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"? When you purchase through links on our site, we may earn an affiliate commission. Here’s how it works. Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.You are now subscribedYour newsletter sign-up was successfulWant to add more newsletters?Delivered dailyKiplinger TodayProfit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more delivered daily. Smart money moves start here.Sent five days a weekKiplinger A Step AheadGet practical help to make better financial decisions in your everyday life, from spending to savings on top deals.Delivered dailyKiplinger Closing BellGet today's biggest financial and investing headlines delivered to your inbox every day the U.S. stock market is open.Sent twice a weekKiplinger Adviser IntelFinancial pros across the country share best practices and fresh tactics to preserve and grow your wealth.Delivered weeklyKiplinger Tax TipsTrim your federal and state tax bills with practical tax-planning and tax-cutting strategies.Sent twice a weekKiplinger Retirement TipsYour twice-a-week guide to planning and enjoying a financially secure and richly rewarding retirementSent bimonthly.Kiplinger Adviser AngleInsights for advisers, wealth managers and other financial professionals.Sent twice a weekKiplinger Investing WeeklyYour twice-a-week roundup of promising stocks, funds, companies and industries you should consider, ones you should avoid, and why.Sent weekly for six weeksKiplinger Invest for RetirementYour step-by-step six-part series on how to invest for retirement, from devising a successful strategy to exactly which investments to choose.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.Become a smarter, better informed investor. Subscribe from just $107.88 $24.99, plus get up to 4 Special IssuesProfit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.Profit and prosper with the best of expert advice - straight to your e-mail.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.Under the current draft of the legislation, SB 6346 would impose a 9.9% tax on Washington personal income above $1 million.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.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:Here’s how the new capital gains tax structure works:Gains up to the exemptionNo TaxGains between the exemption and $1 million above it7% TaxGains above $1 million over the exemption9.9% TaxWashington'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.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.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.Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.Kelley R. Taylor is the senior tax editor at Kiplinger.com, where she breaks down federal and state tax rules and news to help readers navigate their finances with confidence. A corporate attorney and business journalist with more than 20 years of experience, Kelley has helped taxpayers make sense of shifting U.S. tax law and policy from the Affordable Care Act (ACA) and the Tax Cuts and Jobs Act (TCJA), to SECURE 2.0, the Inflation Reduction Act, and most recently, the 2025 “Big, Beautiful Bill.” She has covered issues ranging from partnerships, carried interest, compensation and benefits, and tax‑exempt organizations to RMDs, capital gains taxes, and energy tax credits. Her award‑winning work has been featured in numerous national and specialty publications.

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