Washington Senate Approves 9.9% Income Tax on Incomes Over $1 Million

The Washington State Senate approved Senate Bill 6346, a measure establishing a 9.9% state income tax on annual individual or household incomes exceeding $1 million, on Monday, February 16, 2026. This legislative action represents a significant departure from the state's long-standing policy against broad-based income taxation, which voters have rejected ten times over the past century. The bill passed the chamber with a vote of 27-22 and now proceeds to the House of Representatives before the legislative session concludes on March 12, 2026.

Sponsors of the legislation, including State Senator Jamie Pedersen (D-Seattle), estimate the targeted tax will affect fewer than 1% of the state's wealthiest households, approximately 30,000 taxpayers. Proponents project the levy will generate an estimated $3.7 billion annually, revenue intended for public education, early learning, childcare, and healthcare services. The bill also includes provisions designed to mitigate broader economic impact, such as expanding the Working Families Tax Credit and eliminating the sales tax on hygiene products beginning in 2029.

The core objective of Senate Bill 6346 is to restructure Washington's current tax code, which relies heavily on sales, property, and business and occupation (B&O) taxes, which proponents argue is regressive. Advocates cite data indicating that the bottom 20% of households pay approximately 13.8% of their income in state and local taxes, compared to only 4.1% paid by the top 1%. The legislation explicitly aims to supersede the 2024 bipartisan-supported Initiative 2111, which had banned state and local income taxes.

Opposition, voiced by all 19 Republican senators, centers on claims of unconstitutionality and warnings of adverse economic effects, including capital flight and reduced business investment. Critics such as Senator Keith Wagoner (R-Sedro-Woolley) contend the measure disregards repeated voter rejections of income tax proposals and express concern that the tax base will eventually expand to include middle-class incomes, referencing the 2021 capital gains tax expansion. Governor Bob Ferguson has voiced support for the concept of an income tax while noting reservations regarding the initial proposal's relief measures for small businesses and lower-income residents, though he indicated the amended version was progressing appropriately.

Washington's move places it within the national discussion on progressive taxation, contrasting with states like California, which has the nation's highest state income tax rate at 13.3%, and the five U.S. states that impose no state income tax. The final outcome in the House will determine the establishment of this new fiscal framework, which also includes a B&O tax exemption for small businesses grossing under $300,000 annually starting in 2029.