Washington state lawmakers advanced legislation Tuesday that would impose a 9.9% tax on personal income exceeding $1 million annually, marking the latest attempt to overhaul one of the nation’s most regressive tax systems. The House Finance Committee held a lengthy public hearing on Senate Bill 6346, which passed the Senate on February 18 by a 27-22 vote.
If enacted, the tax would take effect January 1, 2028, with first payments due in April 2029. The measure would affect fewer than 1% of Washington households—roughly 10,000 to 15,000 high earners—while generating an estimated $3.7 billion annually for schools, healthcare, and other services.
Sen. Jamie Pedersen, the Seattle Democrat sponsoring the bill, urged committee members to back the legislation. “Today was a momentous step forward,” Pedersen said following the Senate vote. “For Washington’s 1.1 million school kids, people struggling to afford health care, and small businesses looking for help, that help is on the way.”
Tax Structure and Key Provisions
The proposed tax applies only to income above $1 million per year for both individuals and households. Income below that threshold would face no tax. The bill also increases the charitable deduction cap to $100,000, potentially offsetting some liability for high earners who donate to qualifying organizations.
Washington currently has no broad personal income tax, relying instead on sales taxes, property taxes, and business and occupation levies. Analyses of state and local tax burdens have ranked Washington’s overall tax system among the more regressive in the country. The bottom 20% of earners pay 13.8% of their income in state and local taxes, while the top 1% pay just 4.1%.
The bill pairs the new income tax with several offsetting measures. Starting in 2029, roughly 65% of small businesses—those with gross receipts under $300,000—would be exempt from the business and occupation tax. The legislation also eliminates sales tax on hygiene products, repeals recent service sales tax expansions, expands the Working Families Tax Credit, and directs 7% of new revenue to county public defense programs.
Legislative Outlook and Legal Questions
The measure faces significant obstacles before becoming law. Voters overwhelmingly passed Initiative 2111 in 2024, which banned income taxes statewide. While that initiative can be repealed through legislation—which is what SB 6346 effectively does—opponents are expected to challenge the tax in court.
Potential legal disputes could address whether the tax complies with the state constitution’s uniformity clause and how it interacts with Initiative 2111. Proponents argue the measure is a targeted tax on high earners, distinct from prior failed attempts at broad-based income taxes. The Washington Supreme Court upheld a similar capital gains tax in 2021, which 64% of voters supported across 32 of the state’s 39 counties.
Some public polling has found support for a tax on millionaires among respondents across party identification. In one 2024 survey, majorities of Democrats and smaller majorities of independents and Republicans reported supporting a tax on millionaires. However, a KOMO poll found that 92% of respondents believe the $1 million threshold would eventually drop to capture more taxpayers.
Governor Bob Ferguson supports the bill but has emphasized affordability concerns. “Our North Star is to make life more affordable for more Washingtonians,” Ferguson said, while noting questions about potential future expansions of the tax base.
Hearing Testimony and Stakeholder Views
Tuesday’s hearing featured testimony from labor groups, business organizations, and individual residents. April Sims, president of the Washington State Labor Council, advocated for a broader tax base to address equity concerns. Max Martin with the Association of Washington Business warned of economic consequences, including the potential for high earners and businesses to relocate to states without income taxes.
Rep. April Berg, a Mill Creek Democrat on the committee, and Rep. Ed Orcutt, a Kalama Republican, represented the divide among lawmakers. Committee members also raised concerns about the public comment system, with some alleging duplicate sign-ins and potential manipulation of the process.
The bill moved quickly through the Senate after being introduced February 3, passing 15 days later. Only two Senate Democrats joined Republicans in opposition.
Next Steps
The House Finance Committee could hold an executive session as early as February 27 to vote on whether to send the bill to the full House floor. The legislative session ends March 12, creating a tight timeline for passage. If the bill clears the House, it would go to Ferguson’s desk. The governor has indicated he would sign it, though he may seek refinements.
For high earners affected by the tax, planning options include adjusting withholding and estimated payments, evaluating relocation to no-income-tax states like Texas or Florida, or increasing charitable giving to take advantage of the expanded deduction. Tax advisors recommend modeling scenarios now, given the 2028 effective date.
Beginning in 2029, the bill would exempt businesses with gross receipts under $300,000 from the B&O tax. Businesses organized as pass-through entities could be affected if owners’ taxable income exceeds $1 million. Business groups said they are seeking changes as the bill moves through the House.
If the bill becomes law, opponents could pursue legal challenges. Any constitutional questions would be resolved through the court system, including potential review by the Washington Supreme Court.
Source
WATCH: WA income tax proposal sparks more heated debate in Olympia | NCWLIFE