Washington state on Monday enacted a 9.9% tax on income over $1 million starting in 2028.
In signing the bill, Gov. Bob Ferguson said in a statement that its adoption "makes our tax system more fair, and means free meals for K-12 students, the largest tax break in state history for small businesses, eliminating the sales tax for baby diapers, and sending a check to nearly 500,000 working families to make life more affordable."
Less than one half of 1% of Washingtonians will pay the tax, "but it will make life more affordable for millions," Ferguson's office said.
The bill does not apply to:
- income below $1 million
- the first $1 million of income on individuals who will owe the tax or
- assets, such as homes or property.
The new tax "does not tax net worth, due to the complexities of annual valuations," Jeff Bush of The Washington Update told ThinkAdvisor in an email Tuesday. "Instead it taxes high income filers as a proxy for wealth."
Filers have time to prepare, according to Bush.
"I was in Spokane, Washington as the state legislature was debating this measure," Bush said. "I was surprised by how many clients were actively contemplating making the 20 minute move to Idaho to avoid the increased tax exposure."
In its first full year of implementation, the millionaires' tax is expected to send more than 41.3% of revenue raised back to Washington families and small-business owners, according to Ferguson's office. The next year, that figure could increase to 47.3%.
Senate Bill 6346, sponsored by Sen. Jamie Pedersen, D-Seattle, creates a tax on income over $1 million in a single year. Rep. Joe Fitzgibbon, D-West Seattle, sponsored the companion bill, and Rep. April Berg, D–Mill Creek, proposed an amendment.
"The Millionaires' Tax is historic tax reform that will make Washington more affordable for working people and businesses in our state," Fitzgibbon said in the statement.
"We removed sales tax on essential products, cut taxes for the majority of businesses in our state, expanded tax credits for working families, and provided free school meals to every child, while investing more in things that benefit everyone, like our public schools, health care and childcare. Washington is not afraid to do hard things to make our state a better place, and big tax reform like this will be felt widely in the years to come," he added.
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