Washington’s Legislature has passed ESSB 6346, the new Washington “Millionaires Tax” bill. This bill received final legislative approval on March 11, 2026, was delivered to Governor Bob Ferguson on March 13, 2026, and is now awaiting gubernatorial action (as of March 16, 2026). The 2026 legislative session ended on March 12, 2026, and under Washington law the governor has 20 days (excluding Sundays) to act on bills delivered at the end of session. Notably, Governor Bob Ferguson issued a public statement on March 6, 2026, strongly encouraging the Legislature to pass this revised version of the bill and affirming that he will sign this revised version if presented in that form, making a gubernatorial veto appear unlikely based on his current public position.
This bill creates a new Washington tax on higher-income households beginning January 1, 2028. Below is a summary of what this bill does and why it may matter to you.
Effective date
If enacted by Governor Bob Ferguson, the new tax begins January 1, 2028. The bill states that, beginning January 1, 2028, a tax is imposed on the receipt of Washington taxable income. Estimated payments are not required before July 1, 2029. Returns are generally due on or before the due date of the taxpayer’s federal income tax return for the same year.
To whom this applies
The bill is intended to apply to households at the higher end of the income spectrum. The legislature states that it intends the tax to apply to households with annual adjusted gross income of $1,000,000 or more, and that households with annual adjusted gross income of less than $1,000,000 will not owe this tax.
More precisely, however, the actual tax is imposed on Washington taxable income, not directly on federal adjusted gross income (AGI). Washington taxable income is determined by starting with federal AGI, making Washington-specific additions and subtractions, and then applying a $1,000,000 standard deduction. For spouses and registered domestic partners, that $1,000,000 deduction is combined, regardless of whether they file joint or separate returns.
For now, this is not a broad-based tax on most Washington households. It is aimed at households whose Washington-adjusted income remains above that effective threshold after the required state-law modifications. However, it is conceivable that this threshold may be adjusted downwards in the future.
Starting point: federal AGI, and how the bill modifies it
The tax starts with federal AGI. The bill defines federal AGI by reference to section 62 of the Internal Revenue Code. It then creates a Washington-specific income base by making a series of additions, subtractions, and deductions to federal AGI. The bill calls the first modified number Washington base income, and the final number after further deductions Washington taxable income.
Important modifications include the following:
- Long-term capital gains / losses: long-term capital gains included in federal AGI are deducted out, and long-term capital losses included in federal AGI are added back. Then, for taxpayers who owe Washington capital gains tax, the bill adds back the amount of Washington capital gains subject to the existing capital gains tax for the same year.
- State and local obligations: interest excluded under federal law for state and local obligations is added back, except for interest on obligations of Washington State or political subdivisions of Washington. This means out-of-state municipal bond interest is generally added back, while Washington municipal bond interest is not.
- Federal obligations / Treasury interest: income derived from obligations of the United States (i.e., interest from Treasury securities) that Washington is prohibited by federal law from taxing is deducted out, net of related expenses such as amortizable bond premium to the extent those expenses were deducted federally.
- State and local income taxes / B&O / public utility tax adjustments: certain taxes deducted federally are added back.
- Charitable contributions: up to $100,000 of charitable contributions may be deducted, but for spouses / domestic partners the combined charitable deduction is capped at $100,000, regardless of joint or separate filing.
- Standard deduction: there is a $1,000,000 standard deduction, combined for spouses / domestic partners. For individuals who are not residents for the entire taxable year, this deduction is prorated by multiplying it by a fraction whose numerator is the individual’s Washington base income and whose denominator is federal AGI from all sources.
Tax rate
The tax rate is 9.90% of Washington taxable income. If Washington taxable income is less than zero for a taxable year, no tax is due.
Resident, nonresident, and part-year resident rules
This is one of the most important practical sections of the bill.
The bill defines a resident in two main ways:
- a person who is domiciled in Washington during the taxable year, unless a narrow exception applies, or
- a person who is not domiciled in Washington, but who maintains a place of abode in Washington and is physically present in Washington for more than 183 days during the year. The bill says a “day” means a calendar day or any portion of a calendar day.
For residents, all income is allocated to Washington. For nonresidents, only income derived from sources within Washington is allocated to Washington. Washington-source income for nonresidents includes, among other items:
- wages and compensation from employment within Washington,
- business / pass-through income carried on within Washington,
- rents and certain gains tied to Washington real or tangible personal property, and
- certain intangible income if the intangible property was employed in a Washington business.
There is also a 5-day de minimis rule for nonresidents: if a nonresident performs services in Washington five or fewer days cumulatively in a calendar year, no income is allocated to Washington under that section.
For part-year residents, the bill effectively treats them as residents for the part of the year they are Washington residents and as nonresidents for the rest. During the resident portion, all adjusted gross income is included; during the nonresident portion, only Washington-source adjusted gross income is included. For pass-through entity items, the bill has a more specific proration rule based on the number of days the taxpayer was a resident versus a nonresident during the entity’s tax year.
Special investment-related considerations
A few investment-related items are especially important:
- Washington municipal bond interest: the bill does not add back interest on obligations of Washington State or its political subdivisions. That means Washington municipal bond interest receives favorable treatment under the bill’s state-and-local-obligations rule.
- Out-of-state municipal bond interest: by contrast, municipal bond interest from states other than Washington is generally added back into the Washington tax base under the bill’s state-and-local-obligations rule.
- U.S. Treasury / federal obligations: the bill specifically deducts income derived from obligations of the United States that Washington is prohibited by federal law from taxing, subject to a reduction for related expenses such as amortizable bond premium.
- Long-term capital gains: these are not simply taxed again wholesale under the new regime. The bill subtracts long-term capital gains from federal AGI and then adds back only the amount of Washington capital gains already subject to the existing Washington capital gains tax, for taxpayers who owe that tax.
Interaction with the existing Washington capital gains tax
The new tax is designed to work alongside Washington’s existing capital gains tax, rather than simply duplicate it.
As noted above, the bill removes long-term capital gains from federal AGI, then adds back Washington capital gains subject to the existing capital gains tax. Because the bill adds back only Washington capital gains subject to tax under chapter 82.87 RCW, gains that are excluded from the existing Washington capital gains tax regime are generally not added back through that provision. In addition, the bill provides a credit against the new tax for the amount of Washington capital gains tax paid for the same tax year.
Thus, there is explicit coordination between the new regime and the existing Washington capital gains tax.
Constitutional issue and likely legal challenges
This bill plainly conflicts with the traditional language of Article VII of the Washington Constitution, which provides that all taxes shall be uniform upon the same class of property, shall not in any year exceed one percent of the true and fair value of such property in money, and defines “property” to include everything, whether tangible or intangible, subject to ownership.
That conflict will almost certainly lead to legal challenges.
At the same time, it is important to be realistic: the Washington Supreme Court previously upheld the state’s capital gains tax in Quinn v. Washington, holding that it was an excise tax rather than a property tax subject to Article VII’s uniformity and levy requirements. The court’s summary states that the capital gains tax was upheld because it was levied on the sale or exchange of capital assets, not on the assets or gains themselves. The Washington Department of Revenue likewise states that the capital gains tax was ruled constitutional and valid.
Because this new law appears drafted with that same line of reasoning in mind, there is a meaningful probability that courts could uphold this law as well, even though it will likely be challenged. That is an assessment from a practical and tax advisory perspective, not legal advice nor a prediction or guarantee.
Out-of-state relocation planning
Some higher-income households will understandably look at this bill and begin thinking about whether a move to another tax-favorable jurisdiction may make sense.
The bill’s residency and sourcing rules make that a real planning issue. For some individuals, a genuine move to another state will materially reduce or eliminate exposure; for others, Washington-source wages, business income, or rental income may continue to matter even after a move. The bill’s rules are detailed and highly fact-specific, especially for individuals who split time across states, work remotely or partially in Washington, own Washington rental property, or are married to a spouse with different residency facts.
If you are considering a move, it is important to do it carefully and early rather than casually or at the last minute.
Other relevant points
A few other items from the bill are worth noting:
- The bill requires electronic filing and generally requires that taxpayers owing tax include a copy of their federal return and related federal forms / information returns with the Washington filing.
- The bill includes credits intended to reduce double taxation, including credits for taxes paid to another jurisdiction, Washington capital gains tax, certain B&O / public utility taxes, and pass-through entity tax payments.
- The bill expressly states that the statutory ban on state and local personal income taxes does not apply to this new tax so long as the standard deduction remains at least $1,000,000 for a household.
- The standard deduction is indexed for inflation beginning in 2030.
- Unlike the existing Washington capital gains tax, which is limited to a narrower category of gains, this new regime is built on a much broader federal-AGI-based framework.
- The bill also makes clear that a number of previously tax-protected Washington public pension / retirement benefit statutes no longer exempt those benefits from tax under the new Title 82A chapter. This means certain public pension and retirement benefits are not automatically carved out from this new tax if they are otherwise included in the tax base and the applicable threshold is met.
Planning implications
This is a significant development in Washington State tax policy. For some households, this bill may have little or no practical effect. For others, it may influence decisions regarding:
- residency and domicile planning,
- timing of income recognition,
- investment location and tax-efficient asset placement,
- charitable giving,
- business entity structure,
- retirement distributions / conversions, and
- long-term estate and relocation planning.