Washington has ended its long run as a no‑income‑tax state for top earners, putting a new levy squarely on the radar of financial advisors with millionaire clients in the Pacific Northwest and beyond.
Governor Bob Ferguson signed Senate Bill 6346 into law on March 30, creating a 9.9% state tax on personal income above $1 million, effective for tax years beginning in 2028. For the taxpayers impacted, the first payments will be due in 2029, on top of existing federal liabilities and Washington’s separate capital‑gains excise tax.
Until now, Washington relied heavily on sales, property and business taxes, and was among a handful of states that largely avoided taxing wages. That structure produced one of the most regressive tax systems in the country, with lower‑income households paying a significantly larger share of their income in state and local taxes than the wealthy.
The new tax is expected to apply to less than 0.5% of Washington residents, focusing on the highest earners in sectors such as technology, finance and professional services.
In its most recent state tax competitiveness rankings, the Tax Foundation ranked Washington 45th overall.
Lawmakers tied the millionaire tax to a package of measures aimed at affordability and social spending. Revenue is earmarked to expand the Working Families Tax Credit, a state program that sends cash payments to lower‑income households, and to provide free breakfast and lunch to all K‑12 students. It will also finance reductions in business taxes for thousands of small firms and eliminate sales tax on diapers, over‑the‑counter medications and certain hygiene products.
Supporters argue that asking more from very high earners will let the state ease the burden on working‑ and middle‑income households while funding child‑care and education priorities that, in theory, should support long‑term growth. Ferguson has described the change as an effort to “rebalance” a tax code that, in his view, favored the wealthy for years.
The measure is likely to face both political and constitutional challenges well before 2028.
Business groups and Republican lawmakers argue that layering a 9.9% income tax on top of federal rates will encourage high earners to relocate to lower‑tax states, eroding the state’s base of entrepreneurs, investors and senior executives. Similar concerns have been voiced as other states have debated surtaxes on million‑dollar incomes or large fortunes.
Legal opponents are preparing to go to court. One key issue is a 1930s Washington Supreme Court ruling that treated income as a form of “property,” which must be taxed uniformly under the state constitution. That precedent was central to earlier fights over whether the state could impose graduated income‑style levies and is expected to resurface as plaintiffs challenge SB 6346.
Anti‑tax activists are also expected to pursue a ballot measure to repeal or limit the law. A similar effort failed in 2024, when voters upheld Washington’s 7% capital‑gains tax, but the possibility of a repeal campaign adds another layer of uncertainty for high‑income households and their advisors.
Even with those open questions, the broad outlines of the tax are now set, and advisors will have to start addressing at least two core issues with affected clients.
The first concerns residency and domicile. Because the tax applies to all taxable income of Washington residents above $1 million, the value of being – or not being – a Washington resident has changed dramatically for the top slice of earners. For highly mobile clients who could plausibly establish residence in another state, the new levy raises fresh questions about where they live, work and own homes. For those who intend to stay, advisors will need to help them understand how the additional 9.9% on income above the threshold alters their long‑term after‑tax cash flow and philanthropy or investment plans.
Then there's the nature and sourcing of income. The law taxes income above $1 million, and for nonresidents, it applies to Washington‑source income such as wages earned in the state. That puts a premium on how compensation is structured – salary, bonus, equity and partnership draws – and how multi‑state earnings are documented and apportioned. Advisors serving executives, founders and professional partners with ties to Washington will need to monitor how state guidance develops and how it interacts with the existing capital‑gains tax and credits for taxes paid to other states.
(Article update on 04/06: Adjusted third paragraph to correct statement around Washington taxation of wages.)
Medicare scam, pandemic benefit theft, offshore tax evasion — federal prosecutors are casting a wide net.
Report finds that pension income acts as a financial lifeline for retirees facing late-life shocks and raises urgent questions about the DC-only future.
Nine-month electronic trading freeze and share lending program at the center of dismissed claim.
Meanwhile, Rossby Financial's leadership buildout rolls on with a new COO appointment as Balefire Wealth welcomes a distinguished retirement specialist to its national network.
With a smaller group of companies driving stock market performance, advisors must work more intentionally to manage concentration risks within client portfolios.
As technical expertise becomes increasingly commoditized, advisors who can integrate strategy, relationships, and specialized expertise into a cohesive client experience will define the next era of wealth management
Growth may get the headlines, but in my experience, longevity is earned through structure, culture, and discipline
