Article | by Andrea Potter

This article is a follow-up to our previously published piece, “Tax Policy Shift: How Washington’s Proposed “Millionaires Tax” on High Earners Could Impact Business Planning,” in which we covered the introduction and Senate passage of Senate Bill 6346. Below, we provide the latest update as the bill moves closer to becoming law.

A Quick Recap and the Latest Update

Washington State Senate Bill (SB) 6346 proposes a 9.9% income tax on Washington residents earning more than $1 million in annual income. As discussed previously, the bill passed the Washington State Senate and has quickly become one of the most closely watched tax proposals in recent Washington State history. It raises significant questions about the Washington’s constitutional framework, tax equity, and the potential future of income taxation in the state.

After a 24-hour debate on the House floor, the bill passed the full Washington State Legislature. Before it can head to Governor Bob Ferguson’s desk, it must return to the Senate for a concurrence vote on amendments added in the House. Those amendments are notable as they expand eligibility for the Working Families Tax Credit which currently serves approximately 460,000 households with annual checks ranging from $300 to $1,300, reduce taxes on small business owners, address funding for free school meals, and add new sales tax exemptions. Governor Ferguson has indicated he intends to sign the revised bill.

Key Provisions Worth Noting

Beyond the headline rate, there are several technical provisions in the bill that have drawn attention. Most notably, the bill applies the same $1 million deduction to both single filers and married couples. The bill also establishes a formal income tax framework within Washington State law. This represents a significant structural development given the state’s long history without a broad-based income tax and the body of Washington court precedent interpreting income as property subject to uniform taxation requirements.

How This Fits Into a Broader National Context

Washington has historically operated without a broad-based income tax throughout its history, and voters have rejected income tax measures at the ballot box on multiple occasions. SB 6346’s narrow focus on income above $1 million appears designed to address the constitutional considerations that have historically limited income tax proposals in the state, while establishing a framework that future legislatures could potentially expand or modify.

Washington is not alone in this approach. Massachusetts enacted a 4% surtax on income above $1 million in 2022, and states such as California and New Jersey have long maintained elevated marginal rates on high-income earners. If enacted, Washington’s proposed 9.9% rate would place it among the higher millionaire tax rates in the nation.

Implications for High-Income Residents and Business Owners

If signed into law, SB 6346 would represent a significant shift in Washington State’s tax landscape, with direct implications for high-income individuals, business owners, and investors across the region. Key planning considerations include how the new tax would interact with existing federal and state tax obligations, whether current business structures and compensation arrangements remain optimal, and how the marriage-penalty provision may affects filing decisions for joint filers. Legal challenges to the bill are widely anticipated, meaning the situation could continue to evolve even after the governor signs the legislation. The bill’s progress can be tracked at leg.wa.gov.

At Geffen Mesher, we are closely monitoring SB 6346 and its potential impact on clients throughout Washington and the Pacific Northwest. Our tax professionals are available to help high-income individuals, business owners, and investors understand how this legislation may affect their specific circumstances and identify opportunities for proactive planning.

About Geffen Mesher: Geffen Mesher is a Portland-based CPA and advisory firm with nearly a century of experience serving businesses, families, and investors across the Pacific Northwest. We focus on providing ongoing financial strategy, accounting, and tax advisory services for businesses and individuals across numerous industries. Learn more at info@gmco.com.