WA income tax passes Senate; Ferguson expected to sign

Lead: The Washington State Senate gave final approval Wednesday to a new income tax on top earners, sending the measure to Gov. Bob Ferguson, who has said he intends to sign it. The bill levies a 9.9% tax on annual income above $1 million, with first payments scheduled for 2029 and projected revenue of $3 billion to $4 billion a year. The final Senate vote was 27-21 after the chamber concurred with House amendments. Supporters say the revenue will shore up schools and social services; opponents vow legal challenges and potential ballot fights.

Key Takeaways

• The legislature approved a 9.9% tax on income over $1 million annually; first collections are set for 2029.
• The tax is estimated to generate $3 billion to $4 billion each year to support K-12 schools, human services and universities.
• The Senate concurred with House changes and passed the final version 27-21, largely along party lines.
• About 5% of revenue is earmarked for child care and early learning programs.
• Several sales-tax exemptions and other tax breaks are included: diapers and certain hygiene items, expanded Working Families Tax Credit (about 460,000 more households eligible) and broader B&O small-business exemptions.
• The bill rolls back some recent sales-tax expansions that affected school-district revenue, including temporary staffing and live performances.
• Opponents warn of out-migration by high earners and have pledged lawsuits and ballot measures to block the law.

Background

The measure — often termed a “millionaires tax” by supporters — comes after intense debate in the state House, where advocates and critics engaged in a marathon 24-hour session over the bill’s merits. The Senate vote Wednesday was more narrowly focused on the House’s amendments rather than re-litigating the underlying policy. The tax targets individual income above $1 million and was authored in the Senate by Majority Leader Jamie Pedersen, D-Seattle.

Supporters framed the proposal as a way to stabilize long-term funding for public schools, early childhood programs and other state services after several years of budget pressure. Opponents, including business groups and many Republicans, argue that higher top rates will push wealthy taxpayers and executives out of Washington for lower-tax states. Those concerns intensified after high-profile departures of some executives to other states.

Main Event

On Wednesday the Senate formally accepted the House’s revisions to Senate Bill 6346 and voted 27-21 to send the measure to Gov. Bob Ferguson’s desk. The evening debate in the Senate was technically constrained to the changes made in the House, so it lacked the broader, more contentious floor exchanges seen earlier in the session.

Senate Majority Leader Jamie Pedersen, the bill’s lead sponsor, welcomed modifications from the House that he said improved the measure, including a provision to use part of the revenue to guarantee free school lunches for K-12 students. Pedersen described the legislative process as iterative, noting wide public input shaped the final text.

Republican senators countered that the tax will have downstream effects beyond its target group. Sen. Chris Gildon, R-Puyallup, argued that higher rates create incentives for lawmakers to raise revenue from other sources later and predicted the tax would ultimately touch a broader swath of taxpayers.

The statute also includes offsets and targeted relief: elimination of state sales tax on diapers, over-the-counter medications and basic hygiene items; expanded exemption thresholds for the business-and-occupation (B&O) tax for small firms; and an enlarged Working Families Tax Credit estimated to make roughly 460,000 additional households eligible for rebates up to $1,300 annually.

Analysis & Implications

Fiscal officials estimate the tax will bring in $3 billion to $4 billion per year. That level of revenue could materially ease budget strains for education and human services, though year-to-year receipts will depend on capital gains realizations and high-earner income volatility. Policymakers will need to manage the new revenue stream and set priorities for one-time versus ongoing commitments.

Economically, the rate and threshold concentrate the burden on a relatively small number of taxpayers, but critics warn of behavioral responses such as increased tax planning, deferred income realization or geographic relocation. The magnitude of such effects depends on how mobile top earners prove to be and whether other states offer more attractive tax environments.

Politically, passage sets up an immediate accountability test. Opponents have signaled both litigation and ballot campaigns to overturn the law, which could delay implementation and generate uncertainty for fiscal planning. If legal challenges proceed, courts will be asked to weigh constitutional questions about the state’s authority to tax income at this structure and level.

Comparison & Data

Placed against Washington’s recent tax changes, this law marks a significant shift toward progressive revenue generation. The 9.9% rate is steep relative to other state top rates in the U.S., and the delayed start to collections (2029) gives time for administrative and legal preparations. Budget offices will incorporate these estimates into multi-year planning but will also model downside scenarios reflecting market volatility and possible taxpayer responses.

Reactions & Quotes

Supporters emphasized the direct benefits for education and families, and some pointed to the bill’s tradeoffs — revenue gains paired with targeted tax relief for low- and middle-income households.

“One of the great joys of this legislative process is that at every step… this bill has gotten better and better.”

Sen. Jamie Pedersen (D-Seattle)

Opponents framed the measure as a liability for the state’s competitiveness and warned of broader tax impacts.

“Everyone with a job will eventually be paying this income tax…because it’s the easiest thing that politicians can do when budget deficits come about.”

Sen. Chris Gildon (R-Puyallup)

Gov. Ferguson dismissed predictions of a mass exodus of wealthy taxpayers and highlighted the bill’s offsets as business-friendly adjustments.

“Candidly, that’s what they say on any revenue increase…We’ll see how things play out, but I am confident this will actually help businesses.”

Gov. Bob Ferguson (statement)

Unconfirmed

• No court filings have yet been lodged with respect to specific constitutional claims; opponents have pledged lawsuits but details and timelines remain unconfirmed.
• The precise behavioral response of high-income taxpayers — in terms of relocation or altered income timing — is uncertain and will only be measurable after the law takes effect and data accumulate.

Bottom Line

The Legislature’s approval of a 9.9% tax on income above $1 million represents a major fiscal policy shift for Washington, prioritizing new revenue for schools and social programs while coupling the levy with targeted tax relief. The 27-21 Senate vote finalizes a measure that supporters say strengthens the social safety net and critics say risks competitiveness and migration of high earners.

Implementation is not immediate: collections do not begin until 2029, and legal or ballot challenges could alter or delay the law. Policymakers and analysts will monitor revenue receipts, taxpayer behavior and litigation outcomes closely to assess the measure’s practical effects on state finances and the economy.

Sources

• The Seattle Times (news report)
• Washington State Legislature — SB 6346 (bill summary) (official legislative information)