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Washington state’s proposed new income tax includes the nation’s largest “marriage penalty,” imposing higher taxes on some couples who file jointly, tax experts say.
The state House of Representatives approved the first-ever income tax in Washington, imposing a 9.9 percent tax on income above $1 million a year. Having also passed the state Senate, the bill will now go to the governor, who plans to sign it into law. Washington is currently one of nine states without an income tax, and the new rate would be one of the highest in the country.
While Democratic lawmakers call it the “millionaires’ tax,” some taxpayers earning much less as individuals will also be subject to the tax because of a steep marriage penalty. Under the law, the $1 million tax threshold applies to individuals, couples and domestic partners. So if a married couple each earns $600,000, their combined income of $1.2 million would trigger the tax.
“By law, it doesn’t matter if you’re single or married, the exemption is $1 million,” said Joe Wallin, a lawyer who advises tech companies and founders in Washington. “It should be called the half-millionaire tax.”
Although marriage penalties are not uncommon in state or federal tax codes, Washington’s is notable for its breadth. Most states use two income thresholds for tax brackets, one for individuals and another for couples, usually twice as high. Some high-tax states, such as California and New York, only apply marriage penalties to higher earners, according to the Tax Foundation, a nonprofit tax policy think tank.
In New York, for example, the income thresholds for each bracket are doubled for joint filers thanks to the 9.65% rate, which applies to income above $1,077,550 for single filers and $2,155,350 for joint filers. But for the special millionaires surtax rates of 10.3% and 10.9% — applicable to those earning more than $5 million and $25 million in income, respectively — the income thresholds are the same for joint and single filers.
In California, bracket thresholds double for joint filers, with the exception of the 1% Mental Health Services Act, which applies to incomes above $1 million for both single and married filers.
Jared Walczak, a senior fellow at the Tax Foundation, said marriage penalties in New York and California are relatively small, amounting to a tax rate difference of 1 percent in California and 0.65 percent in New York. In Washington state, however, the difference can be as much as 9.9 percent.
“In the most extreme case, if you had two single filers who both made exactly $1 million, they would owe nothing, but if they got married and made the same income, they would owe $99,000,” he said. “The sanction for marriage in Washington will be by far the heaviest.”
The state’s Democratic lawmakers and governor have not specifically addressed concerns about sanctioning marriage. State Sen. Noel Frame, who leads budget policy for state Senate Democrats, said the standard $1 million per household deduction is the same structure used for the state’s capital gains excise tax, passed by voters in 2021.
“As we work to make the two separate tax structures work together, consistency in deductions facilitates both the administration of the tax by our Department of Revenue and simplicity for taxpayers,” she said in a statement. “Since the tax does not apply to incomes below $1 million, many high-income couples still won’t see much of a tax impact even if their combined incomes are more than $1 million.”
Yet in a state that depends on highly skilled, well-paid workers at companies like Amazon, Microsoft and other tech companies, many dual-income families could be hit by the tax, analysts say.
“There’s this idea that we’re just taxing rich people who own yachts,” said Brian Heywood, a hedge fund manager in Washington who founded Let’s Go Washington, a conservative political action committee opposed to the tax. “They haven’t been honest about who they’re looking for and what the numbers are.”
Wallin joked that some dual-income couples might even consider a legal divorce for tax reasons, even if they want to actually stay married. “The tax savings alone would more than pay for the costs of a divorce lawyer,” he said.
The marriage penalty is the latest controversy surrounding Washington’s new income tax, which has become a beacon in the Democratic Party’s push to raise taxes on the wealthy. From Rhode Island to New York to Virginia to Michigan, Democrats in state legislatures are seeking to counter rising inequality and cuts in federal health care funding by raising taxes on top earners. California is considering a ballot initiative to create the state’s first wealth tax, taxing the entire net worth of the state’s billionaires.
Washington will be a closely watched experiment in the debate over the impact of higher taxes on wealth migration.
Two of the state’s most famous entrepreneurs — Amazon’s Jeff Bezos and Starbucks’ Howard Schultz — have already left the state for Florida, which has no income tax. Bezos announced his move to Miami in 2023, after the state’s new 7% capital gains tax takes effect. He sold more than $9 billion worth of Amazon stock in 2024, saving more than $600 million in capital gains taxes he would have had to pay to Washington state.
Schultz recently announced he had left Seattle after 44 years. He said his family office would also move to Miami, but his foundation would continue to operate in Seattle.
“We hope that Washington will continue to be a great place for business and entrepreneurship to thrive, creating critical opportunities for the people of Seattle and the surrounding area,” he wrote.