Statistical data shows an increase in the number of millionaires in Washington and a new tax targeting their wealth.

Washington's newest tax on millionaires won't be enforced until January 1, 2028. That may seem like a long way off, but if you want to take advantage of some key financial strategies to minimize its impact, you'll need to start planning now. It's important to understand who will be affected by this tax, how many people fall into that category, and where the revenue will ultimately come from.

Before we dive into the numbers, it's worth noting that these are estimates based on data from the IRS and the Washington Department of Revenue. While they are good-faith estimates, they should be taken with a grain of salt. Contrary to popular belief, the majority of taxpayers who will be affected by this tax are not billionaires.

In fact, the largest group of people who will be subject to the tax are those earning between $1 million and $2 million in adjusted gross income. This includes a range of individuals, from successful business owners to two-income households to those who have simply had a particularly profitable year. Using data from the IRS and projecting the distribution of incomes above the threshold, we can get a clearer picture of who will be paying this tax: - AGI Band - Share of Payers - Approximate Households - Average Tax Owed - $1M - $2M - ~65% - ~13,900 - ~$36,000 - $2M - $5M - ~26% - ~5,700 - ~$193,000 - $5M - $10M - ~6% - ~1,250 - ~$574,000 - $10M - $20M - ~2% - ~440 - ~$1.25M - $20M - $50M - ~0.8% - ~180 - ~$2.8M - $50M - $100M - ~0.2% As you can see, the majority of taxpayers who will be subject to this tax fall into the $1 million to $2 million AGI band.

This group makes up around 65% of the total number of payers, with an average tax owed of approximately $36,000. The next largest group is those earning between $2 million and $5 million, who make up 26% of payers and have an average tax owed of $193,000. While the headlines may make it seem like only the ultra-wealthy will be affected by this tax, the reality is that it will impact a wide range of individuals and households.

This is why it's important to start planning now and considering strategies such as changing the structure of your business, timing significant gains or sales, and even potentially changing your state of domicile. So, while January 1, 2028 may seem far off, it's never too early to start preparing for the new millionaires tax in Washington. Understanding who it will affect, how many people will be impacted, and where the revenue will ultimately come from can help you make informed decisions about your finances and minimize the impact of this new tax.

The state of Washington has recently announced a new tax for millionaires, but don't let the distant effective date of January 1, 2028 fool you. While it may seem like a long time away, some strategic planning may be necessary in order to avoid or minimize the impact of this tax. In fact, many of the most effective planning strategies require starting a year or two in advance, so it's important to understand who will be affected by this tax, how many people fall into that category, and where the revenue will actually come from.

Interestingly, the statistics surrounding this tax are more intriguing and useful than what may initially come to mind based on the headlines. It's worth noting that these estimates are based on Pareto distributions developed by the Anthropic Claude LLM, using data from 2022 IRS income distribution and estimates from the Washington Department of Revenue. While they are good-faith estimates, it's important to keep in mind that they are still just estimates.

Contrary to popular belief, the majority of people who will be paying this tax are not the ultra-wealthy billionaires that often come to mind. In fact, the largest group of taxpayers who will be affected are those earning between $1 million and $2 million of adjusted gross income. This group includes successful business owners, high earners, dual-income households, and individuals experiencing a particularly profitable year.

To get a better understanding of the distribution of incomes above the threshold, let's take a look at the data from 2022 IRS income distribution and model it accordingly: AGI band Share of payers Approx. households Average tax owed $1M – $2M ~65% ~13,900 ~$36,000 $2M – $5M ~26% ~5,700 ~$193,000 $5M – $10M ~6% ~1,250 ~$574,000 $10M – $20M ~2% ~440 ~$1.25M $20M – $50M ~0.8% ~180 ~$2.8M $50M – $100M ~0.2% As you can see, the majority of taxpayers fall into the $1 million to $2 million AGI bracket, making up approximately 65% of those who will be affected by the new tax. This group is estimated to include around 13,900 households, with an average tax owed of $36,000.

The next largest group is those earning between $2 million and $5 million, making up around 26% of payers and including approximately 5,700 households with an average tax owed of $193,000. The remaining income brackets represent smaller percentages of taxpayers, with the highest being those earning between $50 million and $100 million. However, even though these brackets include a smaller percentage of taxpayers, the amount of tax owed is significantly higher.

For example, those earning between $20 million and $50 million are estimated to include around 180 households with an average tax owed of $2.8 million. It's important to keep these numbers in mind and start planning accordingly in order to avoid any unexpected surprises when the new tax takes effect in 2028. By understanding who will be affected, how many people will be affected, and where the revenue will come from, individuals and businesses can make informed decisions and potentially minimize the impact of this new tax.