Just as the US was getting close to having its 10th state with no income tax, it lost one… sorta. At the end of March, Washington State passed a new “Millionaire’s Tax” affecting the ~20K residents who earn an adjusted gross income of $1M or more per year.

• Washington State’s constitution expressly prohibits an income tax, but the legislature has characterized the tax like an “excise tax” on the privilege of being a millionaire.
• Only income above $1M is taxed at the 9.9% rate — it will supposedly raise $3B per year for education and expanded tax credits for lower-earning families.

Up for debate: The new tax is expected to go into effect in Jan. 2028, but it’s far from settled  — challenges have already been filed on constitutional grounds. Proponents worry that it could clear the way for income taxes on lower earners or a wealth tax. It’s the second tax targeting the state’s wealthiest residents, following the passing of a Capital Gains Tax that faced similar legal hurdles — it ultimately was allowed by the state’s Supreme Court, allowing a 7% tax on long-term gains above $250K per year.