Washington's Senate passed legislation Monday to create the state's first broad income tax in a 27-22 vote. Senate Bill 6346, if enacted, would levy 9.9% on earnings above $1 million annually starting in 2028.
The bill targets roughly 20,000 taxpayers (under 1% of households) and projects $3.5 billion in annual revenue for schools, health programmes, and deficit relief. First returns would be due April 2029.
Three Senate Democrats broke ranks to oppose the measure alongside unanimous Republican opposition. Sen. Chris Gildon called it "the largest tax increase this century" and questioned constitutionality, noting Washington voters have repeatedly rejected graduated income taxes.
The legislation taxes only Washington-sourced income above the threshold. A taxpayer earning $1,000,100 would owe $9.90. Credits offset existing capital gains and business and occupation (B&O) taxes. Pass-through income counts post-credit.
Tax Relief Provisions
The bill exempts small businesses earning under $300,000 from B&O tax (covering 65% of firms). Businesses up to $600,000 receive partial relief. Sales tax on hygiene products gets repealed. Working Families Tax Credit expands. Seven per cent of revenue goes to county public defence.
Sen. Marko Liias backed an adopted amendment expanding small business relief and repealing most 2025 retail services taxes. Another amendment clarified pass-through entity rules.
What's Next
The bill advances to the House before the 12 March adjournment. Democrats hold majority support but expect amendments. Gov. Bob Ferguson's input anticipated.
Sponsor Jamie Pedersen expects a November ballot initiative regardless. "We fully expect this is going to be in front of the voters," he said. Legal challenges are considered certain.
Washington currently has the most regressive state tax structure after Florida. The bottom 20% of earners pay 13.8% of income in state taxes. The top 1% pay 4.1%.
Technical Considerations
Accountants should track House amendments on interstate income allocation, credit mechanisms, and federal deductibility treatment for high earners. The bill includes $100,000 exemption and charity deduction provisions.