Topline
The state of Washington is set to enact a law that will tax income over $1 million, marking a major break from its history of not having income tax and becoming the latest state to implement a so-called millionaires tax.
Key Facts
The 9.9% income tax will become effective at the start of 2028.
Gov. Bob Ferguson, D-Wash., signed the measure Monday, marking Washington’s first income tax of its kind.
Ferguson said during a press conference Washington ranks at the bottom of all U.S. states in tax fairness, saying families in the state “whose income is in the bottom 20% pay a whopping 13.8% of their total income in state and local taxes while the wealthiest pay a far smaller percentage of their income.”
The governor accused President Donald Trump’s tax cuts to the wealthy of making the disparity between low income and the highest income earners in Washington worse.
Money from the income tax will go toward free meals for kindergarten through 12th grade students, affordable childcare and eliminate sales tax on diapers, over-the-counter drugs and hygiene products, according to a statement from Ferguson’s office.
Big Number
At least $3 billion. That is how much the 9.9% tax is expected to generate for Washington per year beginning in 2029, according to officials. Seattle alone had 54,200 millionaires in 2023, according to U.K. wealth advisory firm Henley & Partner.
Surprising Fact
Washington is one of nine states that does not tax wage and salary for individuals.
What To Watch For
Brian Heywood, founder of conservative political committee Let’s Go Washington, filed a referendum against the tax in an attempt to have voters repeal the law in the general election later this year.
Key Background
As affordability remains a pivotal topic heading into the midterms, Washington is one of multiple Democratic-led states to enact tax laws on income over $1 million in the last few years. Massachusetts’ governor signed a 2023 law that placed a 4% surtax on annual taxable income beyond $1 million. Meanwhile, California imposes a 1% surcharge on personal income exceeding $1 million, placing the money generated into its health care system. While it hasn’t been signed and is at a city level instead of a state level, a 2% surcharge tax is being considered in New York City, which would generate billions of dollars from the tax.
Tangent
California voters in November are set to cast ballots to decide whether the state should enact a one-time, 5% tax on the assets of residents with net worths of $1 billion or more. The controversial proposal, which is starkly different from an income tax in that it taxes assets individuals own rather than their income in a given year, is opposed by Gov. Gavin Newsom.
Further Reading
California 5% Wealth Tax On Billionaires Could Pass This Time (Forbes)
