Inside Wealth: 'Marriage penalty' in Washington state's new millionaire tax stirs debate
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Washington state's first-ever income tax would impose a 9.9% tax on income of more than $1 million a year.
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Washington state's proposed new income tax includes the largest "marriage penalty" in the nation, placing higher taxes on certain couples who file jointly, according to tax experts. The state House of Representatives approved Washington's first-ever income tax, imposing a 9.9% tax on income of more than $1 million a year. Having also passed the state Senate, it will now go to the governor, who plans to sign it into law. Washington is currently one of only nine states with no state income tax, and the new rate would be the one of the highest in the nation. While Democratic legislators call it "the millionaire's tax," some taxpayers making far less as individuals will also be subject to the tax thanks to a steep marriage penalty. According to the legislation, the $1 million threshold for the tax applies to individuals, couples and domestic partners. So if a married couple each makes $600,000, their combined income of $1.2 million would trigger the tax. "According to the statute, it doesn't matter if you're single or married, the exemption is $1 million," said Joe Wallin, an attorney who advises companies and tech founders in Washington. "It should be called the half-millionaire tax." While marriage penalties are not uncommon in state or federal tax codes, Washington's stands out for its size. Most states use two income thresholds for tax brackets, one for individuals and another for couples that's usually twice as high. Some high-tax states, like California and New York, only apply marriage penalties for the highest earners, according to the Tax Foundation, a nonprofit tax policy think tank. In New York, for instance, the income thresholds for each bracket are doubled for joint-filers through 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 millionaire surtax rates of 10.3% and 10.9% — relevant to those making above $5 million and $25 million in income, respectively — the income thresholds ...
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