02/15/2026
For every million dollars a Washington resident earns above $1 million, they could soon owe the state roughly $100,000 in taxes — a proposal that would introduce Washington’s first broad-based income tax in modern state history.
House Bill 2724 and Substitute Senate Bill 6346 seek to establish a 9.9% tax on income exceeding $1 million per individual or household. Supporters call it overdue tax reform aimed at correcting structural inequities, while critics warn it could trigger economic flight and constitutional challenges that may halt the policy before it ever collects a dollar.
The proposal is straightforward in structure. Someone earning $2 million annually would owe approximately $99,000 in state income tax. At $5 million, the tax bill would total about $396,000. Lawmakers estimate the measure would affect roughly one-half of one percent of Washington households — about 17,000 families statewide.
The legislation includes key exemptions. Income from selling qualified family-owned small businesses and real estate transactions would not be taxed. That provision aims to protect farmers, small business owners, and homeowners from one-time windfalls pushing them into the tax bracket. For most Whatcom County residents, where median household income hovers near $70,000, the threshold remains far out of reach.
Revenue would flow primarily into the state’s general fund, with allocations outlined in the legislation, including: K-12 education, including special education, Health care and long-term care program, Higher education and workforce training, Early learning initiatives, and The Working Families’ Tax Credit.
Supporters say these investments address chronic funding shortfalls across essential services.
A portion of new revenue could also ease pressure on public defense systems, helping counties meet constitutional obligations to provide legal representation. Local governments like Whatcom County currently shoulder most of those costs as caseloads rise and attorney recruitment becomes more difficult.
To offset the new tax, the legislation includes consumer and business relief measures. On the consumer side, the bills propose sales tax reductions on essential household goods, including personal care products and other items that disproportionately impact lower- and middle-income families.
For businesses, the proposal expands credits within Washington’s Business & Occupation tax system. Because B&O taxes are assessed on gross receipts rather than profit, companies can owe taxes even during loss years. Supporters argue targeted credits would ease that burden, particularly for small and mid-sized employers operating on thin margins.
Proponents frame the proposal as a necessary correction to what they describe as one of the nation’s most regressive tax systems.
“Washington families making $25,000 a year pay 17% of their income in state and local taxes, while those making over $500,000 pay just 3%,” said Treasure Mackley, executive director of Invest in Washington Now, a coalition backing the measure. “That’s not just unfair — it’s unsustainable.”
The Institute on Taxation and Economic Policy has frequently ranked Washington among the least equitable state tax systems, largely because heavy reliance on sales and consumption taxes places a higher effective burden on lower-income residents.
Opponents argue the policy risks undermining Washington’s long-standing competitive advantage.
“Washington has thrived precisely because we don’t have an income tax,” said Jason Mercier of the Washington Policy Center. “Once you create the infrastructure, the pressure to expand it becomes irresistible.”
Business groups warn high earners — entrepreneurs, executives, and tech professionals — may relocate to states like Texas, Florida, or Nevada, all of which lack income taxes. Critics also question whether the “millionaires only” threshold would remain permanent, pointing to states like Oregon where income taxes expanded beyond initial high-earner brackets.
Sen. Lynda Wilson, R-Vancouver, voiced similar skepticism: “They promise it’s only for millionaires. But taxes have a funny way of growing once the door is open.”
The proposal faces significant legal uncertainty.
In 1933, the Washington Supreme Court ruled graduated income taxes unconstitutional under the state’s uniformity clause. Voters have rejected income tax proposals eight times since 1934, most recently in 2010.
However, a 2023 ruling upholding the state’s capital gains tax — classifying it as an excise tax rather than a property tax — created a potential legal pathway. Supporters believe similar reasoning could apply if the millionaires’ tax is framed as an excise tax on the privilege of earning high income.
Opponents argue it remains, in substance, a graduated income tax and would violate constitutional uniformity requirements — setting up what legal experts expect would be an immediate court battle.
“The capital gains ruling opened a door,” said University of Washington constitutional law professor Hugh Spitzer, “but whether this walks through it is a genuine question.”
Locally, the impact cuts both ways.
Additional state funding could support Whatcom County schools struggling with special education costs, Western Washington University programs facing budget pressures, and the county’s strained public defense system.
“We’re drowning in caseloads and can’t pay attorneys competitive salaries,” said Whatcom County Public Defender Kathy Redulla. “Sustainable state funding would be transformational.”
But economic concerns remain. Whatcom County’s economy relies heavily on cross-border commerce, agriculture, and small businesses — sectors sensitive to tax policy shifts. Business leaders warn ripple effects from high-earner migration or reduced investment could influence job growth and regional vitality.
Both bills remain in committee as the 2026 legislative session continues. If approved, the tax is proposed to take effect January 1, 2027, and would almost certainly face immediate legal challenges that could take years to resolve.
For now, the debate centers on a question Washington has wrestled with for more than a century: In a state without a state income tax, who should pay for health care and other vital public services — and how should that responsibility be shared?
Residents who wish to weigh in can contact their state legislators or participate in upcoming committee hearings as the proposal moves through Olympia.
Article By Greg Thames
Citizen Reporter, Bellingham Metro News
