Washington's Millionaires Tax: what it is and who pays it

Who is taxed in Washington State

The Millionaires Tax is a 9.9% tax on the portion of a household's annual income that exceeds $1 million. It was passed by the Legislature as Engrossed Substitute Senate Bill 6346 and signed by Governor Bob Ferguson on March 30, 2026 (Chapter 238, Laws of 2026).[1]

The standard deduction is $1 million for an individual or a married couple or registered domestic partnership. Only income above the applicable deduction is taxed, at a single rate of 9.9%. The deduction is adjusted for inflation every two years, beginning with taxes due in 2030. Nonresidents and part-year residents receive a prorated deduction.[1]

• Married couples and registered domestic partners share one $1 million deduction.
• The calculation starts from federal adjusted gross income, with Washington-specific adjustments (listed below).
• No paycheck withholding. Taxpayers who owe the tax file an annual return. Estimated payments are required when annualized tax liability is $5,000 or more. People who owe nothing do not have to file a Washington income tax return.[3]
• Residents’ income is included regardless of where it is earned, subject to the law’s exclusions, deductions, and credits. Nonresidents are taxed only on income allocated to Washington, with a prorated standard deduction.

What's exempt or deducted from the tax

Beyond the $1 million standard deduction, the law excludes or deducts several kinds of income.[1][3]

• The standard deduction described above: $1 million for an individual or a married couple or registered domestic partnership, with adjustments for inflation and residency.
• Home sales and other real estate gains. Long-term capital gains from sales of homes and other real estate. Short-term gains are not covered by this exclusion.
• Long-term capital gains from sales of qualified family-owned small businesses that qualify for Washington’s capital gains tax deduction.
• Gains in retirement accounts exempt under the capital gains tax, and qualified Roth IRA and Roth 401(k) distributions, which are not part of federal AGI.[8]
• Up to $100,000 in qualifying charitable contributions to organizations principally directed and managed in Washington. Married couples and registered domestic partners share this deduction.
• Interest on U.S. government bonds and on Washington state and local government bonds.
• Specified tribal income, including qualifying treaty income, income earned by tribal members within their own tribe’s country, and income derived directly from qualifying trust lands or funds.
• 90% of gambling losses, up to the amount of gambling winnings.
• Deposits to a federal Capital Construction Fund for fishing vessels.
• Business expenses of licensed cannabis businesses that federal law disallows.

Credits that prevent double taxation

Households can take credits for Washington capital gains tax paid on the same gains, income taxes paid to other states, and B&O or public utility taxes paid on the same income. A pass-through business can elect to pay the tax at the entity level, with owners credited for it.[1]

Only the wealthiest would pay it

The Department of Revenue estimates that about 25,000 households would pay the tax, up from about 21,000 estimated when the bill passed, according to reporting by the Washington State Standard in August 2026. Married couples and registered domestic partners share one $1 million deduction.[4] The Department counts tax filers.[15]

More than 99% of Washington households are expected to owe nothing. For year-round residents, only annual income above the applicable $1 million standard deduction, after Washington-specific adjustments and other deductions, is subject to the tax.

How much revenue it would raise

The first returns and payments are due in 2029, so the 2027–29 budget period includes only the initial collections. Later collections include estimated payments and remaining payments for the first tax year.

The Office of Financial Management estimates that repealing the tax through I-645 would reduce state revenue by $11.4 billion across state fiscal years 2027 through 2031.[5]

What it would fund

By law, 5% of collections go to the Fair Start for Kids Account for child care and early learning (an estimated $377 million in 2029–31). The remaining 95% goes to the state general fund, where K-12 education is the largest expense.[1][5] The Legislature passed the tax together with a package of tax fairness efforts that take effect in 2029:[2][3]

Timeline

• February 16th, 2026Senate passes SB 6346, 27–22.
• March 9th and March 11th, 2026House passes an amended version of the bill, 51–46; the Senate later concurs, 27–21.
• March 30th, 2026Governor Ferguson signs the bill.
• May 4th, 2026State Supreme Court upholds the law's necessity clause, so it cannot be challenged by referendum. A separate constitutional challenge is pending.
• July 2026Secretary of State certifies Initiative 645 for the ballot, after signatures were submitted on July 2nd.
• November 3rd, 2026Voters decide Initiative 645. Counties certify their results on November 24th; the deadline for statewide certification is December 3rd.
• January 1st, 2028Tax takes effect for income earned in 2028, if it is not overturned. 
• 2029First returns and payments are due in April; estimated payments begin in July. The law’s principal tax cuts and Working Families Tax Credit expansion take effect. Universal free school meals remain subject to future legislative action and appropriations.

Initiative 645

Initiative 645 is an Initiative to the People sponsored by Let's Go Washington, the group founded by Brian Heywood. It was certified for the November 3, 2026 general election ballot in July.[6]

The sponsor says the measure is needed to prevent a broader statewide income tax in the future. Governor Ferguson and the No on I-645 campaign oppose it, citing the cuts they say repeal would force in education, health care, and child care.[6]

Proponents and opponents

The campaigns for and against are aligned with the Republican and Democratic parties.

Photo: Brian Heywood speaking

Photo: credit to come

Photo: Bob Ferguson speaking

Photo: credit to come

What I-645 would repeal and change

I-645 does more than repeal the tax. It also enacts a statutory ban on any tax on individual income, at any rate and any threshold, by the state or by any city, county, or other local government.[7]

The initiative asks courts to read its language as broadly as possible. Because "income" is defined to include any gain from capital, labor, or property, legal analysis suggests that other revenue sources for public services provided by the state, like the capital gains tax on the wealthy or premiums supporting paid family and medical leave and WA Cares, could be in jeopardy.[5][9]

Under the Washington State Constitution, the Legislature cannot amend a voter-approved initiative for two years without a two-thirds vote in both chambers.

Fiscal impact: $11.4 billion less state revenue across fiscal years 2027 through 2031, according to the Office of Financial Management.[5]

What about the $1 million threshold?

An often discussed concern brought up by skeptics is that the threshold would later be lowered to reach more households. It's important to know that similar taxes on the incomes of wealthy households adopted this century have not been adjusted downward. Here is the record:

• California adopted a 1% tax on income above $1 million (Proposition 63) in 2004. The $1 million threshold has never been lowered.
• Massachusetts adopted a 4% surtax on income above $1 million, advanced by the Legislature in 2021 and approved by voters in 2022. The threshold has not been lowered; it is indexed to inflation and has risen.
• Washington's capital gains tax, adopted in 2021, started at $250,000. That threshold has not been lowered; it is indexed to inflation and has risen every year. (In 2025 the Legislature added a 2.9% surcharge on gains above $1 million.)
• Governor Ferguson pledged on May 27, 2026: "so long as I am Governor I will veto ANY attempt to lower the threshold or raise the rate of this tax."[10]
• The law itself indexes the $1 million deduction to inflation, and its exception to Initiative 2111's income tax ban applies only as long as the standard deduction is at least $1 million per household.[1]
• Any future proposal to lower the threshold could also face an initiative campaign to reverse it, just as we're seeing now, with income tax opponents using I-645 to try to repeal the tax.

Constitutionality

Washington’s Constitution does not expressly prohibit an income tax. However, past court decisions have treated income as property, making income taxes subject to constitutional requirements governing property taxation, including uniformity and a one-percent limit on regular property-tax levies. Whether the Millionaires Tax can stand under the Constitution will be determined by the courts. A legal challenge has already been filed by tax opponents.

• 1932: About 70% of voters approved Initiative 69, a graduated income tax on higher incomes to relieve property taxes and fund schools.[11]
• 1933: In Culliton v. Chase, the State Supreme Court ruled 5–4 that income is property. Because property taxes must be uniform, a graduated income tax with rising rates was struck down. The Court reaffirmed this in 1936 (Jensen v. Henneford), striking down an income tax the Legislature passed in 1935.[11]
• 2026: The Millionaires Tax has a single flat rate of 9.9%, with an exemption for the first $1 million of each household's income, rather than graduated rates.

On May 4th, 2026, the Supreme Court upheld the law’s necessity clause, foreclosing a referendum. That ruling did not decide whether the tax itself is constitutional. A separate lawsuit, the one mentioned above that is pending in Klickitat County Superior Court, is challenging the tax’s constitutionality. If the Supreme Court ultimately invalidates the provision imposing the tax, the law specifies that most of its provisions, including its principal tax cuts, become void.[1][12]

What about public pensions?

Washington's public retirement statutes (for example, RCW 41.40.052 for PERS and RCW 41.32.052 for teachers) say pension benefits are exempt from state and local taxes. SB 6346 amended these statutes to say that exemption does not apply to the new tax on income over $1 million.[13]

• Pension income is taxed only as part of household income above $1 million. A retired teacher, firefighter, or state employee pays nothing unless the household's total income exceeds $1 million, and then only on the amount above it.
• The change prevents otherwise taxable public pension income from receiving a special exemption unavailable to comparable private pension income. Without it, a household above $1 million could exclude public pension income while a household with the same private pension or 401(k) income could not.
• Critics, including the I-645 sponsor, argue that removing the exemption would matter if the threshold were ever lowered. I-645 would reverse these amendments.[13]

Frequently asked questions

Sources

1. Final Bill Report, ESSB 6346 (C 238 L 26), Washington State Legislature
2. Millionaires Tax signed into law, Washington Senate Democrats, April 1, 2026
3. Millionaires Tax: Frequently Asked Questions, Washington House Democrats
4. WA revenue officials: Income tax will bring in more money than first expected, Washington State Standard, August 12, 2026
5. FAQ: WSPTA's opposition to Initiative IP26-645, Washington State PTA (cites OFM fiscal impact)
6. Washington voters to decide on an initiative to repeal legislation establishing an income tax, Ballotpedia News, July 18, 2026
7. Summary of Initiative 26-645, Washington State Legislature
8. Is retirement income subject to Washington's 9.9% income tax?, The Startup Law Blog
9. Washington income tax repeal: what changes if it passes, The Startup Law Blog
10. Ferguson vows to veto any expansion of WA "millionaires tax", Spokesman-Review, May 27, 2026
11. Washington State Supreme Court declares citizen-approved state income tax unconstitutional on September 8, 1933, HistoryLink.org
12. WA Supreme Court rules against first challenge to "millionaires tax", KUOW
13. Brian Heywood: WA income tax quietly stripped pension shield, Seattle Red
14. QuickFacts: Washington (households, 2020–2024), U.S. Census Bureau
15. Fiscal note, SSB 6346, Office of Financial Management and Department of Revenue ("approximately 21,000 filers in the first year")