By Joe Wallin | The Startup Law Blog
Update, October 2, 2026: The September 25 ERFC forecast has been released and revises projected individual income-tax receipts upward. The March fiscal note analyzed below is a historical snapshot, not the latest forecast. See the Initiative 645 tracker for subsequent developments.
Washington’s official revenue estimate for the new 9.9% income tax assumes affected taxpayers do not reduce their taxable income in response to the tax.
That does not mean the forecast is wrong. It means the forecast contains an important behavioral assumption that readers should understand. Under ESSB 6346 (Chapter 238, Laws of 2026), the tax applies beginning January 1, 2028, at 9.9% of Washington taxable income, with a $1 million standard deduction under §314 (indexed under §316). Only individuals are subject to the tax.
The enrolled Department of Revenue score models that base without a behavioral reduction in taxable income. Separately, the same note applies compliance assumptions and an AGI adjustment for reduced IRS enforcement. Those are different knobs from the behavioral-response assumption.
A concentrated base, by design
The $1 million deduction is ordinary statute, not a constitutional floor. The Legislature can amend it. Spouses and state-registered domestic partners share one combined $1 million deduction regardless of filing status. That design concentrates the tax on a relatively small set of high-AGI households whose income often includes capital gains, equity events, and other lumpy items.
A tax that hits a thin, variable slice of the income distribution can meet, beat, or miss a forecast. Direction is not predetermined. Concentration is. That is the forecast risk that matters for budgeting—and for anyone modeling exit timing under Washington’s income-tax rules.
What the enrolled score actually says
Revenue comparisons need a bill version, a date, a fiscal or tax year, and a measure of receipts. Gross income-tax collections are not the same as the net effect of a bill that also cuts sales and B&O taxes and expands credits.
The primary official score for the enrolled bill is fiscal-note package 77653 (bill version 6346 E S SB PL / ESSB 6346 as passed). The Department of Revenue’s individual note was prepared March 25, 2026. Figures are labeled Estimated Cash Receipts (not accrual).
DOR’s income-tax line (new “Tax on Income” source) shows:
| Period | Income-tax cash receipts (DOR) |
|---|---|
| 2027–29 biennium | $2.698 billion |
| 2029–31 biennium | $6.899 billion |
Those are gross income-tax figures before other tax changes in the same bill. DOR’s net cash-receipt impact for the whole package (income tax plus sales/B&O and related account effects) is approximately −$46.5 million in 2025–27, $2.301 billion in 2027–29, and $5.343 billion in 2029–31.
OFM’s separate Initiative 960 ten-year projection for ESSB 6346.PL (govdelivery notice dated April 28, 2026) breaks the income-tax line by fiscal year, including $2.698 billion in FY 2029, $3.732 billion in FY 2030, and $3.167 billion in FY 2031—cash timing that reflects first returns due in 2029 and the later start of estimated payments.
Earlier House-amended package 77469 (AMH FIN H3724.1; DOR preparation March 3, 2026) scored a different bill version: income-tax cash receipts of $2.548 billion (2027–29) and $7.215 billion (2029–31), plus a dedicated public-defense transfer line that did not survive in the same form. Use 77469 only as a dated comparison, not as the final-law forecast.
The behavioral assumption
Both the enrolled DOR note and the March House-amended note state, in substance: in response to the new tax, affected taxpayers do not reduce taxable income.
That is not a claim that collection will be perfect. The enrolled note separately assumes 90% compliance for tax year 2028 and 95% thereafter, and applies a 4.71% AGI haircut drawn from an ITEP analysis of reduced IRS enforcement. The behavioral sentence is narrower: the score does not model taxpayers shrinking the base through timing, investment choices, entity structure, or residence changes.
Whether that assumption holds is an empirical question. It is not resolved by asserting that “income taxes always miss.”
What out-of-state evidence does—and does not—show
California’s Legislative Analyst’s Office has warned that revenues tied to high-income taxpayers and capital markets can miss estimates in either direction. Its 2016 Proposition 30 discussions support planning for volatility—not a universal shortfall rule.
Young and Varner’s 2011 New Jersey study found a small overall migration response to the 2004 top-rate increase and substantial additional revenue, with limits in capturing income manipulation. Useful as a migration-nuance cite; it does not translate into a fixed percentage haircut for Washington.
Nor does shifting income into a pass-through automatically avoid the personal tax. Under ESSB 6346, the elective pass-through entity tax and owner-level credit are scored as roughly revenue-neutral. Model under Washington’s capital-gains coordination rules, not another state’s shorthand.
The fiscal note is not necessarily wrong because it does not model a behavioral reduction in taxable income. But readers should understand what the forecast represents: an estimate under an explicit assumption about taxpayer behavior. Once actual returns under the new tax become available, Washington will have evidence with which to test that assumption.
Legal risk is a separate track. A court decision can change what the state may collect; that is not the same problem as an economic forecast miss under an operative tax. For the constitutional analysis under Quinn and Culliton, see the separate essay. Ballot developments that could repeal the tax before 2028 are tracked on the Initiative 645 page.
This post is general information, not legal advice. Talk to your advisor about your specific situation.
Sources
- ESSB 6346.SL (Chapter 238, Laws of 2026) — https://lawfilesext.leg.wa.gov/biennium/2025-26/Pdf/Bills/Session%20Laws/Senate/6346-S.SL.pdf
- OFM fiscal-note package 77653 (6346 E S SB PL / enrolled) — https://fnspublic.ofm.wa.gov/FNSPublicSearch/GetPDF?packageID=77653 (DOR cash receipts; behavioral & compliance assumptions; agency prep 2026-03-25)
- OFM I-960 ten-year projection notice for ESSB 6346.PL — https://content.govdelivery.com/accounts/WAGOV/bulletins/414ef34 (dated 2026-04-28 PT)
- OFM fiscal-note package 77469 (6346-S.E AMH FIN H3724.1; House-amended comparison) — https://fnspublic.ofm.wa.gov/FNSPublicSearch/GetPDF?packageID=77469
- Bill summary SB 6346 (2025–26) — https://app.leg.wa.gov/BillSummary/?BillNumber=6346&Year=2026
- Young & Varner (2011), National Tax Journal — https://doi.org/10.17310/ntj.2011.2.02 (author PDF: https://cristobalyoung.com/wp-content/uploads/2018/11/NTJ-millionaire-migration-state-taxation.pdf)
- CA LAO, Administration’s January 2016 Proposition 30 Estimates — https://lao.ca.gov/LAOEconTax/Article/Detail/174
- CA LAO, May Revision 2016: Proposition 30 Estimates — https://lao.ca.gov/LAOEconTax/Article/Detail/187
