Millionaires’ Income Tax on $1 Million or More Lacks Safe Harbor Protection

Washington lawmakers are considering a proposed millionaires’ income tax that lacks first-year payment protection for people who become liable unexpectedly. The proposal covers households earning $1 million or more.

The design issue remains unresolved. As of October 7, 2026, lawmakers and an advisory group were still discussing how to handle taxpayers who owed no Washington income tax in the previous year.

Bea Nahon, a CPA and principal at Kirkland-based Sweeney Conrad, raised the issue at the advisory group’s October 5, 2026 meeting. Her concern focused on taxpayers with no prior-year state filing obligation.

“I don’t have a safe harbor,” Nahon said.

She compared the gap with federal estimated-tax rules. Nahon also said people could owe the tax intermittently, filing one year, having no filing requirement for two years, then becoming liable again.

A tax-free prior year leaves no state payment benchmark

Estimated-tax protections generally depend on payments reaching a required share of a liability. That measure can be based on either the current-year bill or the prior year’s tax.

Withholding and quarterly payments count toward those amounts. But someone with no Washington income tax due in the previous year has no state tax figure to use as a prior-year benchmark.

Paying the full balance when filing may not address the gap. A penalty could still apply if required installments were not paid during the year.

A one-time income event can create a bill before filing

A taxpayer might have no Washington filing obligation one year, then receive a large bonus or capital gain the next. A business-sale payment, stock transaction or other income event could also push household earnings over the proposal’s threshold.

The tax could be paid with the return and still leave an estimated-payment penalty risk. The issue is when payments arrive, not only whether the eventual bill is paid.

The proposal could also reach non-Washington residents through income covered by the tax. They, too, could become subject to it unexpectedly.

Anyone facing a large one-time income event should not assume that paying by the filing deadline eliminates a penalty. That protection would need to appear in the enacted law or later guidance.

Lawmakers have time to set a baseline, but an exemption could shift the bill

Rep. Noel Frame, D-Seattle, said lawmakers had considered how the tax would first operate but had not fully addressed people who become subject to it after owing nothing the prior year. The first payments are due in April 2029.

Frame said lawmakers have roughly a year after implementation begins to establish a prior-year baseline. He cited lessons from putting Washington’s capital-gains tax into effect.

A first-year exemption from estimated payments could create a different problem. Frame warned that taxpayers might then have to pay 90% or 100% of an estimated liability in advance the following year.

Some could later discover they do not qualify. They would have to wait for a refund.