HB 2724

In Committee

House

Tax on millionaires

Establishing a tax on millionaires.

Introduced (completed)
2
Committee (current stage)
3
Floor Vote (not started)
4
Opposite Chamber (not started)
5
Governor (not started)
6
Signed (not started)

This status may be delayed. See Action History below for the latest updates.

How does a bill become law?

Introduced: The bill is filed and assigned a number.
Committee: A subject-matter committee holds hearings, takes public testimony, and decides whether to advance the bill.
Floor Vote: The full chamber (House or Senate) debates and votes on the bill.
Opposite Chamber: The bill repeats the committee and floor vote process in the other chamber.
Governor: The Governor reviews the bill and decides whether to sign or veto it.
Signed: The bill has been signed into law.

Introduced: February 3, 2026

Last Action: February 4, 2026

Status: H Finance

Companion Bill: #6346

View Bill Text (HTML)View Bill Text (PDF)

AI Analysis

This analysis was generated by AI and may contain errors. It is not legal advice. Always refer to the official bill text for authoritative information.

People & CommunitiesPeople-leaningCorporate & Wealthy Interests

This bill establishes a new 9.9% tax on individuals with Washington adjusted taxable income over $1 million, intended to fund K-12 education, health care, higher education, human services, and the expanded working families' tax credit. It also reduces taxes on consumers and small businesses by exempting essential hygiene products from sales tax and increasing B&O tax credits.

Imposes a 9.9% tax on individuals with Washington adjusted taxable income over $1 million (after a $1 million standard deduction).
Exempts long-term capital gains and losses from the tax base (but adds back Washington capital gains subject to the existing capital gains tax), and excludes sale of residential real property and qualified family-owned small businesses.
Creates a new 'working families' tax credit' expansion, increasing refundable credits for low-income households (up to $1,200 for families with three or more children).
Reduces sales and use taxes by exempting grooming and hygiene products (e.g., soap, shampoo, toothpaste) starting January 1, 2029.
Increases the business and occupation (B&O) tax credit for small businesses (up to $320 per month for qualifying businesses) and allows pass-through entities to elect entity-level taxation to avoid double taxation.
Requires high-income individuals to file returns and make estimated tax payments, with penalties for underpayment or noncompliance, and includes criminal penalties for tax evasion.

Who is affected

High-income individuals (millionaires) — High-income individuals (those with Washington adjusted gross income of $1 million or more) will owe a new 9.9% tax on their Washington taxable income, after a $1 million standard deduction and other modifications.
Low- and middle-income households — Low- and middle-income households will benefit from expanded access to the working families' tax credit, and will see sales tax eliminated on essential grooming and hygiene products starting in 2029.
Small businesses and pass-through entities — Small businesses and pass-through entities (e.g., S corporations, partnerships, LLCs) can elect to pay the new millionaires' tax at the entity level, avoiding double taxation, and benefit from increased business and occupation tax credits.
Public employees and retirees — Public employees and retirees will see their pensions subject to the new millionaires' tax if their annual income exceeds $1 million, but otherwise retain existing exemptions from state income tax.

Effective: January 1, 2028Fiscal impact: The bill is projected to generate approximately $3.5 billion over the 2026–2027 biennium, primarily from the new millionaires' tax, with funds dedicated to K-12 education, health care, higher education, human services, and the working families' tax credit.

Model: Intel/Qwen3-Coder-Next-int4-AutoRoundGenerated: Mar 19, 2026, 8:16 PM

Pro/Con Analysis

Stronger case for benefits

Potential Benefits (5)

The 9.9% tax on individuals with >$1M WA adjusted taxable income—after a $1M standard deduction—is projected to raise $3.5B over two years, dedicated to K-12 education, health care, higher education, human services, and expanded working families’ tax credit, directly strengthening public services that benefit all Washingtonians.
FinancialPeopleRef: Sec. 201 & 202
Expanding the working families’ tax credit to $1,200 for families with three or more children (up from $900) and indexing to inflation provides meaningful, refundable cash support to low-income working households, reducing net tax burden and improving economic security.
FinancialPeopleRef: Sec. 901
Exempting essential hygiene products (soap, shampoo, toothpaste, etc.) from sales tax starting in 2029 reduces out-of-pocket costs for everyday people, especially low-income households and families with children, who spend a higher share of income on these items.
FinancialPeopleRef: Sec. 903 & 904
The pass-through entity election and associated owner credit reduce double taxation for small businesses and family farms, improving cash flow and potentially supporting hiring and investment—particularly beneficial for sole proprietors and micro-businesses operating near the threshold.
Business & EmploymentPeopleRef: Sec. 206 & 502
Credits for Washington capital gains tax and B&O tax paid prevent double taxation of the same income, ensuring fairness for taxpayers and improving compliance, especially for small businesses and individuals with mixed business/investment income.
FinancialPeopleRef: Sec. 205 & 204

Potential Concerns (5)

The $1 million standard deduction means only the top 0.5% of households (those with >$1M WA adjusted taxable income) pay the new 9.9% tax, but high-income earners with complex income structures (e.g., large capital gains, out-of-state income) may structure affairs to reduce or avoid the tax, reducing revenue reliability.
FinancialPeopleRef: Sec. 309
Public pensions exceeding $1M annually become subject to the new tax, which could reduce net retirement income for high-earning public sector retirees (e.g., university professors, state agency executives), though most public retirees earn far less than $1M and remain exempt.
FinancialPeopleRef: Sec. 801–811 (amending pension exemption statutes)
Exempting grooming and hygiene products from sales tax provides modest savings ($15–$40/year) for low- and middle-income households, but the benefit is regressive in effect because higher-income households spend more in absolute dollars, and the policy does not address broader sales tax regressivity.
FinancialLean peopleRef: Sec. 903 & 904
The B&O tax credit increase (up to $320/month for qualifying businesses) is capped and phased out for larger firms; most small businesses will benefit, but the credit is not indexed for inflation and may not offset rising compliance or input costs.
Business & EmploymentLean peopleRef: Sec. 905
Allowing pass-through entities to elect entity-level taxation avoids double taxation, but the election is complex and may disproportionately benefit larger pass-throughs with professional tax staff, while very small sole proprietorships may lack resources to utilize it.
Business & EmploymentLean peopleRef: Sec. 502

Who Is Most Affected

High-income individuals (>$1M annual income)Negative Impact
High-income individuals (>$1M annual WA income) will pay the new 9.9% tax on income above $1M, but can use the standard deduction, capital gains exclusion, and pass-through election to reduce liability. Most affected are salaried executives, high-earning professionals, and retirees with large distributions—not just 'wealthy investors'.
Low- and middle-income householdsPositive Impact
Low- and middle-income households benefit from the expanded working families’ tax credit and sales tax exemption on hygiene products. These are refundable cash transfers and direct price relief, with the greatest relative impact on households earning <$75K/year.
Small businesses and pass-through entitiesMixed Impact
Small businesses and pass-through entities benefit from the increased B&O tax credit and the entity-level election, reducing compliance burden and double taxation. However, very small sole proprietorships may lack resources to optimize the election, limiting net benefit.
Public retireesMixed Impact
Public sector retirees earning over $1M annually (e.g., university professors, agency directors) will owe the new tax on the excess, while most public retirees earning under $1M remain exempt. This affects a narrow, high-earning subset of retirees.
State and local governmentsPositive Impact
State and local governments benefit from $3.5B in new dedicated revenue over two years to fund K-12, health care, higher education, and human services, supporting service levels and reducing future budget pressures—benefiting all residents through more stable public services.