The Law As It Presently Exists

The State of Washington imposes various taxes to raise revenue to fund state government. Those taxes include the retail sales tax, the business and occupation tax, the state property tax, the capital gains tax, and other state taxes. In 2026, the Legislature passed a law imposing a 9.9 percent tax on an individual’s receipt of income over $1,000,000, beginning in calendar year 2028. Beginning in 2029, the $1,000,000 standard deduction is increased to account for inflation.

The amount of income subject to tax is based on adjusted gross income reported on federal income tax returns, with some modifications.

In addition to the $1,000,000 standard deduction, taxpayers may deduct up to $100,000 for charitable contributions. The $1,000,000 standard deduction and the possible $100,000 deduction for charitable contributions apply per household, so a married couple or domestic partnership shares a single $1,000,000 deduction and up to $100,000 for charitable contributions. Additional deductions are available for certain specific situations. Certain expenses related to pass-through entities that are deducted for federal tax purposes are added to the amount subject to Washington’s tax.

The law also allows certain tax credits, which lower the amount of taxes due. These credits are available for income tax paid to another state; amounts paid under Washington’s capital gains tax; and taxes owed for business and occupation taxes or public utility taxes paid on the same income subject to this tax.

Nonresidents of Washington are only subject to this tax based on income derived from sources within Washington. Income that they earn from other sources is not counted.

Five percent of the money collected from this tax is deposited into an account that can only be used for childcare and early learning purposes. The remaining 95 percent of money collected from the tax and any interest and penalties is deposited into the state’s general fund.

The 2026 law enacting the tax on income above $1,000,000 also enacted or expanded various tax exemptions, deductions and credits. First, it eliminated sales tax on the sale of diapers, over-the-counter drugs, grooming and hygiene products, and certain software, digital services, data processing, and live presentations. Second, it reduced business and occupation taxes by increasing a small-business tax credit, increasing the minimum threshold for businesses to file taxes, and removing a surcharge on high grossing businesses for health care providers, hospitals, prescription drug resellers, and wholesale food sales. Third, it expanded eligibility for the Working Families Tax Credit, which provides a tax refund for qualifying low-income individuals.

The Effect of the Proposed Measure if Approved

If approved, the proposed measure would repeal the annual tax on individual income over $1,000,000. This would also eliminate the funding collected from the tax that would go to the general fund (which funds public K-12 education, higher education such as universities and community colleges, health care, and other human services) and childcare and early learning. The non-income tax credits, exemptions, and deductions that accompanied this tax would not be repealed and would remain in place.

The measure would also prohibit state and local governments from imposing taxes on individual income or the receipt of individual income and taxes measured by an individual’s income. The only tax explicitly listed and repealed by the measure is the tax on income over $1,000,000.

The measure would also provide definitions for some terms used in the measure. It would define “income” for purposes of excise taxes as “any gain or benefit measured in money derived from an individual’s capital, labor, property, or other source.” It would define “individual” for purposes of excise taxes as “a natural person.”