ARTICLE | February 6, 2026

What the Proposal Targets

At a high level, the tax would apply only to income above a high threshold, commonly discussed as $1 million. The proposed tax rate on income above this mark would be a flat 9.9%. The current proposal would combine married couples joint incomes for purposes of this tax.

The key questions are which types of income are included and when they are recognized. Depending on the final language, wages, bonuses, and certain investment income may be covered, while other categories could be excluded or treated differently. One-time liquidity events and other capital gain events could be treated differently than recurring annual income under this framework.

Who Should Pay Attention

Those most likely to encounter the tax may include business owners with concentrated pass-through income, executives with high salaries and bonuses, and investors realizing significant gains in a single year.

The Constitutional Backdrop

Any discussion of an income tax in Washington inevitably leads back to the state constitution.

For decades, going all the way back to a state supreme court ruling in 1933, Washington’s constitution has been interpreted as prohibiting a graduated personal income tax. That interpretation has shaped tax policy and explains why similar proposals have faced both voter resistance and legal scrutiny. As a result, the current proposal would almost certainly be challenged in court if enacted.
From a planning perspective, this legal uncertainty matters. It can affect timelines and enforcement.

Timing and the 2028 Effective Date

As drafted, the tax would apply to income earned beginning January 1, 2028, with first filings and payments due in 2029.

That date provides a useful planning horizon, but it should be viewed as conditional. It assumes passage, no prolonged legal delays, and no significant changes to the law.

How to Prepare

This is not a moment for rushed decisions. It is a moment for thoughtful planning and staying informed as to the status of this tax legislation. If legislation is enacted, then identifying potential high-income or liquidity events over the next several years, modeling different tax outcomes, and coordinating early with tax, legal, and wealth advisors would be advised.

A Final Perspective

The proposed Washington millionaire’s income tax is significant, but it is not an immediate trigger for drastic action. It is a signal to stay informed and plan with intention.

Contact your LG Advisor today for more information, or to setup a consultation use the form below.