OLYMPIA – The Millionaires Tax, which will provide a major and sustainable funding increase for schools, health care and other essential services, help fix Washington’s broken tax code and provide tax cuts for millions of working Washingtonians and small businesses, was passed off the Senate floor on Monday.

Senate Bill 6346, sponsored by Senate Majority Leader Jamie Pedersen, passed the chamber on a 27-22 vote and will now head to the House of Representatives for further consideration.

“Today was a momentous step forward,” Pedersen said. “For Washington’s 1.1 million school kids, people struggling to afford health care, and small businesses looking for help, that help is on the way.”

Less than 1% of the wealthiest households in the state would pay the Millionaires Tax. The narrow, targeted proposal would levy a 9.9% tax on income above $1 million. Households with incomes of $1 million and below would pay nothing.

It’s estimated the Millionaires Tax would generate $3.7 billion annually, which will fund critical services like public education, early learning and child care, health care, and other services Washington families rely on.

Revenue from the Millionaires Tax would also be dedicated to targeted tax cuts to rebalance Washington’s regressive, nearly century old tax structure.

Tax reductions include eliminating sales tax on grooming and personal hygiene products, such as shampoo and deodorant. Every small business grossing less than $300,000 — roughly 65% of all businesses in the state — would be exempt from the business and occupation (B&O) tax starting in 2029. An amendment in Ways & Means increased that figure from $250,000. This would mark the largest tax cut for small businesses in state history. Additionally, a B&O surcharge will also be eliminated beginning in 2029, which would lower taxes for many leading Washington businesses.

The Millionaires Tax will also allow for the expansion of the Working Families Tax Credit, a sales tax rebate for Washington families with low to moderate income levels struggling to make ends meet.

Additionally, 7% of the revenue collected from the Millionaires Tax will be distributed to counties across the state to help pay for the public defense system and strengthen public safety. That increased from 5% in the bill as originally introduced.

An exemption for charitable deductions also increased from $50,000 to $100,000.

Additionally, an amendment sponsored by Sen. Marko Liias to repeal recent expansions of the sales tax to select services was adopted, cutting hundreds of millions in taxes for Washington retail businesses.

Poor and working people in Washington pay a much larger percentage of their income in taxes than wealthy people. Households with income in the bottom 20% pay 13.8% of their total income in taxes, while those with income in the top 1% pay only 4.1%. Only Florida has a more regressive tax structure than Washington.

Recent independent polling has revealed that a Millionaires Tax is a popular idea across political and geographic lines — 54% of Republicans, 52% of Independents and 71% of Democrats support the idea of taxing millionaires. In the 2024 general election, 64% of voters supported the capital gains tax on the wealthy, including majorities of voters in 32 out of 39 counties.

The bill now moves to the House of Representatives for consideration. The 60-day 2026 legislative session ends March 12.