Washington Adopts 9.9% Tax on Residents Earning Over $1 Million

Washington, long one of the few states without a personal income tax, has enacted a 9.9% tax on income above $1 million. The law is set to take effect in 2028 and is expected to face prompt constitutional challenges.

Washington, historically one of the few states without a personal income tax, has enacted a new tax targeting high-income residents, as Governor Bob Ferguson signed SB 6346 into law on March 30, 2026. The legislation imposes a 9.9% tax on individuals earning annual income exceeding $1 million (which is expected to rise over time with inflation), while excluding the first $1 million from taxation and applying only to income.

The measure, sponsored by State Senator Jamie Pedersen and advanced in the Washington State House of Representatives by State Representative Joe Fitzgibbon, with a key amendment from State Representative April Berg, passed largely along party lines and is scheduled to take effect January 1, 2028, with initial payments due in April 2029. The new law, which supporters call a "millionaire’s tax," is estimated to raise more than $3 billion per year.

The law is expected to face immediate legal challenge from the Citizen Action Defense Fund, led by former Attorney General Rob McKenna, on the grounds that it constitutes an unconstitutional graduated income tax under Washington law, where income has historically been treated as property subject to uniformity requirements. This anticipated litigation follows prior challenges to the state’s capital gains tax enacted under former Governor Jay Inslee, which was ultimately upheld by the Washington Supreme Court.

Although the tax is projected to apply to fewer than 0.5% of Washington residents (about 20,000 households according to legislative estimates), affected taxpayers should begin evaluating potential planning strategies, including income timing, residency considerations, and structural adjustments, while closely monitoring legal developments that may impact the law’s implementation.

Notably, Washington’s existing tax on capital gains provides important context for this development. Enacted in 2021, the tax applies a 7% rate to certain long-term capital gains above a specified threshold (currently $250,000 for individuals), subject to various exclusions, including for real estate and retirement assets.

While initially challenged on constitutional grounds, the Washington Supreme Court upheld the tax by characterizing it as an excise tax rather than a property tax. The court’s reasoning in that case is likely to play a central role in the forthcoming litigation over the new millionaires’ income tax, particularly with respect to how income is classified under state law.

Washington residents should consider the impact of the new tax and continue to monitor developments regarding challenges to the tax.