Quick answer: Washington now estimates that roughly 25,000 households will pay its 9.9% income tax, up from 21,000. The revision highlights a planning problem: incomes can rise across a threshold that does not keep pace. Under sections 314 and 316 of ESSB 6346, the $1,000,000 standard deduction receives no adjustment for tax year 2028. Our reading is that later adjustments occur every other year and capture only about one year of inflation. The statute contains conflicting language, discussed below, but taxpayers should not assume full annual inflation protection.
What changed: the Department used stronger income projections in the June 2026 forecast than in the November 2025 forecast. It told reporters that roughly 4,000 additional households were expected to cross $1 million by 2028. This is a revised forecast, not evidence that 4,000 households have already become taxpayers or that inflation alone caused the increase.
This post is part of our Complete Guide to Washington's New Income Tax.
01. Why the threshold matters
The Department attributes the additional households to stronger projected growth in wages, dividends, and other income. Analysts expect roughly 4,000 households currently below $1,000,000 to cross that line by the time the tax takes effect on January 1, 2028.
The original estimate already assumed income growth. The revision changes that forecast; it does not establish how much of the increase reflects inflation rather than real gains. Both the household count and revenue estimate could move again.
The planning issue persists: those households can cross the threshold without a corresponding increase in purchasing power. When income merely keeps pace with inflation but a tax threshold stays fixed, the result is bracket creep.
That makes the indexing language worth examining. “Indexed for inflation” sounds reassuring. The schedule and measuring period determine how much protection it actually provides.
02. What sections 314 and 316 actually provide
Section 314 sets the deduction: $1,000,000 per individual, or a combined $1,000,000 for spouses and state registered domestic partners regardless of whether they file jointly or separately. (The combined-deduction rule is a separate and substantial problem, addressed in our analysis of the marriage penalty.) Section 314 then states that the deduction "must be annually adjusted pursuant to section 316 of this act."
Section 316 complicates that promise. Its operative formula provides:
Beginning October 2029 and each October of an odd-numbered year thereafter, the department must adjust the standard deduction under section 314 of this act by multiplying the current standard deduction amount by one plus the percentage by which the most current consumer price index available on October 1st of the current year exceeds the consumer price index for the prior 12-month period, and rounding the result to the nearest $1,000.
Three features matter for planning.
The first tax year is unindexed. The tax applies beginning January 1, 2028. The first adjustment occurs in October 2029 and, under section 316(1), "takes effect for taxes due in the following calendar year" — that is, calendar 2030, which is the payment year for tax year 2029. Tax year 2028 therefore runs on a flat, unadjusted $1,000,000. Whatever nominal income growth occurs between now and the end of 2028 accrues entirely against a fixed threshold.
The better reading is biennial adjustment. The odd-year language produces adjustments in 2029, 2031, 2033, and so on. On our reading, the deduction changes for odd tax years and carries forward unchanged into even ones. But section 314 says “annually adjusted,” and section 316 requires publication of the adjusted amount by October 31 every year. Those provisions support a competing reading.
We give greater weight to section 316's specific adjustment schedule: annual publication can mean restating an unchanged deduction in even years. That reconciliation is plausible, but not inevitable. A contrary Department interpretation would be defensible, and a clarifying rule or corrective amendment could change the result. Until then, model the biennial reading and revisit it when guidance appears.
The measuring period may leave a gap. The formula uses roughly 12 months of inflation. If applied only every two years, it would leave part of the inflation between adjustments unaccounted for, with the shortfall compounding over time.
A simple illustration: Assume a $1,000,000 deduction and inflation of 3% in each of two consecutive years. Full protection over those two years would require a deduction of $1,060,900. One adjustment capturing only a single 3% increase would produce $1,030,000—a $30,900 shortfall. This illustrates the biennial reading; it is not a forecast of inflation or an official deduction amount.
Section 316 also specifies a national consumer price index for urban wage earners and clerical workers, without a geographic qualifier. Elsewhere in the same act, section 901 expressly specifies the Seattle-area index for the working families' tax credit. A national measure need not track local living costs.
One provision protects taxpayers: section 316 prohibits an adjustment that would reduce the deduction. Deflation therefore does not push the threshold downward.
03. What the Department actually revised
When Governor Ferguson signed ESSB 6346 in March 2026, the fiscal assumptions behind it were built on the November 2025 revenue forecast: roughly 21,000 households, $2.7 billion in the first budget cycle, and $6.9 billion in the following biennium.
The July figures appeared in the Office of Financial Management's fiscal impact statement on Initiative 645, the repeal measure on the November 3 ballot. Based on the June 2026 forecast, they put first-year collections at $3.108 billion. For 2029–31, the projection is $7.947 billion to the state general fund, or $8.324 billion including the fair start for kids account. The statement's five-year total is $11.4 billion.
The revenue figures appear in Table 1 of the fiscal impact statement. When this post was originally published, the Department's income tax page and The Facts on the Department's Costs to Implement Washington's Income Tax on Millionaires did not carry the revision; the latter still referred to “potentially 21,000 taxpayers.”
The 25,000-household estimate emerged in response to press questions. The fiscal impact statement instead refers to “approximately 30,000 taxpayers” in discussing administrative savings. It does not reconcile that figure with the household estimate; they may measure different populations.
The Economic and Revenue Forecast Council had not yet adopted the higher figures when this post was originally published. Its chief economist said the Council would review the Department's method and might reach a different estimate. The September forecast is the next checkpoint.
04. What the Department and the tax's defenders would say
The Department's strongest response is straightforward: these are forecasts, no collections data exists yet, and better economic assumptions produce higher estimates. That is a valid explanation of the revision.
A defender could also argue that a $1,000,000 threshold still excludes the overwhelming majority of households, even with imperfect indexing. The legislature's findings estimate that the tax reaches the wealthiest one-half of one percent. That is a policy defense of the threshold's reach; it does not answer whether the adjustment formula preserves purchasing power.
Brian Heywood, the repeal initiative's sponsor, raises a different objection: "They think nobody is going to leave because of the tax. They're wrong." If migration is underestimated, the 25,000-household estimate could be too high. The size of that effect remains a forecasting question.
The narrower point here is that the adjustment mechanism deserves scrutiny regardless of which forecast proves right. Under the biennial reading, a household's exposure can increase even when its purchasing power does not.
05. What to do with this
Model income growth against the threshold. A household below $1,000,000 today may cross it by 2028. Project wages, dividends, business income, and other relevant income, then apply the Washington-specific adjustments and deductions. Today's federal adjusted gross income alone does not establish the eventual tax bill.
Married couples should model the combined deduction, not the individual one. Two unmarried individuals each receive a $1,000,000 deduction. A married couple receives $1,000,000 between them, whether they file jointly or separately. For couples near the threshold this is the single largest driver of exposure, and it interacts badly with threshold drift.
Model indexing conservatively. Tax year 2028 uses the unadjusted deduction. Under the biennial reading, 2029 receives the first adjustment and 2030 carries it forward. Cliff planning should test that scenario and account for later guidance. Where legally available, accelerating income into 2027 is worth comparing with deferral, including the federal and other tax consequences.
Watch developments that change the rules. A revenue forecast does not change a client's liability. The outcome of Initiative 645, the constitutional challenge, and any amendment or guidance on indexing could affect planning. Revisit the Before-2028 playbook as those questions resolve.
Update, August 19, 2026. This post has been corrected. The 2029–31 biennial figure originally appeared as "roughly $8.3 billion" without specifying the accounts included; Table 1 of the fiscal impact statement shows $7.947 billion to the state general fund and $8.324 billion including the fair start for kids account. The post originally stated that the revised household count appears nowhere in the fiscal impact statement; the statement contains no household count, but it does refer to "approximately 30,000 taxpayers" in an administrative-savings context, which is now noted. Source links have been added throughout.
Authority and status. This analysis rests on chapter 238, Laws of 2026; see also the Final Bill Report. At original publication on August 19, 2026, no Department rule, interim guidance, or form interpreting these provisions had issued; the 2026 tax legislation page listed no income tax guidance. The advisory workgroup created by section 712 has initial and final report deadlines of December 15, 2026 and December 15, 2027. The indexing analysis above is a working interpretation, to be revisited as guidance develops.
This post is for educational purposes only and is not legal or tax advice. Consult a qualified attorney about your specific situation.
