Washington’s New Income Tax Sparks Debate Over ‘Largest Marriage Penalty’ in the U.S.
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Washington state is on the verge of enacting its first-ever state income tax, a sweeping proposal that would impose a 9.9% rate on income above $1 million annually. While billed by Democratic lawmakers as a “millionaire’s tax,” tax policy analysts warn it contains what may be the most significant “marriage penalty” in the nation, potentially impacting dual-earning couples with incomes far below the $1 million mark per person.
The Structure of Washington’s Proposed Tax
The legislation, passed by both the state House and Senate, awaits the governor’s signature. It establishes a flat 9.9% tax on all income exceeding $1 million for individuals, married couples filing jointly, and domestic partners. This threshold does not double for married couples, a key departure from standard practice in most states with high-income taxes.
“According to the statute, it doesn’t matter if you’re single or married, the exemption is $1 million,” said Joe Wallin, a Seattle-based attorney who advises tech founders and companies. “It should be called the half-millionaire tax.” His observation highlights a core criticism: two single individuals each earning $600,000 would owe no state income tax under the new law, but a married couple with the same combined $1.2 million income would face a tax bill on $200,000 of that income.
Why the Marriage Penalty Is So Extreme
A “marriage penalty” occurs when a tax system causes a married couple to pay more in total than two single filers with the same combined income. This is often mitigated by doubling tax bracket thresholds for joint filers. Washington’s proposed structure provides no such adjustment.
Jared Walczak, a senior fellow at the nonpartisan Tax Foundation, quantified the stark difference. “In the most extreme case, if you had two single filers who both earned exactly $1 million, they would owe $0, but if they married and earned the same income, they would owe $99,000,” he said. “Washington’s marriage penalty will be the largest by far.”
For comparison, high-tax states like California and New York apply marriage penalties only in their top brackets. In New York, the thresholds for the standard brackets double for joint filers, and the special millionaire surtax rates (10.3% and 10.9%) only apply to very high incomes but use the same threshold for singles and couples. In California, most brackets double for joint filers, except for the 1% Mental Health Services Act levy, which applies above $1 million for both filing statuses. The penalty differential in those states amounts to a 1% rate difference in California and a 0.65% difference in New York—orders of magnitude smaller than Washington’s potential 9.9% swing.
Political Rationale and Expert Criticism
State Senator Noel Frame, who leads fiscal policy for Senate Democrats, defended the structure by linking it to the state’s existing capital gains excise tax, approved by voters in 2021. That tax also uses a $1 million household threshold. “Having consistency in the deduction helps with both administration of the tax by our Department of Revenue and simplicity for taxpayers,” she said in a statement. She noted that since the tax only applies to income above $1 million, many high-earning couples with combined incomes just over that line “still won’t see much of a tax impact.”
Critics argue this underestimates the real-world impact on Washington’s economy, which is heavily reliant on dual-income, highly skilled households, particularly in the tech sector centered on companies like Amazon
