This bill (House Bill 2738, H-3582.2) would create a new Washington income tax chapter codified as Title 82A RCW and make many amendments to existing RCW provisions. It imposes, beginning January 1, 2028, a 9.90% tax on an individual’s Washington taxable income (with caption thresholds of individuals over $1,000,000 and households over $2,000,000 stated in the bill caption), but the entire act is contingent on voter approval of a referenced constitutional amendment authorizing an income tax. The bill establishes definitions, detailed adjustments to federal adjusted gross income to compute Washington base and Washington taxable income, a $1,000,000 per‑individual standard deduction ($2,000,000 combined for spouses or domestic partners) with CPI indexation rules, a $100,000 cap on deductible charitable contributions per individual, and numerous allocation and apportionment rules for residents, nonresidents, pass‑through income, professional athletes, and student athletes. The bill creates a new pass‑through entity tax election (effective January 1, 2028) under which an electing entity pays tax at 9.90% on electing entity taxable income, and provides owner credits for tax paid by the entity. It authorizes credits to avoid double taxation for amounts paid under chapters 82.04 or 82.16 RCW, for Washington capital gains taxes under chapter 82.87 RCW, and for taxes paid to other jurisdictions (including reciprocal agreements) with rules limiting credits to tax due and allowing limited carrybacks/forwards. Revenue allocation rules require 7% of taxes collected go to a local government public defense funding stabilization account created in Sec. 711, with the remainder to the state general fund to fund specified sales and use tax relief, an expanded working families’ tax credit, and business and occupation tax relief. The department of revenue is given administration, rulemaking, reporting, and enforcement authority, and the bill adopts extensive procedural rules for estimated payments, electronic filing and payment, reporting, returns and audits. The bill changes penalties and procedures: knowingly attempting to evade the tax or knowingly failing to account or pay collected tax is made a class C felony; other knowing failures to pay or report are gross misdemeanors; civil penalties and interest provisions are specified and tied to existing chapter 82.32 RCW with additional penalty rules for late filing, underpayment, and fraud. It also amends numerous statutes governing retirement benefits to state that pensions and related benefits are generally exempt from most state and local tax and from seizure, while explicitly excepting taxes under the new Title 82A RCW and allowing specified child support and other court‑ordered withholdings. The bill also amends sales and use tax law to add exemptions (for specified “grooming and hygiene products” effective January 1, 2029), modifies sales tax rates and dedicated allocations (including additional taxes on car rentals, peer‑to‑peer car sharing, motor vehicles, and recreational vessels), and creates a temporary surcharge rule and related exemptions that expires December 31, 2028. Several important provisions are missing or incomplete in the extracted text. The precise statutory implementation of the caption household threshold and any definition or mechanism for “household” taxation is not shown. Sections and cross‑references cited in the act (including full texts of sections 306–309, 401–407, 502, 711, 901, 903–906, 909, and others) are not included here, and parts of some sections are truncated. The contingency mechanics for the constitutional amendment, the act’s stated expiration date(s), and some detailed distribution and program provisions are therefore unclear from the available extracts. If a court invalidates section 201 the act declares itself null and void; otherwise the act generally takes effect January 1, 2028, with certain sections effective on other specified dates.

If voters approve the required constitutional amendment, Washington would start charging a new state income tax effective January 1, 2028 that will meaningfully increase annual taxes for people with very high Washington taxable income (the bill’s caption targets individuals above $1,000,000 and households above $2,000,000). Most affected will be high‑income individuals and owners of pass‑through businesses: individuals would face a 9.90% tax on Washington taxable income, and pass‑through entities can elect to pay a similar 9.90% entity tax to shift liability to the entity level; both paths create new filing, estimated payment, and documentation obligations and give the Department of Revenue large new administrative duties and rulemaking responsibilities. The state would direct 7% of receipts into a new local public defense stabilization account distributed to cities and counties each quarter, and use the remainder to expand a working families tax credit, provide targeted sales and use tax relief (including an exemption for certain grooming and hygiene products beginning 2029), and fund business tax relief, while also building in credits to avoid double taxation for existing state business and capital gains taxes. Local governments, low‑ and middle‑income households receiving the expanded working families credit, and public defense systems would likely see increased and more stable funding, but high earners and owners of pass‑through entities would face higher cash tax costs and added compliance burdens (new reporting, offsets, apportionment rules for nonresidents and professional athletes, and criminal penalties for evasion). The package also creates refundable and nonrefundable credits, large standard deductions and caps that limit tax exposure for many filers, and several implementation details (how households are defined, the exact contingency mechanics tied to the constitutional amendment, and omitted cross‑references) are not present in the extracted text, so the timing, precise scope of household treatment, and some administration rules remain uncertain and could affect final taxpayer liabilities or lead to litigation that might void the act.