Key takeaways
- Washington’s wealthiest households, just 22,000 of them and under 1% of the state’s total population, pay this tax, and most live in King County.
- This tax helps fix Washington state’s tax code where low- and middle-income families currently pay a bigger share of their income than the rich do.
- Thanks to the Millionaires Tax, a Seattle mom of two could save more than $2,500 a year, and nearly $30,000 more if funding allows her to access child care subsidies.
- Most small business owners will not pay this tax; many, like a local salon owner, will save thousands of dollars.
The Millionaires Tax, paid by only 22,000 of Washington’s wealthiest households or less than 1% of Washingtonians, will make a meaningful difference in the lives of families and small businesses struggling to make ends meet. The largest concentration of Millionaires Tax payers resides in the King County region, as illustrated in this interactive map(opens in new tab). In Legislative District 48 (Bellevue and Redmond), 2,371 households are subject to the Millionaires Tax, earning an average of $4.2 million per year — over $350,000 per month.
Right now, low- to middle-income households are paying a larger percentage of their income in taxes than the richest among us. This upside-down tax code not only furthers inequity, it also creates annual deficits in Washington’s budget. The Millionaires Tax starts to right these wrongs(opens in new tab) and provides sustained funding to essential public services. How will the typical Washingtonian household and business benefit from the new revenue? The following scenarios demonstrate meaningful savings from the Millionaires Tax:
Example #1) Working mom with two kids
A Seattle mom with two kids, one toddler in diapers and one school-aged child, making an annual salary of $65,000, could save more than $2,500 per year. The Millionaires Tax supports this family in three ways:
- First, sales tax elimination on diapers, baby wipes, over-the-counter medications, and hygiene products creates an estimated annual savings of $203.
- Second, the school-age child will be able to access free school breakfast and lunch for most of the year, saving the household $1,366, not to mention the time and effort that goes into preparing food for the child.
- Finally, the parent is now eligible for the Working Families Tax Credit, thanks to the expansion funded by the Millionaires Tax. She will receive $995 back after she files her taxes.
In addition to giving this mom $2,500 a year of financial padding, Millionaires Tax revenue will also maintain funding for government services that deliver substantial benefits. Five percent of revenue from the tax will go to the Fair Start for Kids account, which funnels directly into Washington’s child care subsidy: Working Connections Child Care. Lack of designated funding has meant delayed expansions to this essential program. If expanded to previously promised levels, this revenue could lower this parent’s child care cost to a monthly copayment of $165, saving her nearly $30,000 a year.
More than half of revenue from the Millionaires Tax will go to Washington’s general fund — our state’s affordability workhorse. This funding is urgently needed as Washington faces another budget deficit and federal cuts to critical programs under H.R. 1. The state is projected to lose at least $3 billion in Medicaid funding.
Scenario 1 — Working Mother, Two Children
Toddler (age 2, still in diapers) + school-age child (age 7). Household income ~$65,000. Living in Seattle.
| Expense / Benefit | Cost Per Month | Cost Per Year | Savings Per Year |
|---|---|---|---|
| Diapers — toddler* | $100.00 | $1,200.00 | $126.60 |
| Baby wipes | $15.00 | $180.00 | $18.99 |
| OTC medications — both children (fever reducers, antihistamines, pain relief) | $25.00 | $300.00 | $31.65 |
| Hygiene products — shampoo, soap, toothpaste, sunscreen | $20.00 | $240.00 | $25.32 |
| Free school breakfast and lunch — school-age child (180 days) | — | $1,366.20 | $1,366.20 |
| Working Families Tax Credit — new expansion | — | — | $995.00 |
| Estimated new annual benefits | $2,563.76 | ||
| Working Connections Child Care (lowers monthly child care costs to $165 copay) | $2,510.00 | $30,120.00 | $28,140.00 |
| Estimated annual benefits with new and retained programs | $30,703.76 | ||
| Savings as a percent of income | 47.2% | ||
| Notes: *This calculation assumes the mom is paying the 10.55% sales tax in Seattle. Sources: National Diaper Bank Network(opens in new tab), WA Dept. of Revenue local sales tax rates(opens in new tab), USDA Food Plans: Cost of Food Monthly Report(opens in new tab).School breakfast/lunch savings: $80.50 (weekly cost of food for a 7-year-old) × 2/3 (two of three daily meals provided at school) ÷ 7 × 180 school days.Child care savings based on the cost of infant care at the 75th percentile in Seattle (2025 Self-Sufficiency Standard) and the DCYF Working Connections Child Care copay calculation table(opens in new tab); see also HCA children’s health coverage info(opens in new tab). | |||
Example #2) Small business owners
Small business owners are unlikely to see any tax increases from the Millionaires Tax. This is largely because the tax would only apply to income for the owners, not gross revenues. In fact, according to the Institute for Taxation and Economic Policy (ITEP), only 1.8 percent of tax filers with pass-through income are millionaires who would pay the new tax, and many in this small group are not primarily engaged in operating small businesses.
Many small business owners will, in fact, see significant tax breaks from the B&O tax reduction and exemption provisions included in the Millionaires Tax. For example, a hair salon owner in Chelan County grossing $300,000 a year currently pays an estimated $4,500 in annual B&O taxes and receives zero small business tax credits — their tax bill sits just above the current eligibility for the small business tax credit, leaving them excluded from current small business tax relief. The Millionaires Tax raises the monthly credit maximum from $160 to $375, meaning that starting in 2029, the salon owner goes from paying $4,500 a year in B&O taxes to owing nothing (a $4,500 annual savings) — representing 1.8% of gross revenue.
Scenario 2 — Hair Salon Owner
$300,000 gross revenue | B&O classification: Services & Other Activities | $100,000 net income
| Item | Per Month | Per Year |
|---|---|---|
| Current B&O tax owed ($300,000 × 1.5%) | $375 | $4,500 |
| Current small business B&O credit | $0 | $0 |
| B&O owed today | $375 | $4,500 |
| New monthly credit under Millionaires Tax ($375/mo) | −$375 | −$4,500 |
| B&O owed after reform | $0 | $0 |
| Annual savings | — | $4,500 |
| Savings as % of gross revenue | — | 1.5% |
| Notes: Sources: WA DOR Small Business B&O Credit table(opens in new tab), WA DOR B&O tax classifications(opens in new tab). Services & Other Activities is taxed at 1.5% for businesses with prior-year gross income under $1,000,000 (rising to 1.75% between $1M–$4.99M and 2.1% at $5M+, effective Oct. 1, 2025). | ||
The Economic Opportunity Institute believes in creating an economy that works for everyone, not just the 1%. The Millionaires Tax adds critical revenue to our state budget and starts to rebalance our upside-down tax code by providing significant relief for low-and middle-income earners and small businesses. These examples offer snapshots of tangible ways that this policy will put money back in the pockets of Washingtonian households and small businesses.