The Washington State Senate approved a bill Monday that would impose a 9.9% tax on annual income above $1 million. The proposal now moves to the Washington House of Representatives for consideration.
According to Daljoog News analysis, the measure represents one of the most significant shifts in Washington’s tax structure in decades. Lawmakers frame it as a correction to what they call a regressive system heavily reliant on sales taxes.
If enacted, the bill would reshape state revenue streams, expand tax credits for lower-income households, and likely trigger a legal battle over whether Washington can impose a tax on income.
What Happened?
Senate Bill 6346 passed on a 27-22 vote. The legislation is sponsored by Senate Majority Leader Jamie Pedersen, a Democrat from Seattle.
The bill would apply a 9.9% tax to income earned above $1 million annually. Households earning $1 million or less would not pay the additional tax.
Supporters say fewer than 1% of Washington households would be affected. They argue the revenue would provide sustained funding for public schools, health care services, and other essential programs.
The legislation includes several amendments adopted during committee review.
Beginning in 2029, small businesses with gross revenues under $300,000 would be exempt from the state’s business and occupation tax. That threshold increased from $250,000 during Senate deliberations. Lawmakers would also eliminate a business and occupation surcharge starting in 2029.
The bill expands the state’s Working Families Tax Credit, which provides rebates to low- and moderate-income households. Lawmakers also voted to dedicate 7% of revenue from the new tax to counties for public defense and public safety services, up from 5% in the original draft.
An additional amendment increased the exemption for charitable deductions from $50,000 to $100,000. Another provision would repeal recent expansions of the sales tax to certain services.
The proposal now advances to the House. If approved, it would require the governor’s signature before becoming law.
Why This Matters
Washington is one of a handful of states without a broad-based personal income tax. Instead, it relies heavily on sales taxes and business taxes, which critics argue place a disproportionate burden on lower-income households.
Supporters describe the measure as a targeted approach that affects only the wealthiest residents while expanding relief for working families and small businesses.
The projected revenue could bolster funding for education and health care at a time when state budgets face pressure from rising service costs and economic uncertainty.
Opponents argue the tax could drive high earners and businesses out of the state. They also warn it may discourage investment and job creation.
The business community will likely scrutinize how the new tax interacts with existing capital gains and corporate tax policies. Even limited shifts in high-income residency patterns can affect state revenue forecasts.
What Analysts or Officials Are Saying
Sen. Pedersen described the vote as a major milestone for Washington’s children, small businesses and residents struggling with health care costs.
Democratic lawmakers say the bill corrects structural inequities in the tax code. They emphasize that most households would see no new tax burden and that expanded credits would benefit working families.
Republican lawmakers largely opposed the measure, arguing it risks undermining Washington’s economic competitiveness. Critics also question whether courts will uphold the tax.
Legal observers note that Washington courts have historically interpreted income as property under the state constitution. That interpretation has complicated past attempts to establish an income tax.
A legal challenge appears likely if the bill becomes law.
Daljoog News Analysis
This proposal signals a deliberate pivot in Washington’s fiscal policy.
Rather than incremental adjustments, lawmakers are attempting a structural rebalancing. By targeting income above $1 million, they seek to capture revenue from a narrow segment of taxpayers while shielding the broader population.
The inclusion of small-business exemptions and charitable deduction increases reflects a political balancing act. Lawmakers aim to blunt arguments that the tax would stifle entrepreneurship or philanthropy.
Still, the measure’s durability depends on the courts.
If judges rule that the tax violates constitutional limits, lawmakers may need to revisit the design or pursue a constitutional amendment. Either path would prolong the debate.
The broader political implication is clear: Washington is testing whether voters and courts will accept a new model for funding public services in a state long resistant to income taxation.
What Happens Next
The House of Representatives will now debate and potentially amend the bill. Passage there would send it to the governor for signature.
If signed into law, implementation details would follow through state tax agencies. However, opponents are expected to file suit quickly, likely seeking to block enforcement pending judicial review.
