(1) Beginning January 1, 2028, a tax is imposed on the receipt of Washington taxable income. Only individuals are subject to payment of the tax, which equals 9.90 percent multiplied by an individual's Washington taxable income.
(2) If an individual's Washington taxable income is less than zero for a taxable year, no tax is due under this section.
[ 2026 c 238 s 201.]
Notes:
Findings—Intent—2026 c 238: "(1) The legislature finds that the state, through the state's general fund, invests in K-12 education, health care, higher education, other essential governmental services, and the working families' tax credit, all of which help Washingtonians succeed and thrive.
(2) These general fund dollars help the state meet its paramount duty to make ample provision for the education of all children in the state, including children who qualify for special education services, creating the opportunity for each child to succeed in school and achieve success in life. The legislature intends to further support academic success and well-being of our children in K-12 education by providing access to breakfast and lunch for all children served without charge each school day.
(3) The general fund supports health care programs that deliver critical, life-saving medical care, provide support for those with developmental and other disabilities, offers long-term care for the elderly, and protects the long-term health and well-being of the public.
(4) Further, the general fund invests in higher education, including two and four-year colleges, apprenticeships, and other postsecondary education and training programs, ensuring Washington students remain competitive in the workforce and broader economy.
(5) The general fund also invests in human services that provide vital basic-needs assistance to the state's lowest-income households and educate the youngest learners. The legislature intends to further support these young learners through transferring a portion of the revenues from this act to the fair start for kids account, for child care and early learning purposes.
(6) Therefore, the intent of this act is to maintain and preserve essential governmental services for Washingtonians, particularly within K-12 education, health care, higher education, and human services, and support working families by ensuring continued investment in, and expansion of who qualifies for, the working families' tax credit by depositing revenues from this act into the general fund.
(7) The legislature further recognizes that reforming our tax code to be common sense, balanced, and sustainable is essential to the long-term economic success of Washington. The Washington tax structure, developed during the Great Depression, relies heavily on excise and consumption taxes, with consequences for equity, adequacy, and long-term fiscal stability that persist today. The legislature recognizes that more progress is needed for the state to have a fair and balanced tax system that can provide sustainable, ample funding for K-12 education, health care, higher education, human services, and other essential governmental services. Washington's tax system remains the second most regressive in the nation as it asks those with the least to pay the most as a percentage of their income. Low-income Washingtonians pay at least three times more in state and local taxes as a percentage of their income than the state's highest income households.
(8) Further, due to the action of the federal government through the passage of HR 1, Washington's highest-income households are set to receive an average federal tax break of $90,850 while Washington's lowest-income households are set to receive a mere $200, according to the institute on taxation and economic policy. These tax breaks were largely funded through cuts to federal funding in health care and food security programs, negatively impacting Washington's working families.
(9) Thus, the legislature intends to limit the tax established by this act to households with annual adjusted gross income of $1,000,000 or more. Washingtonian households with an annual adjusted gross income of less than $1,000,000 will not owe this tax. As a result, the millionaires' tax is estimated to affect only the wealthiest one-half of one percent of the households in this state, taking a significant step toward reducing the disproportionate reliance on working people to fund K-12 education, health care, higher education, human services, the working families' tax credit, and other essential governmental services to benefit Washingtonians. The application of the tax to households matches the policy of the state's capital gains excise tax and the policy of the property tax exemption for senior citizens, veterans, and people with disabilities.
(10) The legislature further intends to exempt certain sources of income from the tax including, but not limited to, the sale of qualified family owned small businesses in accordance with RCW 82.87.070 and the sale of residential and other real property in accordance with RCW 82.87.050.
(11) It is also the intent of the legislature to rebalance the tax system by reducing taxes on consumers, low and middle-income families, and businesses through small business and other business and occupation tax credits, by exempting from the retail sales tax essential household items such as personal care products, certain over the counter drugs, and diapers, and by providing the tax relief in sections 1101 through 1104 of this act. The legislature further intends that the tax imposed under this act operate together with certain tax reductions and tax credits enacted by this act as an integrated reform of the state tax code, and that repeal or invalidation of section 201 of this act would reinstate certain sales and use tax on items made exempt by this act and repeal working families tax credits and small business tax credits enacted by this act.
(12) The legislature finds that local government revenue sources are limited and unable to keep up with rising costs. The legislature further finds that many of the tax reductions that help Washingtonians have an impact on local government revenues. To offset some of those impacts, the legislature intends to create a city and county fiscal health account for future transfers from the general fund to mitigate a portion of the revenue loss to local government. Such transfers will be unrestricted and available for general use.
(13) Thus, to help meet the state's paramount duty of amply providing every child in the state with an education and supporting the health and well-being of Washingtonians, it is the intent of the legislature, by adopting this act, insofar as possible, to:
(a) Impose a tax on those households with the greatest ability to pay, specifically those earning Washington adjusted gross income during the taxable year of at least $1,000,000;
(b) Make the Washington millionaires' tax law reflect the provisions of the internal revenue code relating to the measurement of adjusted gross income, modified as necessary to achieve the goals and purpose of this act;
(c) Achieve this result by the application of the various provisions of the internal revenue code relating to the definition of income, exemptions and exclusions therefrom, accounting methods, basis, depreciation, and other pertinent provisions, subject to additional exemptions and modifications as provided in this act, resulting in a final amount called "Washington adjusted taxable income";
(d) Impose a tax on residents of this state measured by Washington adjusted taxable income wherever derived and to impose a tax on nonresidents measured by Washington adjusted taxable income from sources within this state; and
(e) Increase state funding for K-12 education in order to improve outcomes for Washington's students by strengthening high quality instruction and expanding student supports." [ 2026 c 238 s 1.]
Effect of invalidation of 2026 c 238 s 201—2026 c 238: "If a court of final jurisdiction invalidates section 201 of this act, sections 1 through 1003 and 1201 through 1209 of this act are null and void in its entirety." [ 2026 c 238 s 1202.]
Automatic expiration date and tax preference performance statement exemption—2026 c 238: "Except as provided in section 902 of this act, RCW 82.32.805 and 82.32.808 do not apply to this act." [ 2026 c 238 s 1206.]
Necessity of act—2026 c 238: "The tax imposed in this act is necessary for the support of the state government and its existing public institutions." [ 2026 c 238 s 1208.]
Intent—Implementation by department of revenue—2026 c 238: "It is the intent of the legislature for the department of revenue to spend appropriated amounts to implement this act regardless of litigation." [ 2026 c 238 s 1209.]