Washington’s Millionaires Tax Advances in State Senate with Some Changes

Why It Matters

The tax aims to address growing income inequality and fund critical public services, while its political compromises test Washington’s willingness to adopt a state income tax. Its passage could reshape fiscal policy and set a precedent for other states.

Key Takeaways

• 9.9% tax on income above $1M, effective 2028.
• Projected $3.5B annual revenue, 30,000 taxpayers.
• Small‑business B&O exemption covers >70% firms.
• Charitable deduction doubled to $100,000.
• 7% of proceeds fund local public‑defense costs.

Pulse Analysis

Washington has long prided itself on being one of the few states without a broad‑based personal income tax, relying instead on sales and business‑occupation levies. The surge in high‑net‑worth residents, driven by the tech boom in Seattle and surrounding areas, has intensified calls for a more progressive revenue stream. Governor Bob Ferguson’s recent endorsement of a millionaire’s tax reflects mounting pressure to address widening wealth gaps and fund expanding public‑service costs. The Senate Ways and Means Committee’s approval of Senate Bill 6346 marks the first concrete step toward overturning the state’s historic tax stance.

The revised bill imposes a 9.9 percent surcharge on income exceeding $1 million, projected to raise $3.5 billion a year from roughly 30,000 taxpayers. To soften the impact on small enterprises, the legislation expands the business‑and‑occupation tax exemption to firms with up to $600,000 in gross revenue, effectively shielding more than 70 percent of Washington’s small businesses. Additional incentives include a doubled charitable deduction to $100,000 and a new deduction for commercial‑fishing operators. Seven percent of the proceeds are earmarked for a dedicated fund to help local jurisdictions cover escalating public‑defense expenses, while the balance bolsters the general fund for K‑12 education, human services, and corrections.

Politically, the bill’s passage through a partisan committee underscores the delicate balance Democratic leaders must strike between revenue generation and business‑friendly policies. Republicans have framed the tax as a slippery slope toward broader taxation, echoing past voter rejections of income‑tax proposals. If the full Senate approves the measure before the February 17 deadline, Washington could become a trailblazer for progressive taxation among traditionally low‑tax states, potentially prompting neighboring jurisdictions to reconsider their own fiscal frameworks. The next legislative hurdle will be a full‑chamber vote, followed by possible gubernatorial negotiation on the final amendment package.