Why It Matters
Washington state will impose its first income tax targeting high earners, a move that could influence tax policy debates in neighboring Idaho and other western states. The measure takes effect in 2028 and represents a significant shift in Washington’s revenue structure.
What Happened
Governor Bob Ferguson signed legislation Monday imposing a 9.9 percent income tax on household earnings above one million dollars annually. The tax applies only to income exceeding the million-dollar threshold.
The law takes effect January 1, 2028, with the state beginning tax collection in 2029. The final version of the bill includes expanded tax breaks for small businesses and low-income families.
Ferguson described the signing as making history. Representative April Berg, chair of the House Finance Committee, said revenue from the tax would fund schools, healthcare, higher education, and public safety.
By the Numbers
• 9.9% tax rate on earnings above $1 million
• Effective date: January 1, 2028
• First tax collection: 2029
• Applies only to income exceeding the $1 million threshold
• Includes offsetting tax breaks for small businesses and lower earners
Zoom Out
Washington currently has no state income tax, relying instead on sales taxes and business levies. The measure divided Democrats and Republicans during the legislative session, with supporters arguing the state’s tax system places disproportionate burdens on lower earners.
The move contrasts sharply with Idaho’s flat income tax structure and could intensify regional competition for high-income residents and businesses. Several states in the Mountain West have actively courted businesses and individuals fleeing higher-tax jurisdictions in recent years.
What’s Next
The law faces a two-year implementation period before taking effect. Lawmakers will likely monitor revenue projections and potential legal challenges as the 2028 deadline approaches. Washington officials expect the tax to generate substantial revenue for state programs beginning in 2029.
About the Author
