Senate Bill 6346 and House Bill 2724 would start in 2028 and send most revenue to the state budget while dedicating a slice to county public defense.
OLYMPIA, WA — Washington’s Democratic leaders on Tuesday introduced a “millionaires’ tax” that would levy 9.9% on annual income above $1 million, triggering an immediate clash with the governor over how much relief should be returned to residents and small businesses as the plan advances at the Capitol.
Backers say the proposal aims to shift more of the tax load to the highest earners and stabilize state finances without raising rates on most families. The plan arrives early in a 60-day session and faces both legal and political tests in a state that has long avoided a general income tax. Supporters project billions in annual revenue; critics warn of economic fallout and constitutional hurdles. A first hearing is set this week as lawmakers and the governor negotiate the size of accompanying tax cuts and the details of implementation.
Senate Majority Leader Jamie Pedersen and House Majority Leader Joe Fitzgibbon filed the companion measures — Senate Bill 6346 and House Bill 2724 — framing the move as a targeted surcharge on only the portion of a household’s income above $1 million. The rate matches Washington’s capital gains tax at 9.9%. Democrats said fewer than 1% of households, roughly 20,000 to 30,000 filers, would pay. The bills set Jan. 1, 2028, as the effective date, with first payments due in April 2029, providing time for rulemaking and expected challenges. “We have an opportunity to fund public schools, health care and cut taxes for millions more by asking a few thousand very wealthy people to pay more,” Pedersen said. Gov. Bob Ferguson, who has endorsed the concept, called the bill “a good start” but said it falls short on relief.
The plan would send 95% of proceeds to the state’s general fund and carve out 5% for a new county public defense stabilization account. Democratic fiscal staff estimate about $3.7 billion in annual revenue once fully implemented. Thresholds would be indexed to inflation so the $1 million line rises over time. A package of offsets is tied to the proposal: eliminating state sales tax on grooming and hygiene products such as soap and toothpaste beginning in 2029; doubling the small-business credit under the business-and-occupation tax so firms with less than $250,000 in yearly gross receipts owe none; and ending a 0.5% B&O surcharge on very large companies one year earlier than scheduled. Lawmakers also propose expanding the Working Families Tax Credit, a rebate for low- to middle-income households. Precise dollar figures for each piece remain in flux as negotiations continue.
Ferguson said he cannot support the current draft because “a significant percentage of the revenue must go back into the pockets of Washingtonians.” He has pressed for a far larger small-business relief package — near $1 billion — and broader sales-tax exemptions that include baby diapers, along with a higher rebate and wider eligibility under the Working Families Tax Credit. Legislative budget writers counter that when early B&O changes are counted, roughly 15–20% of the money in the first years would function as tax relief, though only 5% is earmarked in statute for public defense and the rest flows to the general fund, where lawmakers make spending choices year to year. Republicans argued the measure would inevitably creep beyond millionaires and questioned its legality, noting Washington voters have rejected income-tax proposals repeatedly over decades.
Washington is one of nine states without a personal income tax. A 1933 state Supreme Court ruling treated income as property, imposing uniformity limits that have long constrained lawmakers. Democrats say the modern court should revisit that precedent, and they designed the bills to mirror parts of existing state taxes and provide credits to avoid double-taxing certain income. GOP leaders, including House Minority Leader Drew Stokesbary and Senate Minority Leader John Braun, said the draft undercuts a 2024 statute affirming that the state has no income tax. Outside the Capitol, business groups split: some tech and startup advocates warned about talent flight and stock-based income volatility, while the Washington Roundtable signaled openness to ongoing talks if broader relief and predictability are built in. Anti-tax groups are preparing litigation and a potential repeal measure should the plan pass.
The legislation names specific timelines. The Senate Ways and Means Committee set a public hearing for Friday at 1:30 p.m. Fiscal notes and substitute language are expected as the bill moves. If approved this session, agencies would draft rules through 2027, with the tax starting Jan. 1, 2028. The first returns would arrive in spring 2029. Sponsors say the inflation index protects middle-income filers as wages rise. The Department of Revenue would administer the tax, and counties would receive their public-defense allocation quarterly. Democrats also tout interaction with other state levies: capital gains liabilities could be credited where applicable; B&O and public utility tax credits would reduce duplicative burdens on pass-through income. Opponents maintain those safeguards are untested and will be litigated.
At the Capitol on Tuesday, Ferguson told reporters, “It’s a good start, but I cannot support it in this form,” adding that the relief presently totals only a fraction of what he seeks. Fitzgibbon responded that negotiations with the governor are active and that Democrats “intend to arrive at a proposal that he supports.” Republicans sharpened their critique. State GOP chair Jim Walsh called the bill “an income tax with a serious constitutional defect.” Sen. Chris Gildon said the threshold could be lowered by a simple majority in a future session, a claim Democrats rejected, noting any change would require the same public debate and votes. Advocacy groups for affordable housing and education rallied outside, saying a general-fund approach gives lawmakers flexibility to respond to needs as they change.
The state’s recent history frames the stakes. Voters in 2024 kept a 7% capital gains tax passed earlier in the decade. Analyses by inequality researchers show households in the bottom 20% of the income distribution pay a much larger share of their income in state and local taxes than top earners, a disparity Democrats cite as a core rationale. Business leaders point to Seattle’s layered taxes and warn that adding a high-earner levy could affect stock-heavy compensation and IPO-year income. Fiscal analysts project a multiyear structural gap in the state budget even after spending trims and reserves. Whether the new tax closes that gap — and how much of its proceeds should reduce other taxes — is at the center of the current fight.
For now, Democrats hold majorities in both chambers, giving the proposal a clear path to early votes. But the legal cloud remains. If enacted, the tax would almost certainly face a ballot challenge and review by the state Supreme Court, a process that could run in parallel with rulemaking and delay collections. Lawmakers say the 2028 start date anticipates that timeline. The session ends March 12, leaving a narrow window for committee work, floor action and reconciliation. If major amendments expand relief, Ferguson has indicated he could sign on. If not, negotiators will have to bridge the gap quickly.
As the day ended in Olympia, staffers stacked fiscal binders outside Ways and Means while advocates filtered through the marble wings with signs about schools, public defense and affordability. “We can’t go on asking the middle class to pay higher rates than millionaires,” said Rian Watt of the Economic Opportunity Institute. Former lawmaker Reuven Carlyle, now in private finance, cautioned that “radically shifting the tax structure in a very short period” could harm the state’s startup engine. On the steps, a small group waved red “Don’t Tax Wages” placards, while a separate crowd cheered when lawmakers mentioned diaper and hygiene-product exemptions. The contrasts underscored a familiar Olympia scene: unanimous agreement that the tax code needs work, deep disagreement over the fix.
As of Tuesday night, the bills had been filed, the first hearing was scheduled for Friday at 1:30 p.m., and negotiations over the scope of tax relief were underway. Lawmakers said updated language could arrive before the first vote. Further updates are expected after the hearing and before the session ends March 12.
Author note: Last updated February 3, 2026.