Washington state enacts historic millionaires’ tax

For nearly a century, Washington state operated without any income tax — and critics consistently ranked its tax structure among the most regressive in the country, placing the heaviest burden on lower- and middle-income earners. That changed on March 30, 2026, when Gov. Bob Ferguson signed Senate Bill 6346 into law, creating a new tax on individual income exceeding $1 million per year.

Fast Facts

• Less than half of 1% of Washington residents will owe the new tax
• In its first full year, more than 41% of revenue raised goes directly back to families and small businesses
• The law eliminates sales tax on diapers, over-the-counter drugs, and hygiene products statewide

The tax applies only to income above $1 million — not to assets like homes or property, and not to the first $1 million of income for those who do owe it. The vast majority of Washingtonians pay nothing. But the revenue generated will fund programs serving millions of residents across the state.

What the money does

The legislation funds free breakfast and lunch for every K-12 student in Washington, a priority Ferguson identified before taking office and the subject of his first governor-request bill. The state’s Working Families Tax Credit — which sends checks between $300 and $1,300 to qualifying households — will now reach 460,000 additional families, more than doubling its reach.

Small business owners receive relief as well. The bill reduces or eliminates the Business and Occupation tax for 138,000 additional businesses. More than $320 million goes toward affordable childcare in the first full budget cycle, a significant investment in a state that ranks fifth nationally for the highest childcare costs.

The law also removes sales tax from diapers, over-the-counter medications, and basic hygiene products — changes that benefit all Washingtonians and could save families hundreds of dollars per year.

A century of structural imbalance

Washington’s tax code has long drawn criticism for asking the most from those who have the least. Without a state income tax, the state relied heavily on sales taxes and other flat levies that consume a larger share of income from lower earners than from wealthy residents.

Sen. Jamie Pedersen, who sponsored the bill, framed the signing as a turning point. He said the law begins to address a structural problem nearly 100 years in the making — one that has asked working families to carry too much of the load for too long, while not asking enough of the state’s wealthiest residents.

In its first full year, more than 41% of revenue raised returns to Washington families and small business owners. By the second year, that share rises to nearly 47%.

What comes next

The law now moves to implementation. Advocates for tax equity are watching closely to see whether the legislation faces legal challenges — Washington courts have historically treated income as property, a question that could affect how the law fares if it reaches the state Supreme Court. Ferguson and legislative sponsors say they are confident in the bill’s legal standing.

For the families, students, and small business owners the bill targets, the benefits are concrete and near-term. Free school meals, expanded tax credits, and lower costs on essential goods represent direct relief — not abstractions. You can watch the full bill signing ceremony at TVW, Washington’s public affairs network.

Washington consistently ranks among the top 10 states for quality of life, a standing state leaders attribute to sustained investment in healthcare, education, and childcare. The governor’s office says the millionaires’ tax revenue will go directly into those same areas.

Source: Governor Bob Ferguson’s office, March 30, 2026