Washington’s new income tax starts at 9.9% on household income above $1 million. If you’re reading this blog, you probably already know the details of ESSB 6346. The question I keep hearing from clients isn’t about how the tax works today — it’s about where it’s headed.
The short answer: every state that has introduced an income tax has eventually raised the rate, lowered the threshold, or both. There is no exception to this pattern in modern American tax history. Washington will not be the first.
(For the mechanics of ESSB 6346, see Washington’s New Income Tax: What Founders, Investors, Athletes, and High Earners Need to Know. For the full tax landscape, see Washington State Taxes.)
The Pattern: Rate Creep and Threshold Creep
“Rate creep” is when the tax rate goes up. “Threshold creep” is when the income level at which the tax kicks in goes down — either explicitly through legislation, or silently through inflation eroding a nominally fixed threshold. Both are nearly universal in states with income taxes, and they tend to happen together.
The mechanism is predictable. A state introduces an income tax at a modest rate, targeting only the highest earners. The public accepts it because it doesn’t affect them. Over time, the legislature faces budget pressure — a recession, an infrastructure need, a new entitlement — and the path of least resistance is to adjust the tax that’s already on the books rather than create a new one. The rate inches up. The threshold inches down. The tax that was sold as affecting “only millionaires” gradually reaches further into the middle class.
This isn’t speculation. It’s the documented history of nearly every state income tax in the country.
What Other States Show Us
New Jersey is the closest analogue to Washington. New Jersey introduced its income tax in 1976 with a top rate of 2.5% on income above $20,000. Today the top rate is 10.75% on income above $1 million — a fourfold increase in the rate, with the threshold only recently adjusted upward after decades of bracket creep. For most of the tax’s history, the top rate applied at income levels that inflation had pushed well into the middle class.
Connecticut introduced its income tax in 1991 with a flat 4.5% rate. It was sold as a deficit-reduction measure that would stabilize the budget. Within two years, the rate was raised. Today Connecticut has a graduated structure with a top rate of 6.99% and a surcharge that pushes the effective rate above 7.5% for high earners. The “temporary” tax became permanent and grew.
Illinois has a constitutionally mandated flat tax, currently at 4.95%. It was introduced at 2.5% in 1969. The rate has been raised multiple times, including a “temporary” increase in 2011 from 3% to 5% that was partially rolled back and then effectively restored. Illinois voters rejected a 2020 ballot measure that would have allowed graduated rates — but the flat rate has still nearly doubled from its original level.
California enacted its “millionaire tax” (Proposition 30) in 2012 as a “temporary” four-year surcharge. It was extended by voters in 2016 (Proposition 55) through 2030. The top marginal rate in California is now 13.3%, the highest in the nation. What was introduced as a temporary measure targeting the very wealthy is now a permanent fixture that shows no sign of sunset.
Oregon introduced its income tax in 1930 at a top rate of 5%. Today Oregon’s top rate is 9.9% — coincidentally the same rate Washington chose — on income above $125,000 (single) or $250,000 (joint). Oregon’s threshold is a fraction of Washington’s current $1 million, which illustrates what decades of threshold creep look like in practice.
The pattern across these states is remarkably consistent: initial rates roughly double within 20–30 years, and thresholds either fail to keep pace with inflation or are explicitly lowered.
Washington’s Specific Fiscal Dynamics
Several features of Washington’s budget and political landscape make rate and threshold creep particularly likely here.
Revenue volatility. Washington has historically relied on sales tax and B&O tax revenue, both of which are volatile and decline sharply in recessions. The income tax was adopted in part to diversify the revenue base. But an income tax concentrated on high earners is itself volatile — capital gains realizations, stock option exercises, and business sale proceeds fluctuate dramatically with market cycles. The first recession after 2028 will produce an income tax revenue shortfall, and the legislature will face pressure to broaden the base (lower the threshold) to stabilize collections.
The $1 million threshold is not indexed for inflation. Section 316 of ESSB 6346 does provide for inflation indexing of the standard deduction, but only beginning in tax year 2030. Between 2028 and 2030, the $1 million threshold is fixed. And even after indexing begins, the adjustment is based on the consumer price index — which historically understates income growth for high earners. Over time, more taxpayers will cross the $1 million line simply through nominal income growth, even if their real purchasing power hasn’t changed. This is threshold creep by design.
Spending commitments. Washington has significant unfunded obligations — transportation infrastructure, education funding mandates (McCleary), housing and homelessness programs, and public employee pension liabilities. The income tax revenue is not earmarked for specific programs, which means it flows into the general fund and becomes part of the baseline budget. Once programs are funded with income tax revenue, reducing the tax requires finding replacement revenue — which almost never happens.
Political math. The income tax affects a very small number of Washington residents — probably fewer than 20,000 households. The remaining several million voters have no direct incentive to oppose rate increases or threshold decreases. The political cost of raising the tax on a small, wealthy minority is low relative to the political cost of cutting popular programs or raising broadly-felt taxes like the sales tax.
What the Legislature Already Tried This Session
The ink on ESSB 6346 was barely dry before legislators introduced bills to expand its reach. During the 2026 session, SB 6229 and HB 2292 proposed adding back the federal QSBS exclusion — which would have meant that founders selling qualified small business stock would owe Washington’s 9.9% tax even though they owed no federal tax on the gain. Those bills died in committee, but they signal the direction of legislative thinking.
The QSBS add-back is a preview of coming attractions. The legislature identified a category of income that’s currently excluded and moved to bring it into the tax base. Future sessions will likely target other exclusions, deductions, and thresholds. Each adjustment will be framed as “closing a loophole” or “ensuring fairness” — the same framing used in every state that has broadened its income tax base over time.
(For more on the QSBS add-back proposals, see Does QSBS Avoid Washington’s 9.9% Tax? and SB 6229 / HB 2292 Analysis.)
The Migration Factor
Washington’s rate creep trajectory will be influenced by one variable that most other states didn’t face: competition from no-tax neighbors. Nevada, Wyoming, and Texas have no state income tax. Oregon’s top rate matches Washington’s but kicks in at a far lower threshold. Alaska has no income tax.
High earners have options, and some will leave. The revenue impact of migration creates a paradox: the more people leave, the less revenue the tax generates, which increases pressure to lower the threshold to capture more taxpayers — which causes more migration. This dynamic played out in New Jersey, Connecticut, and California, and there’s no reason to think Washington will be different.
The counterargument is that Washington’s tech economy, quality of life, and proximity to headquarters (Amazon, Microsoft, Boeing) create enough “stickiness” to limit outmigration. That’s probably true for many people. But at the margin — for the founder deciding where to incorporate, the executive choosing between the Seattle and Austin office, the retiree weighing Washington against Nevada — the tax changes the calculus. And it’s the marginal decisions that accumulate over time.
(For a detailed comparison, see Washington vs. California: A Tax Comparison for Founders and Investors and Washington vs. Oregon vs. Nevada.)
A Realistic Timeline
Based on the patterns from other states and Washington’s specific dynamics, here’s what I think is a reasonable projection:
2028–2030: The tax takes effect. Initial compliance and revenue collection. The Department of Revenue issues guidance and regulations. Minor technical corrections in the 2029 and 2030 legislative sessions. No major rate or threshold changes yet — the political commitment to “only millionaires” is still fresh.
2031–2034: The first significant economic downturn after implementation (or a major spending initiative) creates a revenue gap. The legislature considers its options. Raising the rate from 9.9% to 12–13% is proposed, likely with a new bracket for income above $5 million. The threshold may be nominally maintained at $1 million but inflation will have reduced its real value by 10–15% by this point.
2035–2040: A second bracket is added — perhaps 5–7% on income above $500,000 or $250,000. The tax now affects tens of thousands of households rather than the original few thousand. The original “millionaire tax” label no longer describes the actual tax. Rate increases at the top bracket push the rate to 12–15%.
This timeline could accelerate if Washington faces a severe recession, a court ruling that invalidates other revenue sources, or a major new spending mandate. It could slow if the economy remains strong and revenue exceeds projections — but even in good times, legislators tend to increase spending to match revenue rather than building reserves.
What This Means for Planning
The practical implication is that planning around a 9.9% rate and a $1 million threshold is planning for the short term. If you’re making decisions with a 10–20 year horizon — estate plans, retirement account structures, business entity choices, where to live — you should assume a higher rate and a lower threshold.
This reinforces the value of the pre-2028 planning window. Every dollar of income you can accelerate into 2026 or 2027 avoids not just today’s 9.9% rate, but whatever higher rate may apply in the future. Roth conversions, stock option exercises, asset sales, and business restructuring all become more valuable when you account for the likelihood that the tax will be worse in 10 years than it is at launch.
(For specific planning strategies, see Washington’s New Tax Reality: Why 2028 Changes Everything for High Earners.)
The Bottom Line
Washington’s 9.9% income tax on income above $1 million is a starting point, not an endpoint. Every state that has enacted an income tax has eventually increased it. The fiscal pressures, political incentives, and structural dynamics in Washington all point in the same direction. The only question is timing.
Plan accordingly.
Concerned about where Washington’s tax rates are headed? Book a 20-minute intro call to discuss how to structure your affairs for both today’s tax and tomorrow’s. Also see: Washington State Taxes Guide | Income Tax Planning Guide for High Earners
