New 9.9% Income Tax on Millionaires: What's Happening in Washington
Washington’s tax structure may be headed for another significant shift. Will more states start "taxing the rich"?
During the current 2026 legislative session, Washington state lawmakers are advancing a proposal to impose a 9.9% tax on personal income above $1 million. That is a notable move in a state that has historically avoided taxing wages, but that began taxing certain capital gains a few years ago.
The measure — Senate Bill 6346, known as the “Millionaires' Tax” — has passed the state Senate and is now under consideration in the House.
Supporters highlight its potential to fund essential services and reduce reliance on regressive taxes. Opponents argue it risks chasing top earners away and reshaping Washington’s tax landscape in ways that could ripple through the economy.
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Washington Gov. Bob Ferguson generally backs the tax for those earning over $1 million, seeing it as a tool to make Washington’s tax system more progressive. However, he has indicated that if such a tax moves forward, it should remain targeted at the wealthiest residents, and certain features should be built into it to protect broader affordability and fairness.
"I’ve said that any Millionaires' Tax I sign must send a significant percentage of that revenue back to Washingtonians, " Ferguson stated in a recent press conference.
And notably, Washington isn't alone. This year, several states are considering or expanding high-earner taxes as lawmakers seek new revenue amid mounting fiscal demands. Here's more to know.
Washington state 'Millionaire Tax' gains momentum
Under the current draft of the legislation, SB 6346 would impose a 9.9% tax on Washington personal income above $1 million.
- According to legislative language, this would affect only the wealthiest roughly 0.5% of Washington households.
- Proponents estimate the tax could generate more than $3.5 billion annually for education, health care, and other public services, though official fiscal scores are still being finalized.
- Gov. Ferguson has noted that a portion of that, roughly $1.9 billion, could fund key sales tax relief for residents.
For supporters, the millionaire’s tax is about fairness and stability.
Washington’s lack of an income tax means it relies heavily on sales taxes and flat levies, which take a larger share of earnings from lower-income families. By targeting income above $1 million, some argue the state can raise revenue from those most able to pay.
Gov. Ferguson has proposed ways to ensure that, if approved, the revenue generated by the millionaires' tax could help fund broader tax relief for Washingtonians.
For example, Ferguson points to strengthening the Working Families Tax Credit, providing more sales tax relief (possibly adding a sales tax holiday), and making permanent sales tax exemptions for feminine hygiene products, diapers, and baby products. His proposal would also focus on tax cuts for small businesses.
Opponents warn that a near-10% top state income tax rate could undermine the state's competitiveness. Another argument is that the tax could cause high earners to flee to states with lower tax burdens, reducing the revenue the policy intends to raise.
But there are also potential legal hurdles: Washington’s constitution has historically prohibited graduated personal income taxes, so legal challenges are likely even if the legislature passes the bill.
The new capital gains tax in Washington
Five years ago, as Kiplinger has reported, Washington enacted an excise tax on certain long-term capital gains — profits from selling assets like stocks, bonds, and business interests. Under that law:
- For most taxpayers, long-term capital gains over the standard exemption ($278,000 for 2025) are taxed at a 7% rate.
- For gains above $1 million, the rate jumps to 9.9%.
Here’s how the new capital gains tax structure works:
Gains up to the exemption | No Tax |
Gains between the exemption and $1 million above it | 7% Tax |
Gains above $1 million over the exemption | 9.9% Tax |
Washington's capital gains tax has already generated hundreds of millions in revenue for schools, childcare, and early learning programs. It has survived legal challenges as an excise rather than an income tax.
Because both taxes hinge on income above $1 million, high earners could see combined liabilities from wages and investments. That's a factor some say might need clarification if the millionaires' tax becomes law.
How Washington compares with other no-income-tax states
Even with the capital gains tax and proposed Millionaires' tax, Washington still sits among a small group of states that largely avoid taxing wages.
Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, and Wyoming all rely on sales tax, property taxes, or resource-based taxes rather than traditional income taxes.
Yes, Washington differs because it now has both a capital gains tax and the potential 9.9% millionaire’s tax. But that would reportedly apply only to the top 0.5% of households. For most Washington residents earning under $1 million, Washington remains a no-income-tax state in practical terms.
Taxing the rich? Bottom line
If this Millionaire Tax bill is approved, most residents would see little change in their personal income tax. But the wealthiest households could face a tax landscape that resembles traditional income tax to some degree, especially when combined with the state’s capital gains tax.
But it's worth keeping in mind that Washington’s debate over SB 6346 is unfolding alongside what could be a broader national shift...
In 2026, several states are considering or enacting high-earner taxes, while at the federal level, Sens. Bernie Sanders (I-Vt.) and Ro Khanna (D-Calif.) have just introduced a 5% billionaires’ tax aimed at the ultra-wealthy.
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