Washington Gov. Bob Ferguson on Monday signed legislation creating the state’s first income tax in nearly a century, imposing a 9.9 percent levy on households earning more than $1 million a year and drawing immediate legal and political challenges from Republicans and business groups.
Senate Bill 6346, sponsored by state Sen. Jamie Pedersen, a Democrat, applies only to income above $1 million. Less than half a percent of Washington residents will pay it, according to Ferguson’s office. In the first full year of implementation, more than 41 percent of revenue will go back to Washington families and small business owners, the governor said.
“Adoption of the historic Millionaires’ Tax makes our tax system more fair, and means free meals for K–12 students, the largest tax break in state history for small businesses, eliminating the sales tax for baby diapers, and sending a check to nearly 500,000 working families to make life more affordable,” Ferguson said at a signing ceremony at the State Reception Room in Olympia.
The governor’s office said the tax expands the state’s Working Families Tax Credit to 460,000 additional households—sending qualifying families between $300 and $1,300—reduces or eliminates the business and occupation tax for 138,000 small businesses, and invests more than $320 million into affordable child care. It also eliminates the sales tax on over-the-counter drugs and hygiene products.
“With this bill, we’re going to begin to right a historic wrong that has plagued our state for nearly 100 years, and made our tax system one of the worst and most regressive in the entire country,” Pedersen said at the signing.
Washington is one of several Democrat-led states moving to tax high earners. Massachusetts voters passed a 4 percent surtax on income over $1 million in 2022, which has since collected $6 billion for education and transportation, according to the state’s Executive Office for Administration and Finance. Maryland, Minnesota, and New Jersey have similar measures in place.
California advocates are pushing a ballot measure that would place a one-time 5 percent tax on assets of those with a $1 billion net worth. Rhode Island legislators are debating a proposal backed by Democratic Gov. Dan McKee that would tax residents earning $1 million or more. In Michigan, organizers are gathering signatures for a November ballot initiative that would add a 5 percent tax on earnings over $500,000.
The push in blue states contrasts with Republican-led states, many of which have moved to cut or eliminate income taxes.
Pushback on Various Fronts
Opposition also came before the signing. In early March, nearly a dozen tech leaders and AI researchers sent a letter urging Ferguson to pause the tax proposal, warning it would “materially undermine” the state’s ability to grow its tech sector and slow AI innovation.
The letter, signed by a former Microsoft vice president, the former CEO of the Allen Institute for Artificial Intelligence, and other current and former executives and engineers, argued that an income tax combined with existing capital gains taxes would prevent Washington from attracting the talent needed to compete with other tech hubs.
Former Starbucks CEO Howard Schultz, whose net worth Forbes estimated to be $3.5 billion in 2026, announced earlier in March that he and his wife had moved their private family office from Seattle to Miami. Though Schultz did not directly address the millionaires’ tax in his announcement, the move coincided with the legislation advancing through the state Legislature. His Schultz Family Foundation will remain in Seattle.
Washington state Republicans and business groups moved swiftly to fight the new law. The Citizen Action Defense Fund announced it is preparing to file a lawsuit, retaining former state Attorney General Rob McKenna, a Republican, to lead the effort.
“Washington’s constitution is clear, and the courts have been equally clear for nearly a century—income is property, and progressive income taxes are unconstitutional under existing law,” McKenna said.
Washington state GOP Chairman Rep. Jim Walsh called the signing an act of deception.
“[The governor] lied about ‘having concerns’ about the scheme, as drafted,” Walsh said in a statement posted by the state GOP on X.
He added, “The [Washington GOP] is going to fight this unconstitutional state income tax scheme—and the cloud of lies around it—every inch of the way. By initiative. By lawsuit. By state legislative campaigns. This year. Next year. In 2028. And beyond, if necessary.”
Bruce Parker, Kimberly Hayek, and The Associated Press contributed to this report.
