On November 3, voters in Washington will decide whether the state tax on income over $1 million should be repealed [Initiative No. IP26-645].
Earlier this year, legislation was enacted that created a state income tax on income over $1 million, effective January 1, 2028 (S.B. 6346, L. 2026). The rate is set at 9.9%.
Potential Impact on Payroll?
If the tax remains in place, payroll professionals may receive questions about how the tax will be paid.
The tax is likely to be paid by individuals when they file their personal income tax return, which the state would have to develop, since Washington has no state income tax. The law does not require employer withholding, but it is still not clear how the tax would be collected.
The tax would start with federal adjusted gross income, which is then modified by several other elements, including capital gains and losses.
State Withholding Requirements
Currently, Washington has no state income tax that requires withholding. However, employers are required to report employees’ wages and hours and pay premiums every quarter for paid family and medical leave insurance and long-term care insurance.
Interested in more state and local payroll coverage? PayrollOrg’s PayState Update eNewsletter is perfect for you.
Lia Coniglio, Esq., is Managing Editor of PayState Update and Senior Manager of State Payroll Information Resources for PayrollOrg.
