Note: This article has been updated since Washington Senate Bill 6346 (aka The Washington Millionaire’s Tax) passed a vote in the House of Representatives on March 10th, 2026.
Key Takeaways
- Washington’s proposed Millionaire’s Tax would impose a 9.9% tax on household income over $1 million starting in 2028, significantly impacting high earners, business owners, and those with large liquidity events.
- Even if passed, the bill is likely to face legal and political challenges, including potential lawsuits and a possible voter initiative to repeal it in 2026.
- High net worth residents should begin proactive planning now, especially around equity compensation, business exits, charitable giving, estate strategy, and potential residency considerations.
Senate Bill (SB) 6346 aka The Washington State Millionaire Tax
Summary of the Bill
In February 2026, the Washington State Senate reached a milestone with the passage of SB 6346, a high-profile tax on high earners popularly referred to as the Millionaire’s Tax.
The Core Proposal: A 9.9% Tax on Annual Income over $ 1M
Although the bill includes specific exclusions and adjustments to what income is subject to the tax, the primary goal of the legislation is to address budget shortfalls by raising taxes on Washington’s high earners.
If enacted as currently proposed, the tax will apply a 9.9% tax on household adjusted gross income over $1,000,000. Income earned starting January 1st, 2028 would be taxable with first payments due in early 2029.
If you’re a high-earner in the state of Washington who earns $1,000,000+ per year, this article will walk you through the ins and outs of the Washington State Millionaire tax.
Reach out to our team of CERTIFIED FINANCIAL PLANNERS® serving clients in Spokane, WA and nationwide if you want help with financial planning, retirement planning, and more.
Current Status and Legislative Timeline.
The first major hurdle for the Washington Millionaire Tax was cleared in February 2026 when SB6346 passed chamber in the Senate. As of March 10th, 2026, the bill passed the state House of Representatives and is set to be signed by Governor Ferguson, who has expressed his intention to sign the bill into law.
The Governor’s signature is the last hurdle for SB6346 to clear before it is enacted into law.
The bill did undergo some minor changes as it was reviewed by the House Finance Committee and subsequently it passed a vote in the House. Governor Bob Ferguson has previously voiced his support for a Washington State Millionaire’s Tax, and is widely expected to sign the current version of the bill when it hits his desk.
The bill came down to the wire and was debated for over 24 hours on the House floor, beating an important March 12th legislative deadline.
🗓️ → See the Washington State Legislature’s cutoff calendar
Constitutional and Political Hurdles
Even with SB6346 having passed the House and ultimately expected to be enacted as law, the bill is likely to face significant challenges via lawsuits, voter initiatives, or both.
Legal Battle Expected
History suggests a tough road ahead for the Millionaire’s Tax even after it clears the Governor’s desk.
The Washington Supreme Court, in a landmark 1933 decision, effectively banned graduated income taxes in Washington State. Additionally, Initiative 2111, passed in 2024, prohibits the state, counties, cities, and other local jurisdictions from imposing personal income taxes, though SB6346 already addresses this, using explicit exemption language.
If SB 6346 passes, it will almost certainly face a lawsuit aimed at striking it down before it ever takes effect.
Voter Initiatives
In addition to being challenged in the courts, Washington’s voters could ultimately decide the bill’s fate.
The bill includes an “emergency clause” that prevents it from being overturned by a simple referendum but opponents of the tax are likely to try to force the bill to a vote via voter initiative.
Assuming an initiative gains enough signatures, it would put a vote to repeal SB 6346 on the statewide ballot for the November 2026 election.
Rolling Back the Estate Tax – SB6347
In an attempt to prevent wealth flight, a second bill was passed alongside SB 6346.
Washington SB 6347 aims to reverse many of the estate tax increases that were passed in 2025.
Despite Washington’s lack of a traditional state income tax, Washington’s tax landscape has become increasingly complex with the proposed Washington Millionaire’s Tax, the state capital gains tax, and one of the most aggressive estate taxes in the country.
The Tax Foundation ranked Washington 45th in their 2026 State Tax Competitiveness Index.
Proponents of the sister bill fear this will cause wealthy residents to flee to more tax friendly states for high earners. The hope is that reducing the impact of the state estate tax will alleviate these concerns.
The Marriage Penalty and Washington’s Tax Stack
The “Marriage Penalty” on Washington High Earners
Unlike many federal tax laws that double the income threshold for married couples, Washington’s proposed Millionaire’s Tax applies a flat $1 million threshold per household.
This creates a significant “marriage penalty.” For example, two individuals earning $700,000 each would pay $0 in this tax while single. However, if they marry, their combined income triggers the tax on the $400,000 above the limit.
Worse yet, you cannot avoid this by choosing the “Married Filing Separately” status. Washington’s tax is designed to apply to the combined household regardless of how you file.
The Tax Stacking Effect for High Net Worth Families
Though tax law is written in pencil and constantly evolving, the current landscape for high earners and high net worth families warrants careful attention and proactive planning.
While these taxes do not all apply to the same income simultaneously, certain income streams may be subject to multiple layers of taxation, creating meaningful overlap in effective tax rates.
5 Potential Financial Planning Considerations
1. RSU Vesting and Deferred Compensation
High-earning Washington residents with equity compensation often receive “lumpy” income with limited control on the timing of various income bumps, whether due to a graduated vesting schedule or a liquidity event such as an IPO.
This can force taxpayers above certain thresholds (such as $1M in income) in specific tax years, even if their average annual comp is otherwise below such levels.
If you’re a highly compensated employee with equity comp, you should consider if your employer offers a non-qualified deferred compensation plan that might allow you to “push” income in a current or upcoming year further into the future.
2. Charitable Giving Optimization
Under the latest version of SB 6346, high-income earners can claim a charitable deduction of up to $100,000 against their state taxable income.
Charitable giving should be mission-driven first and tax-driven second. However, for high earners already making significant contributions, this deduction offers a valuable “double-dip” benefit by lowering both your federal and state tax obligations.
If you’re sure you want to give but unsure at this point of which charities you want to support, consider a Donor-Advised Fund to increase flexibility in your giving plan.
3. Pass-Through Entity Tax (PTET) Elections
For Washington residents that own a pass-through entity such as an S-Corporation or a Partnership, the proposed bill includes a critical tax planning opportunity: the Pass-through Entity Tax (PTET) Election.
If you own an S-Corporation or a Partnership, making this election could significantly reduce your federal tax bill by bypassing the SALT deduction cap.
Although the OBBBA raised the SALT deduction cap from $10K to $40K, it’s phased back down to $10K for high earners.
The PTET Election allows business owners to pay the tax at the entity level, which ensures it is a deductible expense on your federal tax return, essentially bypassing the SALT cap.
If you’re a majority owner of a small business, you should be talking to your tax advisor about paying this tax at the entity level when it is implemented.
4. Multi-Year Exit Planning
For Washington taxpayers preparing to exit a business, the Washington Millionaire’s Tax has significant planning implications.
Specifically, considering an installment sale might be more advantageous after SB 6346 becomes law.
An installment sale allows a retiring business owner to stretch the taxable income of the business sale over multiple tax reporting years which helps to maximize the annual $1 million standard deduction.
To give an oversimplified example, a taxpayer selling a business at a profit of $10,000,000 might have $9 Million taxed at 9.9% ($990K) if the entire gain is recognized in a single tax year, but may be able to avoid (or mostly avoid) the Washington Millionaire’s tax if they structure the sale over ten years.
Installment sales do introduce risks not present in a lump-sum transaction, so consult your team of advisors before finalizing such a sale structure.
5. Proactive Estate Planning to Alleviate the Washington “Tax Stack”
For high-net-worth families, effective tax planning is an ongoing process focused on one goal: lowering your lifetime tax bill.
In Washington, this requires a strategy that balances federal income, estate, and gift taxes against state-level hurdles like the capital gains tax and the proposed “Washington Millionaire’s Tax.”
Without a cohesive plan that covers your peak earning years, retirement, and eventual estate transfer, you risk leaving hundreds of thousands of dollars on the table.
Honorable Mention: Residency Considerations
Though not easy in practice, many Washington retirees consider a retirement relocation to a more tax-friendly state like Idaho. This move can look great on a spreadsheet but is often a bit messier in reality.
Relocating from Washington to Idaho can result in significant estate tax savings as Idaho has no state level estate tax. There are other factors to consider, however.
For one, if your business is still anchored in Bellevue, Washington isn’t just going to wave goodbye to its cut. Income sourced from Washington businesses generally remains subject to the Millionaire’s Tax regardless of where your primary residence is.
Plus, each state has its own pros and cons. Idaho, for example, has a state income tax, so the cost-benefit analysis would need to consider that as well. If your primary motivation for moving is taxes, consider consulting The Tax Foundation’s State Tax Competitiveness Index.
If you’re a Washingtonian considering a move to another state, connect with our team to discuss the various planning implications.
Frequently Asked Questions – SB6346 Washington
Will the sale of my home be taxed by Washington State?
No, in addition to being exempt from Washington’s capital gains tax, income from the sale of real estate is exempt from the current version SB 6346.
Is retirement income such as withdrawals from an IRA subject to the tax?
No. The current bill excludes qualified pension income and retirement account withdrawals from the Millionaire’s tax.
Can a married couple file separately to avoid the “marriage penalty”?
As currently drafted, there is not much of a workaround for the marriage penalty for couples with combined income over $1M.
Simply filing “Married Filing Separately” unfortunately will not avoid the Washington Millionaire’s Tax as currently drafted.
Can I move out of state to avoid the Washington Millionaire Tax?
Potentially, but it depends. As discussed above, if your income is sourced in Washington state through a Washington business, simply moving out of state will not avoid the tax.
That being said, if you’re working for a company with established operations in other states, moving out of state could reduce your tax liability to Washington.
Can I reduce my Washington tax bill with charitable giving?
Yes. Washington SB 6346 allows for a $100,000 charitable deduction, which means any income above $1 million can be offset by up to $100,000 in qualified charitable contributions.
It’s always worth noting, however, that this is not advantageous from a purely financial perspective, as you’d be giving up $100,000 to save $9,900 in state taxes (before accounting for federal tax savings). If, however, you’re charitably inclined or otherwise have a cause or organization you’d like to support, Washington tax savings can sweeten the deal and help maximize impact.
Will capital gains face double taxation due to the Washington Capital Gains Tax?
Likely not. Washington SB 6346 includes a credit for any taxes paid in Washington capital gains taxes. This is to prevent double taxation on investment income in Washington state.
What the Washington Millionaire’s Tax does do, however, is essentially bump any taxable long-term gains straight to the top 9.9% capital gains tax bracket.
Prior to the Millionaire’s Tax, the first $1 Million of taxable long-term gains were taxed at 7% and any taxable gains over $1 Million. If you’re over the million dollar income threshold, however, the current version of SB 6346 gives you a credit for the 7% taxes you paid on that first million, but leaves you on the hook for the 2.9% difference.
In essence, will capital gains face “double taxation”? No. But will your Washington capital gains be taxed at a higher rate? Yes.
Is there a way for voters to stop or overturn Washington SB6346?
Maybe, but not yet. The bill includes “emergency clause” language that prevents a simple voter referendum to put it up to a vote on the ballot. Therefore, Washington citizens must wait for the bill to pass legislature and be placed into law before it can be challenged.
Once enacted, however, voters could challenge the bill via voter initiative. This requires a certain threshold of signatures from Washington citizens and would put a vote to repeal on the ballot.
Washington state has a long history of rejecting state income taxes and, therefore, SB 6346 could face a stiff challenge if a repeal effort is put on the ballot. This tax, however, is different from any previous proposal in the state’s history and it’s hard to know how it will fare.
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