to sign it. He has 20 days after the session ends to make it official.

Washington had been one of nine states without any personal income tax.

Only income above $1 million gets taxed

The tax only kicks in on earnings above the $1 million mark for individuals or couples. So someone making $1.5 million would owe the 9.9% rate on just the $500,000 above the threshold.

It takes effect Jan. 1, 2028, with the first payments due in 2029. State estimates put the revenue at roughly $3 billion to $4 billion a year.

About 21,000 households would pay it, roughly half of 1% of the state’s residents based on IRS data.

The House debated for 24 hours straight

The House floor fight was a marathon. Debate started around 5:38 p.m. Monday and did not wrap up until about 6 p.m. Tuesday.

Republicans filed nearly 60 amendments trying to slow or kill the bill. It passed 51-46.

Not a single Republican voted yes, and eight Democrats broke with their party to vote no. One member did not vote.

The final tally came after one of the longest continuous debates in recent state history.

The Senate sealed the deal 27-21

The Senate gave final approval on March 12, voting 27-21 to accept the House changes.

Republicans tried a last-minute move, arguing the House amendments went beyond the original bill’s scope, but that effort fell short.

Sen. Jamie Pedersen, a Seattle Democrat and Senate majority leader, sponsored the bill. The vote came on the final scheduled day of the 2026 legislative session, cutting it about as close as possible.

Supporters call it a 100-year tax shift

Backers say the tax fixes a system that leans too heavily on sales, property, and business taxes.

Gov. Ferguson said it touches less than half of 1% of residents but will make life more affordable for millions. Democrats argued the state needs the money for schools, health care, housing, and public safety.

Democratic Rep. April Berg, who chairs the House Finance Committee, called it a once-in-a-century change to Washington’s tax code.

Opponents warn it could spread further

Republicans pushed back hard, warning the tax could open the door to a broader income tax on all residents down the road.

The Association of Washington Business called it a major shift that could hurt the state’s ability to compete for jobs and investment.

Some lawmakers pointed out that inflation could slowly push more people above the threshold over time.

Others said the tax could drive wealthy residents and businesses to pack up and leave.

The bill also includes new tax breaks

The millionaires tax is not just about collecting more money.

It expands the Working Families Tax Credit to about 460,000 more households, with rebates up to $1,330 a year. It funds free breakfast and lunch for every K-12 student in the state.

Starting in 2029, shoppers will no longer pay sales tax on diapers, hygiene products, or over-the-counter medicines. Small businesses earning $300,000 or less would owe no state business and occupation tax.

Five percent of the revenue goes toward childcare and early learning.

A 1933 court ruling blocked income taxes for decades

Washington’s fight over income taxes goes back nearly a century.

In 1933, the state Supreme Court struck down a voter-approved graduated income tax in a 5-4 decision.

The court ruled that income counts as property, and the state constitution says property must be taxed at a uniform rate. That ruling blocked every income tax attempt for more than 90 years.

SB 6346 gets around it by framing the new tax as an excise on receiving income, the same legal theory that held up the state’s capital gains tax in 2023.

A 2024 ban on income taxes complicates things

There is another wrinkle. In 2024, the legislature passed Initiative 2111 with strong bipartisan support, 76-21 in the House and 38-11 in the Senate.

That measure banned the state and local governments from imposing personal income taxes. SB 6346 includes language declaring that the ban does not apply to this particular tax.

Whether the legislature can carve out an exception to its own recent ban is another question that will likely land in court.

Legal battles and a ballot fight loom

Opponents plan to challenge the tax in court almost as soon as Ferguson signs it. They will argue it violates the state constitution’s uniformity clause and conflicts with Initiative 2111.

A ballot initiative to repeal the tax could also show up on the November 2026 ballot.

The bill includes a necessity clause that blocks a direct referendum, but an initiative campaign can still move forward. Ferguson has said he expects legal challenges and called that part of the process.

Howard Schultz left Seattle the same day

The timing was hard to miss. Former Starbucks CEO Howard Schultz announced he was moving from Seattle to Miami on the same day the House voted.

Schultz framed it as a retirement decision, saying he has family on the East Coast.

He did not mention the tax directly, but his post expressed hope that Washington would stay a place where businesses want to be. His family office moved to Miami, though his foundation stays in Seattle.

The move fueled debate about whether the tax could push wealthy residents out.

Most residents won’t see a tax bill

For the vast majority of people in Washington, nothing changes. If you earn under $1 million, you will not owe any income tax.

The relief measures in the bill, like expanded tax credits and sales tax cuts, could actually put money back in pockets for lower- and middle-income families. But the tax’s future is not settled.

Court challenges are coming, and a repeal effort could land on the November 2026 ballot. What happens next depends on the state Supreme Court and Washington voters.

This article was created with AI assistance and human editing.

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