The Millionaires’ Tax and Other Proposed Washington State Tax Legislation

Written by Christian Rodrigues, Eric Nix, and Grant Shaver.

Originally published 2/18/2026.
Updated 3/13/26 to include an update on the Washington Legislature’s decision.
Updated 3/31/26 to include Gov. Bob Ferguson’s signature on the Millionaires’ Tax.

This article is a part of a series on the Washington Millionaires’ Tax published by Clark Nuber. To read the other articles in the series, please explore our article archive.  

Millionaires’ Tax Update, Senate Bill 6346

March 13 Update

After extensive legislative debate, the Washington Millionaires’ Tax, Engrossed Substitute Senate Bill 6346 (SB 6346), was approved by both chambers of the Washington Legislature on March 12, 2026. The bill is now headed to the governor’s desk for signature. Governor Bob Ferguson has publicly stated he supports the new tax and plans to sign the bill that was sent to him.

As outlined in the original article below on the draft bill, the tax becomes effective January 1, 2028, with initial filings and payments due for the 2028 taxable year starting in 2029. While several revisions were made during the legislative process, the final enactment largely preserves the structure of the original proposal, subject to targeted clarifications and modifications.

March 31 Update

The Washington State Millionaires; Tax was signed by Governor Ferguson on March 30, 2026. For more information, read Washington State Millionaires’ Tax Signed — What Happens Next?

Stay tuned for a more holistic update regarding the details of the Millionaires’ Tax changes and other Washington excise tax repeals and amendments.

Proposed Millionaires’ Tax Overview

The Washington State Legislature is considering legislation that would impose a 9.9% state income tax on annual income in excess of $1 million. On Feb. 16, 2026, the Senate passed SB 6346. Companion HB 2724 is with House Finance Committee as of Feb. 17, 2026.  Absent judicial or voter intervention, the proposed tax in both bills would become effective on Jan. 1, 2028, with initial returns and tax payments due in 2029. Lawmakers have been debating multiple technical amendments during the short legislative session that include increasing the filing threshold to $2 million for joint filers and allowing for broader pass through entity tax elections. Under the current proposal, the $1 million threshold applies to both single and joint filers as detailed below. Much of the debate thus far has been regarding how the resulting revenue from the tax will be spent.

For purposes of determining liability under the millionaires tax, resident taxpayers begin with federal adjusted gross income. As with other state income taxes, specified modifications are required to determine Washington taxable income. These modifications include, but are not limited to, adjustments for:

• State and local income taxes
• Washington business and occupation (B&O) taxes
• Washington public utility taxes (PUT)
• Net operating losses

After determining Washington’s base income, resident taxpayers apply a $1 million standard deduction to compute Washington taxable income, which is then subject to the 9.9% tax rate to determine the resulting Washington income tax liability.

The tax also applies to nonresident taxpayers with Washington income. The proposed legislation includes rules for  sourcing, allocating, and apportioning Washington nonresident income. Generally, income is allocated to the state to the extent wages or other employment compensation are received within the state, or the related business activities or services are performed within the state.  In addition, nonresident taxpayers must prorate the $1 million standard deduction by applying a fraction whose numerator is Washington base income and whose denominator is federal adjusted gross income. The resulting adjusted standard deduction is then subtracted from Washington base income to determine Washington taxable income.

Certain tax credits are available for both resident and nonresident taxpayers. The credits are nonrefundable and cannot be carried forward or back. Taxpayers may reduce their tax due for the following:

• Washington capital gains tax
• State and local income taxes
• Washington business and occupation (B&O) taxes
• Washington public utility taxes (PUT)
• Pass-through entity taxes (PTET)

Other points to monitor in the current proposals include:

• An increase in the business and occupation tax credit for small businesses, which exempts the first $300,000 of business income and phases out at $600,000.
• An increase in the charitable contribution deduction from $50,000 to $100,000.

Several statutory exclusions are included in the proposed legislation to relieve taxpayers from the millionaires tax, including real estate sales, qualified family-owned businesses, and certain retirement income, including public pensions.

Next Steps for Proposed Millionaires’ Tax

The 2026 regular legislative session is a short, sixty-day session that is scheduled to conclude on Mar^. 12. In order for the new tax to pass both chambers must draft, negotiate, and advance a bill to Governor Ferguson for signature. If HB 2724 passes in its current form, the Senate and the House will have to negotiate a combined bill that may include some or all of the amendments in SB 6346.  If agreement on a combined bill is not reached during the regular session, the Governor or legislative leadership could convene a special session to complete deliberations.

Most of the political debate related to the proposed tax has focused on how much of the revenue will be allocated to new/expanded government programs as opposed to tax cuts aimed at groups like small businesses.

Governor Ferguson has acknowledged that litigation is inevitable and that the measure is likely to be submitted to voters, either through a referendum or an initiative challenge.[1]

In light of these considerations, taxpayers with Washington income exceeding $1 million, including investment holdings or equity‑based compensation, should closely monitor the progress of the proposed millionaires tax and reach out to their tax advisor to discuss the potential impact to them.

Proposed Payroll Expense Tax

To make up for projected budget shortfalls, the Washington State Legislature is also considering a series of bills that would impose a payroll tax on large employers operating in Washington. Currently, there are three bills on the table, two in the Senate and one in the House.  These bills are largely modelled after the Seattle payroll expense tax that was implemented in 2021.

All three bills would initially impose the payroll tax on businesses with over $7 million in payroll. The payroll expense taxes in SB 6093 and HB 2100 only apply to “large operating companies” with $5 million in gross receipts and more than 20 employees.  SB 5796 does not contain a similar limit and simply imposes payroll expense tax on businesses with $7 million or more in payroll.

The tax rate applicable to businesses that meet the criteria above is 5% in all three bills.  However, the wage thresholds on which the tax is calculated differ.  In HB 2100 and SB 6093, payroll expense tax is the total amount of calendar year wages for each employee in excess of the minimum wages subject to the additional Medicare tax as defined in Treasury Decision 9645.  Currently the bills set this rate at $125,000 which is the “Married individual filing a separate return” threshold.  SB 5796 bases the tax on the total amount of calendar year wages for each employee in employment of the employer that exceeds the maximum wages subject to taxation for social security. The IRS has set this threshold to $184,500 for 2026.

All three payroll expense tax bills have been referred to committees for action as of Feb. 17, 2026.

Proposed Wealth Tax

The Washington House of Representatives and Senate have reintroduced two bills from the 2024-2025 legislative session.  These bills would introduce a wealth tax on the mere ownership of intangible assets such as stocks and bonds.

While these bills are generally similar in nature there are some key differences.

It is important to understand that this tax does not rely on a transaction related to the intangible assets to occur. The mere ownership of intangible assets in excess of the exemption threshold subjects an individual to this tax.

Please follow Clark Nuber for ongoing updates regarding the proposed millionaires, payroll expense, and wealth taxes and its potential implications should it be enacted. Our team will continue to analyze legislative activity and provide timely guidance to help you navigate these emerging developments. For questions about these bills and potential outcomes, connect with the Clark Nuber State and Local Tax team.

© Clark Nuber PS, 2026. All rights reserved.

[1] Gov. Ferguson Backs Income Tax on WA Residents Earning Over $1M, FOX 13 Seattle (Dec. 23, 2025, 3:36 PM),
https://www.fox13seattle.com/news/wa-gov-ferguson-backs-income-tax-wa-residents-earning-over-1m.