Olympia Releases Draft Income‑Tax Bill: 9.9% on Income Over $1 Million, Overturns Voter Ban

Washington state Lawmakers Unveil Draft Income Tax Proposal Targeting High Earners

Olympia, WA – A contentious debate is brewing in Washington State as legislators have released a draft proposal for a new income tax, specifically aimed at those earning over $1 million annually. This initiative, currently under consideration, could substantially alter the state’s tax landscape and generate significant revenue. The core of the plan centers around a 9.9% tax rate applied too income exceeding the seven-figure threshold.

Breaking Down the Proposed Tax Structure

For weeks, discussions about a potential income tax have circulated within the state capital. Now, the specifics are coming into sharper focus with the release of the full draft language. This proposed tax seeks to override the existing, voter-approved prohibition on state income taxes, a longstanding feature of Washington’s financial structure. It is indeed vital to note that this proposal includes several stipulations which have not yet been extensively examined by the public.

Key Provisions of the Draft

The proposal doesn’t just outline the tax rate; it delves into the mechanics of implementation. Several provisions within the document have prompted discussion among legal and financial experts. These include details regarding deductions, exemptions, and how the tax revenue would be allocated. Preliminary analysis suggests the tax could generate hundreds of millions of dollars annually for state programs.

Past Context: Washington’s Tax System

Washington State has a unique tax structure, relying heavily on sales and property taxes, and explicitly prohibiting an income tax. This prohibition dates back decades, reflecting a strong conservative sentiment among voters. Attempts to introduce an income tax have consistently faced strong opposition and been defeated at the ballot box. The debate over tax fairness and the state’s funding needs has been ongoing for years.

Comparing Washington’s Tax Structure to Other States

Washington is one of a handful of states without a state income tax. The Tax Foundation provides comparative data on state tax systems, revealing how Washington’s reliance on sales tax differs significantly from states like California and New York, which depend more on income tax revenue. This difference impacts the distribution of the tax burden across various income levels.

State	Income Tax	Sales Tax (Avg.)	Property Tax (Avg.)
Washington	No	9.29%	0.99%
California	Yes (progressive)	7.25%	0.73%
New York	Yes (Progressive)	4.00%	1.68%

Potential impact and Future Outlook

The introduction of this draft proposal is likely to ignite a heated public debate. Proponents argue that an income tax on high earners is a fairer system and would provide much-needed funding for essential services like education and healthcare. Opponents contend that it would harm the state’s economy and discourage investment.

The legislative process is far from over. The draft will be subject to revisions, committee hearings, and ultimately, a vote by the full legislature.the outcome remains uncertain, but the proposal marks a notable moment in Washington’s ongoing conversation about its tax structure.

What implications do you foresee if Washington State adopts an income tax on high earners? Do you believe this proposal addresses the state’s budget needs effectively?

Share your thoughts in the comments below,and be sure to share this article with your network to keep the conversation going.

What is the proposed 9.9% tax on income over $1 million in Washington?

Olympia Releases Draft Income-Tax Bill: 9.9% on Income Over $1 Million, Overturns Voter Ban

Washington state residents are facing a critically important shift in the tax landscape. Olympia has released a draft bill proposing a 9.9% income tax on annual income exceeding $1 million,effectively overturning a decades-long voter ban on state income taxes. This move is sparking intense debate and scrutiny across the state, impacting high-income earners, Washington’s economy, and the future of state funding.

Understanding the Proposed Income Tax

The proposed legislation targets individuals earning over $1 million annually. The 9.9% tax rate would apply only to the portion of income exceeding that threshold. Proponents argue this is a progressive step towards fairer taxation,ensuring the wealthiest residents contribute more to essential state services.

Here’s a breakdown of key aspects:

* Tax Rate: 9.9% on income over $1 million.

* Applicability: Individuals only; no tax on corporate income.

* Revenue Allocation: Funds are earmarked for education and childcare initiatives, according to initial statements.

* Effective Date: If passed, the tax is projected to take effect in the 2027 tax year.

Overturning the Voter Ban: A Legal and Political challenge

Washington state voters have consistently rejected income tax proposals in the past. This new bill attempts to circumvent the existing ban by classifying the tax as an “excise tax” on high incomes, rather than a traditional income tax. this legal maneuver is expected to face immediate and substantial challenges.

Governor Bob Ferguson has already voiced concerns, labeling the proposed wealth tax “novel, untested, difficult to implement,” and predicting swift legal challenges. Stephanie Barnard, House Republicans highlighted these concerns in April 2025, foreshadowing the potential for court battles. The core argument against the bill centers on whether it truly qualifies as an excise tax, or if it’s an income tax in disguise – violating the state constitution.

Impact on Washington State’s Budget & Services

The state is currently grappling with budget constraints, leading to cuts and freezes in essential services. According to reports, medicaid, child support programs for low-income families, and special education are facing reductions. The proposed income tax is presented as a solution to stabilize funding and potentially restore these vital programs.

Though, critics argue the tax could have unintended consequences:

* Capital Flight: High-income earners may relocate to states with more favorable tax climates, reducing the overall tax base.

* Economic Slowdown: Increased taxes on investment income could discourage economic activity.

* Compliance Costs: Implementing and enforcing the tax will create administrative burdens for both the state and taxpayers.

Potential Benefits & Revenue Projections

Despite the concerns, proponents emphasize the potential benefits of increased revenue. Preliminary estimates suggest the tax could generate hundreds of millions of dollars annually. These funds are intended to address critical needs in:

* Education Funding: Increased investment in K-12 education, including teacher salaries and classroom resources.

* Early Childhood Education: Expansion of access to affordable childcare and preschool programs.

* Healthcare Access: Strengthening Medicaid and other healthcare services for vulnerable populations.

The exact revenue projections remain subject to debate and will depend on factors such as economic conditions and taxpayer behavior.

What This Means for High-Income Earners

Individuals earning over $1 million in Washington state need to proactively prepare for the potential implementation of this tax. This includes:

1. Tax Planning: Consult with a qualified tax advisor to assess the potential impact on your financial situation and explore strategies to mitigate the tax burden.
2. Estate Planning: Review your estate plan to ensure it aligns with the new tax landscape.
3. Financial Modeling: Project the impact of the tax on your investment returns and overall wealth accumulation.
4. Stay Informed: monitor the progress of the bill through the legislative process and be prepared to adapt your financial strategies accordingly.

Historical Context: Washington’s Resistance to Income Tax

Washington has a long history of resisting state income taxes. Voters have rejected numerous proposals over the years, reflecting a strong preference for a tax system based primarily on sales and property taxes. This latest attempt to introduce an income tax represents a significant departure from that tradition and is likely to fuel further debate and political polarization.The state’s reliance on sales tax makes it notably vulnerable to economic downturns, a factor proponents cite as justification for diversifying revenue streams.