Washington State Legislature passes a 9.9% “millionaires tax”; SB 6346 now heads to Gov. Bob Ferguson for signature

On March 12, the Washington State Senate approved SB 6346 in final form, agreeing to amendments adopted by the House two days earlier. The bill clears the way for the state’s first income tax in nearly a century.

Gov. Bob Ferguson received the bill on March 13. He has publicly promised to sign it, but no final decision has been made yet—he has until April 4 to take official action.

If it becomes law, the rate would be 9.9% on household income above $1 million, starting January 1, 2028. The first payments are expected in 2029. Fiscal analysts estimate the measure could generate about $3.4 billion per year from roughly 21,000 taxpayers—less than 0.5% of the state’s population.

At the same time, Washington’s constitutional framework has long been interpreted by courts in a way that effectively blocks a broad-based income tax. That is why passage of SB 6346 has drawn heightened legal and political attention.

SB 6346’s path in Olympia: how the bill reached final votes

From introduction to final approval, the bill moved through every stage in just six weeks—an unusually fast pace for a change that reshapes the state’s tax identity.

Senate Majority Leader Jamie Pedersen (D, Seattle) introduced SB 6346 on February 4, during the first week of the 60-day short session. Momentum then followed party lines: the Ways & Means committee advanced the bill by a majority vote.

On February 16, after more than three and a half hours of debate, the Senate passed SB 6346 by 27–22. Three Democrats—Senators Adrian Cortes, Drew Hansen, and Deb Krishna-dasan—joined Republicans, voting with 19 Republicans.

But the House process took longer. Even Gov. Ferguson raised concerns about an earlier version of the bill, seeking stronger support for small businesses. At the same time, representatives from the tech sector and AI companies sent a letter urging lawmakers to instead raise capital gains taxes.

With the 8 days remaining before the session ended, SB 6346 still had not been brought up in the House.

The turning point came through an amendment by House Finance Committee Chair April Berg (D, Mill Creek). She proposed a package of changes: expanding the Working Families Tax Credit to an additional 460,000 households; increasing business and professional tax credits for small businesses; and adding sales tax relief for diapers, hygiene products, and over-the-counter medicines.

Ferguson backed the updated version on March 7.

After that, the House held the longest debates in the history of the state legislative process: SB 6346 was considered late on March 9. Republicans filed more than 80 amendments. Democrats rejected most of them in party-line votes. The bill also tied the $1 million threshold to a mechanism referencing the standard U.S. deduction—an approach described as a compromise linked to the 2024 initiative I-2111, which enshrined a ban on new income taxes.

The back-and-forth lasted more than 25 hours. On March 10, the House passed the bill; according to bill text descriptions, the vote was recorded as 51–46 (with potential discrepancies depending on the source). Ultimately, eight Democrats voted against it.

Then, on the final evening of the session, the Senate agreed to the House amendments: 27–21 after rejecting a Republican procedural attempt. The session ended at 8:25 p.m.

How Washington’s “millionaires tax” would be calculated

SB 6346 bases the calculation on federal adjusted gross income (federal AGI). From that starting point, a $1 million standard deduction is subtracted per household. Beginning in 2030, the threshold is planned to be indexed for inflation. The bill does not double the threshold for married couples—potentially creating a “marriage penalty”.

For example, two workers earning $700,000 each who file as “single” may fall below the tax threshold. But if they file jointly, the combined income could push them over the limit.

The bill also includes exclusions. For instance, certain income from real estate transactions, profits from selling a family small business if conditions are met, and certain types of retirement income would not be subject to the tax.

Capital gains already taxed under Washington’s existing rate range of 7% to 9.9% would receive a tax credit to avoid double counting. Charitable deductions up to $100,000 are allowed.

For nonresidents, income earned from Washington sources would also be included, allocated based on the number of days worked in Washington. For business income, the bill uses a formula based on a sales factor.

The measure also offers an option for pass-through entities (PTET): partnerships, LLCs, and S corporations could pay the tax at the entity level on behalf of eligible owners, provided the requirements are met.

Why the rate for high earners in Seattle could approach “nearly 18%” or more

For high-income Seattle residents, the new tax would be layered on top of existing levies aimed at wealthier taxpayers. According to the Tax Foundation, the combined top marginal state and local tax rate for wage income and RSUs (restricted stock units) could reach 18.037% on amounts above the threshold.

That figure includes: 9.9% under SB 6346; 0.58% under WA Cares (long-term care insurance); 5% under Seattle’s Social Housing Tax; and up to 2.557% under JumpStart Payroll Expense Tax.

If federal income tax (37%) and Medicare tax (2.9%) are added, the overall burden at the top marginal level could be as high as 57.937%. The text also notes that—based on estimates—this combination ranks among the highest among U.S. cities and states.

RSUs are especially significant because of a “double trigger”: part of the shares may convert and vest immediately upon an IPO or a company sale. That means income in a single year could jump above the $1 million threshold even if the average annual salary is below that level.

There is also partial protection. Founders who sell shares that qualify as Qualified Small Business Stock (QSBS) under federal Section 1202 may avoid the new tax because profits excluded at the federal level would not be included in the state’s base. A separate bill, SB 6229, which could have limited QSBS protection at the state level, did not advance during this session.

Billionaires, migration, and the “Florida plan”: Schultz, Bezos, and others

During legislative debate, former Starbucks CEO Howard Schultz came up. He said he and his wife plan to move from Seattle to Miami after more than four decades living in the region.

Bloomberg estimates Schultz’s net worth at about $6.6 billion. He reportedly bought a $44 million penthouse in Florida. His statement did not explicitly mention the new tax, but it emphasized a hope that Washington would remain “a place where business and entrepreneurship can thrive.”

Schultz is not the first billionaire to change residences. Jeff Bezos moved to Florida in 2023, a move estimated to have saved at least $610 million on Amazon stock sales by avoiding Washington’s capital gains tax. The article also cited the case of Seattle startup founder Marc Barros, who said he intends to relocate the company to Wyoming.

Estimates of the scale of the so-called “brain drain” vary. Attorney Stephen Schindler of Everbridge Law Group told GeekWire that residents are indeed leaving and listing taxes as one reason, but he added that it is hard to tell “how much that shows up in economic metrics.” Meanwhile, attorney Madhus Singh of Foundry Law Group argues that startup activity is not slowing.

Against this backdrop, lawmakers are also discussing a parallel measure: SB 6347, which would roll back a 2025 increase to Washington’s estate tax. The top rate would fall from 35% to 20% for deaths after July 1, 2026. Supporters argue that without this rollback, the overall tax burden could push even more people to relocate.

Legal risk: 93 years of arguments against an income tax

Even if Ferguson signs SB 6346, the likelihood of a legal challenge is considered high. In Culliton v. Chase (1933), Washington’s Supreme Court ruled that income is a form of property and that the constitution requires uniform taxation using a maximum rate of 1%. The article notes that this approach has been reaffirmed in subsequent cases roughly a dozen times.

Beyond the courts, voters have also repeatedly rejected statewide income tax proposals; the text says there have been ten rejections since 1934.

SB 6346 attempts a “legal workaround.” The collection is described as an excise on the “receipt of income”—a framing that echoes the reasoning supporting the capital gains tax in Quinn v. State (2023). House Majority Leader Joe Fitzgibbon publicly argued that the 1933 decision relied on a split among judges (5–4) and could theoretically be revisited.

There is also a key procedural point: SB 6346 became possible because, in 2024, the legislature adopted the I-2111 initiative directly—without sending it to a referendum. Measures passed through the legislature are generally easier to change: a simple majority can suffice. By contrast, a ballot vote would have required a higher qualified majority.

However, former Attorney General Rob McKenna disagrees. He points to about a dozen cases supporting the Culliton approach and argues the correct route is a constitutional amendment—not an attempt to “re-interpret” the courts.

The article also notes that SB 6346 includes an emergency clause, which effectively limits the ability to challenge the law via a direct referendum. In other words, voters likely would not be able to overturn it with a simple vote. Opponents would probably seek to put an initiative on the ballot in the fall of 2026.

Parallel initiatives: California, Sanders, and the federal track

Washington’s version of a “millionaires tax” is emerging alongside similar efforts in other states and at the federal level.

In California, lawmakers are considering a proposed “Billionaire Tax Act” for 2026, backed by the SEIU-UHW union. It would impose a one-time 5% tax on residents with net worth above $1 billion.

The text says that even at the proposal stage, some California clients began planning strategies to leave. It then offers an example of how talk of a “tax on the wealthy” can accelerate relocation decisions.

At the federal level, Senator Bernie Sanders and Rep. Ro Khanna introduced Make Billionaires Pay Their Fair Share Act on March 2. The bill would impose an annual 5% wealth tax on roughly 938 Americans with net worth above $1 billion, with projected revenue of $4.4 trillion over 10 years.

The draft also includes a strict “anti-expatriation” provision: an exit tax on renouncing citizenship—40% for part of the range and 60% for those above the threshold. The goal is to prevent renunciation from being used as a way to avoid the tax.

From moving across states to an international “exit”: why timing is critical

From the perspective of consultants, having tax initiatives at both the state and federal levels appear around the same time shrinks the decision window that wealthy investors typically treat as a buffer.

The article draws a distinction between domestic relocation (for example, moving from California to another state) and international exit (renouncing U.S. citizenship). Moving within the country can sometimes be done quickly—within weeks. But preparing an “expatriation plan” takes far longer: obtaining new citizenship and doing tax planning before the exit.

It cites IRS data: in 2024, 4,820 people renounced U.S. citizenship—48% more than in 2023. It also notes that the queue for consular procedures worldwide can exceed 30,000 applicants.

The text emphasizes that calculating the “cost of exit” could become decisive. Under current rules, the exit tax in some cases can be comparable to capital gains taxes on unrealized gains. Meanwhile, the proposed federal wealth tax could raise the burden to much higher levels.

Still, SB 6346 by itself cannot trigger expatriation: the tax consequences depend on federal law regarding citizenship. Moving from Seattle to Miami or Austin usually removes the state-level risk, but federal measures could close off the “domestic corridor,” leaving international action as the only route.

Ultimately, the final revenue estimate for SB 6346 will depend on how many of the targeted roughly 21,000 taxpayers remain in Washington when the tax takes effect in 2028, how courts evaluate the law’s constitutionality, and how far federal proposals that could affect interstate migration advance.

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