Washington State Just Passed a Millionaire’s Tax. The Legal Fight Starts Now

Washington state has enacted a swath of new housing laws—including a 9.9% tax on household income above $1 million. The wealth tax is likely to face a legal challenge.

Gov. Bob Ferguson signed Senate Bill 6346, which takes effect in 2028. The bill, introduced in February, quickly moved through the state's Democratic-controlled legislature, passing the Senate 27-22 last month and the House 51-46 this month.

"Today we're taking a historic step forward to balance an unfair system," Ferguson said during a bill-signing ceremony Monday. He said the tax counteracted favorable tax treatment of wealthy people in federal law and that his state's tax system was regressive.

Washington expects the tax to impact 21,000 filers and generate $3 billion a year in tax revenue. The legislature included an inflation adjustment every two years. Ferguson said the new revenue would go toward a Working Families Tax Credit, plus more support for child care and education programs.

Similar wealth tax proposals have been considered in several states, most notably in California. That's led to some costly legal tangling as well as a purported exodus of wealthy people to other areas, such as Las Vegas.

In a statement posted to Facebook, the State Senate Republican Caucus called the bill a "dark day," but said legal challenges were ahead.

"The Governor and the majority of Legislative Democrats have put the far left and special interests ahead of the people of WA and our state constitution," it said.

Citizen Action Defense Fund said it would file a lawsuit to challenge the constitutionality of the new law. Former Washington Attorney General Rob McKenna will lead that effort.

What are Washington's new housing laws?

Ferguson also signed a package of seven bills aimed at housing policy. The most prominent of these, Senate Bill 6026, allows more housing in commercial areas. It's a priority for Ferguson and part of a recent trend of states loosening land restrictions to encourage more homebuilding.

“We must make it as easy as possible to plan, permit, and build housing to address the crisis," Ferguson said. "This bill removes barriers to clear the way for more housing all across Washington.”

The Puget Sound Regional Council found thousands of parcels in Washington's major cities that could allow for more housing.

Several other bills pave the way for additional kinds of housing to be built in the state. HB 1345 allows accessory dwelling units and creates protections for rural communities. HB 2266 creates standards for permitting permanent supportive housing and transitional housing.

Other bills in the package loosen government constraints. SB 6027 gives local governments more leeway to use tax revenue earmarked for affordable housing. SB 2418 streamlines permitting processes and aims to shorten review times. And SB 1974 aims to speed up the process of securing property through local land banks.

Landlords must disclose more about flood risk under the final measure, SB 6237.

The Realtor.com® state-by-state housing affordability report card gives Washington a C-. The state also recently passed the strongest-yet restrictions on private home listings.

Washington Realtors® supported the mixed-use development law, private listings ban, and ADU rules. But it opposed the wealth tax measure. Mary Hall-Drury, state government affairs director for the group, said it clarified that real estate sales held for 12 months won't be counted as income.