Washington’s Senate has approved a new tax targeting residents who earn more than $1 million a year, pushing the state closer to adopting what supporters call a long-overdue correction to one of the most regressive tax structures in the country. Senate Bill 6346 would impose a 9.9% levy on individual income above a $1,000,000 standard deduction, with revenue earmarked for public defense funding and tax relief for working families. The bill still needs House passage and a gubernatorial signature, but its Senate approval after hours of heated debate signals that the political calculus around taxing high earners in Washington has shifted decisively.
What Senate Bill 6346 Actually Does
The core mechanism is straightforward. Under the statutory language of Senate Bill 6346, Washington would tax individual income above $1,000,000 at a flat rate of 9.9%. The tax base is tied to federal adjusted gross income and Internal Revenue Code definitions, which means the state would piggyback on existing IRS reporting rather than building a separate income-verification system from scratch. A $1,000,000 standard deduction effectively shields all earnings below that threshold, so only the portion above the first million would be taxed.
The bill defines residency using a 183-day rule: anyone physically present in Washington for at least 183 days during a calendar year would be subject to the tax. That provision matters because it sets a concrete boundary for determining who owes the levy, reducing ambiguity for people who split time between states. According to the Senate fiscal analysis, the tax would not take effect until calendar year 2028, giving high earners and their advisors roughly two years to plan. The Department of Revenue would administer the new levy under its existing enforcement powers, including those laid out in state collection statutes that govern assessments, penalties, and appeals for Washington taxes.
How Revenue Would Be Spent
Proponents have framed the bill as a two-sided equation: tax the wealthiest residents and redirect the money toward people at the bottom of the income scale. Senate leaders say revenue from the Millionaires Tax would be dedicated to targeted tax cuts designed to rebalance Washington’s regressive tax system, including expanding the Working Families Tax Credit and increasing income thresholds so more households qualify. Washington has long relied on sales taxes, property taxes, and the business and occupation tax rather than a personal income tax, a structure that places a heavier proportional burden on lower-income households and leaves policymakers searching for progressive revenue sources.
A portion of the proceeds would also flow to county public defense systems. The Senate committee report confirms that SB 6346 dedicates funding to county-level defense services for people who cannot afford an attorney and expands eligibility for those services. That allocation addresses a practical crisis: many Washington counties struggle to meet constitutional obligations for indigent defense, and new state funding could reduce caseloads for overworked public defenders and improve training and oversight. Lawmakers have also pointed to related judicial funding needs, including compensation and support for judges authorized under existing court statutes, as part of a broader push to stabilize the justice system with more predictable state revenue.
The Legal Foundation: Quinn v. State
Any discussion of taxing income in Washington runs into a constitutional wall. The state constitution has historically been interpreted to prohibit graduated income taxes, and opponents of new levies have repeatedly invoked that reading. But the legal ground shifted when the Washington Supreme Court decided Quinn v. State, ruling that the state’s capital gains excise tax was constitutional. In that case, the court analyzed the tax’s legal “incident” and concluded in its majority opinion that the capital gains measure functioned as an excise tax on transactions rather than a property or income tax, sidestepping earlier precedents that had invalidated income taxes as unconstitutional property taxes.
That distinction is not just academic. It gave lawmakers a constitutional pathway to impose levies on high earners without triggering the uniformity requirements that apply to property taxes. After Quinn, the Department of Revenue announced that collection of the capital gains tax would continue, underscoring that the ruling had settled, at least for now, the question of whether that particular tax could stand. SB 6346’s drafters appear to be building on the same legal architecture, describing the new millionaires tax in a way that mirrors the excise framing used in Quinn and tying liability to measurable economic activity rather than mere ownership of property. Whether that approach survives a fresh court challenge is an open question, but the Supreme Court’s reasoning gives supporters a detailed roadmap for defending the measure.
Do Not Confuse This With the Capital Gains Tax
Washington already collects a separate capital gains excise tax, and the two levies are distinct in scope and timing. The existing tax applies only to gains from the sale of long-term capital assets, not to wages, salaries, or other forms of ordinary income. Beginning with tax year 2025, that capital gains tax moved to tiered excise rates of 7% on the first $1 million of taxable gains and 9.9% on amounts above that threshold, with numerous exemptions for retirement accounts, real estate in some circumstances, and certain small business sales. The 2025 capital gains return is due April 15, 2026, and taxpayers must file even if they already report similar information to the IRS, because the state tax piggybacks on but does not replace federal obligations.
By contrast, the proposed millionaires tax would apply to broad categories of income once a filer’s total crosses the $1,000,000 standard deduction, regardless of whether that income comes from wages, business profits, or investments that are not otherwise exempt. Initial collections for tax year 2024 under the existing capital gains tax already brought in more than $560 million, demonstrating that Washington’s framework for taxing high-value financial transactions is generating substantial revenue. Supporters of SB 6346 argue that layering a millionaires tax on top of the capital gains system would create a more coherent progressive tax structure, while opponents warn that the combined burden could push some high earners to change their residency or investment behavior to avoid Washington’s expanding tax net.
Political and Practical Hurdles Ahead
Even with Senate approval, the path to enactment is not guaranteed. The House will have to decide whether to take up SB 6346 as written or pursue its own version; House Bill 2724 reflects similar priorities but differs in technical details and timing. Any discrepancies would need to be ironed out in conference or through amendments, and business groups and anti-tax advocates are already signaling that they will lobby hard against final passage. If the bill reaches the governor’s desk, a signature would set the stage for immediate legal challenges, with plaintiffs likely arguing that the measure crosses the line from an excise tax into an unconstitutional income tax despite the Quinn precedent.
Implementation would also present practical challenges. The Department of Revenue would need to develop new forms, guidance, and audit procedures tailored to high-income filers, while taxpayers and accountants would have to integrate the new rules into complex planning strategies that already account for federal law and Washington’s capital gains tax. Because the tax would not take effect until 2028, there is time for rulemaking and public comment, but that delay also gives potential opponents years to build a repeal campaign or initiative effort. For now, Senate passage of SB 6346 marks a significant milestone in Washington’s long-running debate over how, and how much, to tax its wealthiest residents, signaling that the state’s tax policy is poised for a substantial shift if lawmakers follow through.
More From The Daily Overview
*This article was researched with the help of AI, with human editors creating the final content.
Julian Harrow specializes in taxation, IRS rules, and compliance strategy. His work helps readers navigate complex tax codes, deadlines, and reporting requirements while identifying opportunities for efficiency and risk reduction. At The Daily Overview, Julian breaks down tax-related topics with precision and clarity, making a traditionally dense subject easier to understand.
