What does ‘millionaires tax’ mean for regular WA families? Here’s what it does
Washington’s controversial income tax on high earners is now law after Gov. Bob Ferguson signed the legislation late last month.
Advocates have nicknamed the measure the “millionaires tax.” It imposes a 9.9% levy on household income exceeding $1 million a year, with supporters saying that it will also extend much-needed tax relief to working Washingtonians.
Under Senate Bill 6346, the first tax collections won’t come until 2029. Senate Democrats estimate the tax will rake in roughly $3.5 billion annually. Most of the revenue will go to the state’s general fund, which pays for things like health care, K-12 education, human services and higher education.
Critics argue that the new tax will spur well-off residents and innovators to move, ultimately hurting the state’s economy. Advocates counter that it will fund crucial services and better support Washington communities equitably and sustainably.
Ferguson said at the March 30 bill signing that the state is taking a step toward rebalancing its regressive tax code, under which the wealthiest Washingtonians pay a “far smaller percentage of their income” than non-rich families.
“That’s not fair, and that’s not right,” he said.
Rep. Travis Couture, the House Republican budget lead, argued that the new law won’t help residents as much as advocates contend.
“When you take a closer look at the numbers being used to sell this new unconstitutional state income tax, the ‘savings’ being advertised don’t reflect reality,” the Allyn lawmaker said in an email.
What relief does SB 6346 offer working families, small businesses?
Among those seeing gains from SB 6346: households that were not previously eligible for the Working Families Tax Credit (WFTC), according to an FAQ posted by the Senate Democratic Caucus (SDC).
WFTC gives working people a tax refund of between $335 and $1,330. The new income tax will work to broaden eligibility for the credit to another 460,000 households — up from about 350,000 households.
Under the law, WFTC is extended to seniors aged 65 and older and young adults aged 18 to 24, the SDC reports. It also expands income eligibility to families below or at Washington’s “need standard,” a sort of threshold denoting the monthly income that families of a certain size would need to make ends meet.
According to the Washington State Budget & Policy Center, an economic justice-focused policy and research organization, the bump in WFTC income eligibility means that a single parent with two children earning some $80,000 a year can now qualify for about a $995 cash hike — “enough to cover music lessons, an unexpected hospital bill, or six months of car insurance.” Before, that parent would have earned too much to be eligible.
Republicans have backed a WFTC expansion independently of the income tax, Couture said, adding that it could be funded via other approaches.
Under SB 6346, the business and occupation (B&O) tax small business tax credit more than doubles, according to SDC’s FAQ. So, if a small business has gross receipts of less than $300,000, they won’t be on the hook for the B&O tax, and those with gross receipts reaching $600,000 will get the small business tax credit, as of 2028.
The law’s “intent” language also vows to offer free school meals to every Washington public school student, meaning an additional 272,000 kids, the FAQ notes.
“This puts money back in the pockets of families and helps make sure that kids are ready to learn,” Ferguson said at the March 30 signing.
Couture said that free school meals aren’t guaranteed or binding in the law, and that many schoolchildren currently receive them.
Democrats have stated that the tax will only apply to about 20,000 households, or less than 1% of the state’s richest households.
Senate Majority Leader Jamie Pedersen, a Seattle Democrat who sponsored the bill, said that at the same time, about 8 million people will reap financial benefits.
The bill eliminates sales taxes for over-the-counter medicine, diapers and grooming and hygiene products beginning in 2029. In one example, parents buying cough syrup for their sick kid won’t have to pay tax on that anymore, Pedersen said.
“Big picture is: Anyone who goes to the grocery store is going to benefit from the bill,” he said.
Nicollette Roe, a Tacoma parent of three and member of the grassroots group MomsRising, said she spends at least $120 on diapers per month. She’s looking forward to not paying sales taxes on diapers and other essential items that she buys every week.
Plus, Roe said, her co-parent owns a screen-printing business in Tacoma, so she was happy to see that the bill included support for small businesses.
Where the state spends money shows its values, she said.
“For me, it re-instills the faith of: OK, we do value families. We do value children and parents, we do value making our state’s tax code fair,” Roe said. “We do value small businesses. We do want them to thrive.”
Examples of who could benefit from SB 6346
Annie Kucklick, policy and research associate with the Economic Opportunity Institute (EOI), a Seattle-based think tank that fights for progressive revenue, said benefits from the income tax depend on the person. But she did break down three ways that she thinks the bill will be a boon for Washingtonians.
In the first bucket: families who will get help from the expansion of the Working Families Tax Credit, Kucklick said. The second bucket would be those who will save money thanks to the sales tax exemption for diapers, hygiene products and over-the-counter meds. The final bucket? Small business owners.
Kucklick said the tax will mean relief for working households with small children and for those not currently eligible for the WFTC.
“We’re really excited about that possibility,” she said, “and we want to stay focused on how this will tangibly increase affordability for typical households in Washington.”
The Economic Opportunity Institute also crafted scenarios of who’d win under the bill.
In one example, a Seattle working mom making $65,000 annually with a school-age kid and toddler could save more than $200 a year because she won’t be charged sales taxes on items like diapers, hygiene products and over-the-counter medications, according to EOI.
The organization says that universal free school meals would also ensure that the family annually saves over $1,300 in food costs. The Working Families Tax Credit expansion, meanwhile, puts another $995 back into mom’s pocket.
That family’s yearly savings add up to roughly $2,500, EOI wrote in a tax-scenarios sheet sent to McClatchy. Primary sources informing EOI’s analysis included the National Diaper Bank Network and, for the school-meal component, the U.S. Department of Agriculture.
EOI also argued that the law helps to preserve eligibility for Apple Health for Kids and the Working Connections Child Care (WCCC) program amid federal and state funding cuts. Kucklick noted that the income tax on millionaires dedicates 5% of revenue starting in 2029 to early learning and child care programs, and that it will help shore up the general fund, offsetting federal health-care reductions. This, EOI says, could lead to significant continued savings for that family.
Couture said that the new law didn’t create those two programs, nor is their eligibility guaranteed by it.
“In some cases, like Medicaid coverage for children, those benefits are already required and would continue regardless of this policy,” he said. “Calling those savings attributable to the income tax is misleading.”
Couture added that after removing what isn’t formally assured in the law and what already exists, the direct tax relief “is relatively minuscule.” This comes after Democratic lawmakers last year passed the largest tax hikes in state history, many of which translate to higher costs for working Washingtonians, he said.
In another EOI example, certain small business owners could see notable tax breaks from the new law’s B&O tax reduction.
Take this scenario: The owner of a hair salon grossing $300,000 annually today shells out $4,500 in yearly B&O taxes while receiving no B&O credit, EOI says. This business person’s tax bill “sits just above the current phase-out ceiling, leaving them excluded from current small business tax relief.”
SB 6346 spikes the monthly tax-credit maximum to $375, up from $160, EOI continued. So the salon owner, beginning in 2029, would go from owing $4,500 in B&O taxes annually to paying nothing.
EOI’s hypothetical hair salon owner takes home $100,000 before taxes. They must cover their own health insurance and payroll taxes since they’re self-employed, meaning they’ll ultimately make less than a W2 worker earning $100,000.
“This emphasizes the point that the vast majority of small businesses and pass-through entities will not be affected by the Millionaires Tax,” EOI wrote in the tax-scenarios sheet.
Couture argued that this “best-case” small-business scenario may apply in limited instances, but that it highlights a narrow situation that won’t be true for most. He said he owns a cabinet shop with fewer than 10 employees, operating at a scale that’s typical for family-run ventures, that won’t see any relief under the bill while continuing to take in climbing costs.
Whether the tax takes effect is in the hands of the courts. It’s the subject of an expected legal challenge. Last week opponents filed suit against the law, arguing that it runs afoul of state Supreme Court precedent and that it’s unconstitutional.
“It’s great,” Pedersen told the Washington State Standard last week. “We will now have that robust argument.”
This story was originally published April 14, 2026 at 5:00 AM with the headline "What does ‘millionaires tax’ mean for regular WA families? Here’s what it does."
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