March 5, 2026
Highlights:
In February, Washington state lawmakers introduced legislation to impose a nearly 10% tax on residents earning over $1 million annually, pursuing tax hikes instead of spending discipline amidst a $2 billion budget deficit Notably, any revenue generated by the proposed tax would not be realized for several years, limiting its ability to address the state’s immediate fiscal shortfall.
House Majority Leader Joe Fitzgibbon’s proposal would tax income over $1 million at 9.9%, making Washington’s rate among the highest for a state implementing its first-ever income tax. But, this approach is fundamentally flawed. Washington’s budget challenges stem from spending growth, not inadequate revenue. Nate Nehring, member of the Snohomish County council and Future 42 Snohomish County director noted:
76% of voters in Washington agreed that the state has more than enough money to address important priorities.
In just a single decade, state spending has nearly doubled from $43.6 billion in 2016 to $85.3 billion in 2025, according to the state’s Fiscal Information webpage. So, while Washington state residents and businesses are subject to record levels of taxes, legislators are approving budgets which spend twice as much as they did a decade ago.
This past week, the House of Representatives’ Finance Committee–composed primarily of Democrats–voted 9-6 to recommend that this bill be passed with several minor changes. Among the amendments is the creation of an advisory group to oversee the new tax program, contributing to the already bloated bureaucracy in Washington and driving the employer class out of the state. A critic of this proposal, State Rep. Cyndy Jacobson said:
We’re causing the innovators and the people who hire people to have to leave this state.
The proposed tax would largely fall on small business owners and other high earners whose income flows through pass-through entities such as S-corporations and partnerships, rather than on traditional wage earners.These are not Wall Street financiers. They are employers making payroll decisions, investment choices, and expansion plans. Raising their taxes directly suppresses hiring and capital investment precisely when Washington needs economic growth.
Washington currently enjoys one competitive advantage: no state income tax. Implementing a 10% rate on high earners—especially small-business owners—erodes that advantage immediately. Even if the tax does not trigger widespread relocation as is likely, it will still harm Washington’s economy. Businesses and individuals do not need to move to inflict damage. They simply need to direct new investments and expansions to other states.
Even Democratic Gov. Bob Ferguson expressed skepticism, arguing the bill doesn’t provide sufficient tax relief for lower- and middle-income earners to justify the new levy. He stated:
I have repeatedly insisted that a significant percentage of the revenue generated by the Millionaire’s Tax must go back into the pockets of Washingtonians to make life more affordable. This proposal does not come close.
With the bill expected to reach the House floor for a vote next week, Washington lawmakers should dismiss this proposal. A millionaire tax will not solve the state’s structural deficits and it risks pulling Washington into a race to the bottom that could damage the state’s competitiveness for years.
Read the full article below.
WA House Finance Committee Passes Income Tax Bill: Floor Vote Set for Next Week
By Ryan Frost
Washington Policy Center
February 27, 2026
The House Finance Committee passed ESSB 6346 on a 9-6 vote, with only one Democrat, Rep. Walen, voting against the proposed 9.9% income tax. This despite over 100,000 people signing up in opposition to the bill, making it the most unpopular bill in state history.
Washington doesn’t have a revenue problem. The 2025-27 state operating budget is $95 billion, up from roughly $30 billion a decade ago. Lawmakers have imposed $18 billion in new taxes since 2019 alone. And they’re still running deficits. Not because they don’t have enough money, but because every new dollar gets spent and then some. An income tax won’t break that cycle. More revenue for the current majority party means more spending, which means larger future deficits, which means the next push for even higher taxes.
The committee released a new striking amendment and adopted a series of other committee amendments this morning. The changes are mostly around the edges, and several make the bill worse for businesses.
What the striker adds:
Without this, a keynote speaker flying in for a trade show would owe Washington income tax.
The underlying bill dedicates 7% of revenue with no dollar limit. The striker puts a ceiling on it, which means the public defense fund could get less than 7% if revenues come in high.
An acknowledgment that the surcharge was crushing independent food wholesalers operating on razor-thin margins, margins that don’t survive a 0.5% tax on gross receipts.
The legislature taxed services last year, then had to turn around and exempt schools from their own tax.
Another cleanup of last session’s mess.
What the committee amendments add:
This amendment, by Rep. Shaun Scott, hits Amazon, Microsoft, and our other big businesses. The underlying bill moved a surcharge expiration up from 2029 to 2028, giving businesses relief from this surcharge a year sooner. This amendment strips that out. So, businesses lose an early off-ramp and get squeezed from both the surcharge and the income tax simultaneously.
The same exemption Democrats voted down in Senate committee.
Adds specific exemptions for income earned on tribal lands and from allotted and restricted Indian lands.
The Department of Revenue has never administered an income tax. This group, with reports due in December 2026 and 2027, is essentially an admission that the state has no idea how to operationalize this yet.
The repeal of the non-advertising service taxes from ESSB 5814 moves from 2030 to 2029. Small relief, but it’s something.
The bill now heads to the House floor for a full vote next week, where I expect we’ll see a slew of additional amendments. After that, it goes back to the Senate for concurrence on whatever the House changes. Please continue reaching out to your legislators to tell them you don’t want an income tax in Washington.
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