A new “Millionaires’ Tax” law has been signed to make life cheaper for lower- and middle-income people in Washington. The rule says people earning under $1 million will not pay state income tax, so they keep all their income. Wealthier residents earning above $1 million will now pay more tax under this new system. Earlier, Washington was one of nine U.S. states that did not have a personal income tax.

On Monday, Governor Bob Ferguson signed the bill into law, as per the news release via The Sun. The plan is also called the “Robin Hood” bill because it shifts tax burden to richer residents. People earning over $1 million will pay a 9.9% tax only on income above that amount. Homes and property assets are not included in this tax calculation.

Tax starts in 2028

The law is part of Senate Bill 6346 and will affect less than 0.5% of residents. Around 20,000 to 30,000 households are expected to be impacted. The new tax will officially start in 2028. The government says the money will help make life more affordable for families and small businesses. In the first year, about 41.3% of collected money will go back to residents. In the second year, this share will rise to 47.3%.

$3 billion yearly revenue

The tax is expected to generate more than $3 billion every year. The money will remove sales tax on essentials like baby diapers. It will also provide free school meals for all K-12 students. The plan includes cutting taxes for most businesses in the state. Funds will expand the Working Families Tax Credit program. The credit gives payments between $300 and $1,300 to eligible households, as stated by The Sun. About 460,000 more low- and middle-income families will receive these payments.

More help for families

The program is modeled after the federal Earned Income Tax Credit. It returns part of the sales tax paid by lower-income residents each year. Single parent Athena Dunn said the credit helped her stay in school. She added she will graduate with her bachelor’s degree this June. The U.S. states without personal income tax include Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming.

Revenue from the bill will also fund education, healthcare, and other public services. Supporters say the law will help reduce the state’s budget deficit. They also believe it will ease financial pressure on middle-class families and small businesses, as stated by The Sun. Some Republican lawmakers oppose the plan and call it unconstitutional. Critics warn the tax could push wealthy residents to leave the state.

FAQs

Q1. Who will pay the new Millionaires’ Tax in Washington?

Only residents earning more than $1 million a year will pay a 9.9% tax on income above that level.

Q2. Do people earning under $1 million pay state income tax?

No, residents earning below $1 million will not pay state income tax under the new rule.