SB 6346 Millionaires Tax: Frequently Asked Questions

What is the Millionaires Tax and who pays?

1. What is the Millionaires Tax?

• • The proposed Millionaires Tax is a 9.9% tax “on the receipt of Washington taxable income.” There is a standard deduction of $1 million per year.
  • In the simplest terms, the Millionaires Tax is a 9.9% tax on households earning over $1 million per year.
  • If a household makes $1,000,500 each year, the tax would only apply to that $500. In this example, total taxes owed would be approximately $50.

2. When will the Millionaires Tax take effect?

• • The Millionaires Tax will take effect on January 1, 2028. This means that the first tax returns and payments for 2028 taxable income will be due in April 2029.
  • The state will begin collecting revenues in 2029.

3. Who pays this tax?

• • This tax applies to those who live or work in Washington state and make more than $1 million annually. For Washington residents, the tax applies to all taxable income, and for non-residents, it applies to the net proportional amount of income that is derived from or connected with Washington (e.g., through employment or business activities in the state).
  • This tax would be paid by around 20,000 households in our state, or less than 1% of the wealthiest households in Washington. This means that more than 99% of Washingtonians will not pay this tax.

4. What does the Millionaires Tax apply to?

• • The Millionaires Tax would apply to how much your household actually earns in a year, and not financial assets or net worth. This means that the value of your home, for example, would not be a factor in whether you would pay this tax or not.
  • The Millionaires Tax would also only apply to your Washington taxable income, which is based on a household’s federal adjusted gross income, plus some additional adjustments, deductions, and credits. Generally, the credits and some of the adjustments are designed to prevent double taxation (for taxes already paid on the same earnings for the capital gains tax, the B&O Tax and Public Utility Tax), pass-through entities’ tax payments on the owner’s behalf, and taxes for other states and jurisdictions.
  • The sale of a home and the sale of a small business are not taxed by the Millionaires Tax, and there is a credit for the state’s capital gains tax to avoid double taxation of income from the sale of stocks, bonds, and other financial assets.

5. What protections are in place to ensure this tax won’t affect those making less than $1 million?

• • The Millionaires Tax includes a standard deduction of $1 million, and that deduction is indexed for inflation, using the consumer price index, updating each October of odd-numbered years, aligning with the state biennial budgeting cycle.
  • For example, a similar inflator was used for the passage of the Capital Gains Tax in 2021. When introduced, the standard deduction for the Capital Gains Tax was $250,000. For the 2025 tax year, that standard deduction for the Capital Gains Tax is $278,000.

6. How many states have a Millionaires Tax?

• • Forty-one other states tax individual earnings over $1 million per year.
  • Additionally, within the past 5 years, momentum has been growing nationwide to establish distinct “Millionaires Taxes” – typically through surcharges or progressive income rate structures. For example, Massachusetts voters passed a Millionaires Tax in 2022 called the Fair Share Amendment, a 4% surcharge on top of the standard income tax on earnings over $1 million. (And the number of millionaires in Massachusetts has increased by 30% since then!)

Millionaires Tax and the state budget

7. Why does Washington need a Millionaires Tax?

• • Washington continues to have the second most inequitable — or upside-down — tax code in the nation. This is in part because it over-relies on funding from regressive taxes like the sales tax, which put the biggest squeeze on people with low and middle incomes. Meanwhile, the ultra-wealthy get a special deal. For example, households making over $1 million per year pay around 4% of their income in state and local taxes in Washington – compared to around 11% for median-income households and 14% for the lowest-income households.
  • The Millionaires Tax would help make meaningful progress toward fixing this broken tax code to better fund our communities sustainably and equitably.
  • It is also important to note that the wealthiest 1% of households in Washington recently received the largest wealth transfer in U.S. history through the harmful Congressional H.R. 1 bill, resulting in an average tax break of $90,850.

8. How much revenue will the Millionaires Tax generate, and how will those funds be spent?

• • Current estimates show that the Millionaires Tax generates approximately $3.5 billion per year in revenue, starting in 2029. The current proposal also includes about $1.5 billion of tax reductions, including the expansion of the Working Families Tax Credit.
  • Revenues generated by the Millionaires Tax are currently allocated to the following areas:

General Fund Programs:

• • The most significant investments in the general fund include K-12 education (43% of general fund spending), health care, higher education, human services, as well as other essential government services.
  • The general fund will also be used to further support academic success and well-being of our children in our public schools by providing free breakfast and lunch for all children each school day.

Fair Start for Kids Account:

• • Created in 2021, the Fair Start for Kids account can only be used for child care and early learning purposes – programs that are critical for the success of Washington’s families and economy.

Tax Reductions and expansion of the Working Families Tax Credit:

• • Expanding eligibility for the Working Families Tax Credit to 460,000 additional households, including adding young adults and seniors (i.e., removing age restrictions so those ages 18 and over can qualify), as well as increasing the income threshold to anyone who qualifies for SNAP or TANF starting in 2028.
  • Creating sales tax exemptions for diapers (for all ages), for grooming and hygiene products (like soap, toothpaste, and shampoo) and over the counter drugs starting in 2029.
  • More than doubling the Business & Occupation (B&O) Tax small business tax credit, meaning that businesses with gross receipts under $300,000 will not owe B&O Tax, and those businesses with gross receipts up to $600,000 will receive the small business tax credit, starting in 2028. Repeals the retail sales and use tax on certain services (established via SB 5814 in 2025) including the tax on information technology training services and technical support; custom website development; custom software; security services; temporary staffing services; live presentations; and digital processing services, starting in 2029.
  • Repeals the retail sales and use tax on those same certain services for schools, school districts, educational service districts, public libraries, library districts, and library service centers starting July 1, 2026.
  • Repeals the retail sales and use tax on live presentations offered by non-profit organizations, starting July 1, 2026. Clarifies that live presentations do not include musical, dramatic, comedic, or similar performances (including rehearsals), as well as music lessons of any size, and are excluded from the retail sale tax.
  • Exempts hospitals, health care providers, and the warehousing and reselling of prescription drugs from the 0.5% business and occupation (B&O) tax surcharge on businesses with gross receipts of more than $250 million per year, as well as taxable income attributable to wholesale sales of food and food ingredients.

Local Government Mitigation – $200 million of annual revenue:

• • The very same sales tax reductions that provide meaningful tax reform also impact our local government partners. To ensure cities and counties can still deliver key services to our constituents like public safety, health, and transit, the proposal. dedicates funding to counties and cities.

Free School Meals – $140 million:

• • Revenues from the tax are also used to expand free school meals to all K-12 public school students in Washington, an additional 272,000 students.

9. What is the Working Families Tax Credit and who qualifies?

• • The Working Families Tax Credit was established in 2021 to reduce the disproportionate amount of tax paid by our low-income working families in Washington state, largely due to our reliance on the retail sales tax.
  • The structure of the Working Families Tax Credit follows that of the federal Earned Income Tax Credit, which is limited to people 25-64 years old.
  • The expansion included within the Millionaires Tax proposal removes the age restrictions, expanding this program to young adults (18-24 years old) and senior citizens (65 years or older).
  • It also extends the income eligibility to every family earning at or below our state’s “Need Standard,” which is a monthly income threshold based on family size that is considered reasonable for a family to pay their bills and expenses. For example, a family of four with an income up to $9,579 a month or an individual with an income up to $3,816 would be eligible for Working Families Tax Credit benefits under the Millionaires’ Tax proposal.

To calculate an annual “Needs Standard” income, look at column A to find your family size. Multiply the number in column B by 12 to get the applicable annual income threshold. Family size is capped at 5.

• • People can learn more about the program and find out if they currently qualify at https://workingfamiliescredit.wa.gov.

10. Why is it a good idea to use funding from the Millionaires Tax to expand the Working Families Tax Credit?

• • The Working Families Tax Credit provides a lifeline that people can use for things like groceries, utilities, and school supplies. According to the state Department of Revenue in 2025, it provided an average tax credit of $722 to roughly 300,000 households, supporting one in four kids in Washington. Using part of the Millionaires Tax funding to expand this credit will reach 460,000 additional households and will help fix our tax code holistically by addressing the current  affordability crisis.

11. If this tax goes into effect, does it mean there will no longer be a budget shortfall this year?

• • No. Because Washington does not have the infrastructure to administer this tax immediately. Revenues from the Millionaires Tax would not come in until 2029. While it does not address current budget shortfalls, passing this tax now would help ensure that budgets can be balanced in more progressive ways over the long term.

Millionaires Tax and small businesses

12. How does the Millionaires Tax impact business owners?

• • If a household reports their business income on their own federal tax return and earns over $1 million during the year, it’s possible they would be subject to this tax. That is because their business is organized as a “pass-through entity” (S-corporation, limited liability company [LLC], partnership, etc.) or a sole proprietorship.
  • In businesses with these types of structures, profits pass through to their owners for taxation so that profits fall under personal income taxes rather than corporate income taxes. Taxable state income under the Millionaires Tax would include a business owner’s share of pass-through business income, the same way the federal tax code is structured. The policy is not unique to Washington state.
  • There are a few provisions to help mitigate the impact of the Millionaires Tax on these business owners:
  • Credit for B&O Tax and Public Utility Tax (PUT): Any B&O Tax and PUT paid by the business will result in a dollar-for-dollar credit (on a proportional basis based on share of ownership), reducing taxes owed.
  • Exemption for sale of qualified family-owned small businesses: The sale of qualified family-owned small businesses will be exempt, carried over from the capital gains tax exemption.
  • Pass-Through Entity Election: The state will provide an option in which the business pays the tax rather than the owner, which would allow these businesses to claim a federal deduction, reducing their federal tax liability. Business owners will receive a credit for tax paid on their share of pass-through business income.
  • Net Operating Losses: Business owners who had a net operating loss can apply that loss to reduce their tax liability across all sources of income, and carryover up to 80% of those losses to reduce future tax liability, matching the approach used by the federal government.
  • Streamlined tax administration: There will be a state equivalent to the federal K-1 form to streamline tax compliance for pass-through entities in Washington.

Administration and deductions

13. What deductions are included in the Millionaires Tax?

• • Standard deduction of $1 million: There is a standard deduction of $1 million per household, regardless of filing status (e.g., single, married filing jointly, married filing separately, domestic partners). The $1 million deduction will automatically be increased for inflation every two years
  • Charitable deduction of $100,000: Similar to the standard deduction, this deduction allows for up to $100,000 in allowable charitable contributions to Washington state nonprofits to be deducted per household, regardless of filing status. This is in addition to the $100,000 charitable deduction allowed under the capital gains tax statute.

14. Why isn’t the standard deduction higher for households than individuals?

• • The standard deduction of $1 million per household that is used for the Millionaire Tax proposal is the same structure used for the capital gains tax. As we work to make the two separate tax structures work together, consistency in the deductions helps with tax administration.

15. How will people know that they need to file a Millionaires Tax return and how will the state know to collect from them?

• • Generally speaking, only households with annual federal adjusted gross income (AGI) exceeding $1 million would potentially owe tax. However, a number of deductions and credits may apply, thereby eliminating some or all tax liability.
  • The bill specifically states that individuals not owing tax are not required to file a return. The Millionaires Tax does not go into effect until Jan. 1, 2028, with first collections due in April 2029. Washington state Department of Revenue will provide guidance on filing obligations as the implementation date approaches.
  • For purposes of administration and enforcement, the state Department of Revenue has data sharing agreements with the federal Internal Revenue Service to help identify noncompliance.

16. Will my employer begin withholding part of my paycheck to pay this tax?

• • There will be no withholding of taxes from paychecks. The Millionaires Tax will affect less than 1% of Washingtonians — roughly 20,000 households — so asking hundreds of thousands of businesses to engage in withholding is unnecessary.
  • Those making more than $1 million of earnings will need to make estimated payments. However, estimated payments will not be collected in year one. The first estimated payments will be collected in July 2029 using year one tax due as a baseline.

17. Does the Millionaires Tax apply to the sale of homes and real estate?

• • Sales of real estate (as defined in RCW 82.87.0505) are specifically exempted from the Washington state capital gains tax, and the same is exempted from the Millionaires Tax.
  • While the Millionaires Tax would apply to rental income for people who are landlords, the tax would not apply to the equity or appraised value of a home.

18. How is the capital gains tax factored in?

• • The United States and Washington state tax codes have different definitions of capital gains. For the Millionaires Tax, the Washington state definition of long-term capital gains will be used to calculate Washington taxable income.
  • How this works: Federal long-term capital gains and losses are removed from a taxpayer’s federal AGI, and Washington state capital gains are added back in instead. This ensures that Washington state’s capital gains exemptions – such as on the sale of real estate and the sale of qualified family-owned small businesses – are also excluded from taxation under the Millionaires Tax.
  • Importantly, the Millionaires Tax provides a tax credit of the Washington state capital gains taxes already paid. Capital gains are not double-taxed.

19. Can a taxpayer deduct their Millionaires Tax liability from their federal income tax?

• • Yes, Washington residents have access to the federal State and Local Tax (SALT) deduction, just like every other taxpayer. It’s currently capped at $40,000, on a sliding scale down to $10,000, based on your adjusted gross income.

20. Are non-residents working in Washington state for a very short period of time subject to the Millionaires Tax?

• • A safe harbor of five days is provided for non-residents receiving wages and other compensation for services performed in Washington, excluding non-resident professional and student athletes and entertainers.
  • Nonresidents being paid to be a keynote speaker, panelist, or moderator at a convention or trade show get their income excluded from the Millionaires Tax, so long as the nonresident meets the requirements of RCW 82.32.531.

Legislative process and more

21. Why is this legislation not going to a vote of the people?

• • The people have elected the Legislature to act on their behalf, and we believe this bill is necessary for state government to function in a way people want, by funding things like public education, health care, higher education and other essential government services. And the Washington State Constitution specifically says that those measures in “support of the state government and its existing public institutions” are not subject to referendum.
  • The people can still weigh in directly through a ballot initiative. The proposal in no way impedes the ability of people to gather signatures and put an initiative on the ballot to repeal the policy, should they see fit.

22. Won’t this hurt our professional sports teams and make it harder to sign free agents?

• • Eight of the last 10 teams to win the Super Bowl hail from states with an income tax.
  • Seven of the last 10 teams to win the World Series play their home games in a state with an income tax.
  • 10 of the last 10 NBA Champions come from states with an income tax.
  • Five of the last 10 Stanley Cup champions play in states with an income tax.
  • Most states with an income tax and professional sports teams have comparable or higher tax rates than Washington’s Millionaires Tax. For example:
    • California taxes income above $1M+ at 12.3%
    • Massachusetts taxes income above $1M+ at 9%
    • New York taxes income above $2.155M+ at 9.65%
    • Minnesota taxes income above $330K at 9.85%
    • Arizona taxes ALL income at 2.5%
    • New Jersey taxes income above $1M at 10.75%
    • Colorado taxes ALL income at 4.4%
  • Only four states – Texas, Florida, Tennessee and Nevada – have at least one professional sports franchise and no income tax. So if a free agent athlete’s only decision on where to play is whether or not they’ll pay an income tax, there aren’t many options.
  • Washington was an outlier. Our professional athletes were paying the so called “jock tax” when they competed out of state. Now visiting team’s players will pay Washington taxes and Washingtonians will see the benefit.
  • A jock tax is apportioned based on games played in state. For example, 49ers quarterback Brock Purdy would owe on 1/17 of his salary since he plays in Seattle once per year during the 17 game NFL season.
  • Also…
    • The return of the Sonics? The NBA’s league of governors voted unanimously to explore expansion in both Seattle and Las Vegas AFTER the Millionaires Tax passed the legislature.
    • JSN is the NFL’s best paid WR. Seahawks wide receiver Jaxon Smith-Njigba signed a four-year, $168.6 million contract extension on March 23, making him the highest paid receiver in NFL history.
  • We can have well-funded schools, a fair tax structure and competitive professional sports teams.

23. Why should I believe that this will be implemented correctly or that the money will be used in the right way?

• • As part of the implementation and oversight of the Millionaires Tax, the operating budget includes the creation of the Joint Legislative-Executive Committee on Budget Transparency and Fiscal Sustainability.
  • This committee is made up of Democrats and Republicans from both the House and Senate, as well as representatives from Washington’s labor and business communities.
  • This group will review revenue growth projections, spending assumptions, the four-year budget outlook, state government management structure and staffing levels, budget practices in other states and other economic indicators and best practices.
  • This work will be done in two phases and the group will report its initial findings and recommendations back to the Legislature later this year.
  • All bills passed by the Legislature are subject to scrutiny and change should there be unintended consequences. The Millionaires Tax is no different.

24. What happens if the Legislature got something wrong in the technical details of this tax proposal?

• • Legislation of any topic often needs follow up legislation in subsequent years for technical corrections and to clarify legislative intent. This legislation is no different.
  • Additionally, the legislation creates an advisory group of technical experts and others to assist the state Department of Revenue in the implementation of this new law.

25. I thought the bill included a repeal of the 0.5% business and occupation (B&O) tax surcharge on businesses with gross receipts of more than $250 million per year. What happened to it?

• • The original version of the proposal adjusted the recent B&O tax surcharge on high-grossing businesses to expire one year earlier in 2028 instead of current law, which expires the surcharge in 2029. The version of the bill passed by the House Finance Committee removes this earlier date for repeal.