Is Washington's millionaires tax volatile? $1M+ filers' total AGI fell 34-45% in single years; no reserve

Five-second answer

Claim we investigated

The income Washington's millionaires tax relies on has fallen by a third to a half in a single year, several times the state's worst general-fund drop, and the law sets aside no reserve.

True. IRS data show $1M+ filers' total AGI fell 45% in 2001, 34% in 2022; ESSB 6346 creates no reserve. IRS state income data for 1997-2023, Washington revenue records from DOR and the Economic and Revenue Forecast Council, the full text of ESSB 6346, and cross-state evidence from Pew, California's Legislative Analyst and Connecticut's fiscal office agree that top-end income swings far more than broad taxes and that the new law builds in no buffer.

Quote or cite this fact-check

FactHub rates the claim “The income Washington's millionaires tax relies on has fallen by a third to a half in a single year, several times the state's worst general-fund drop, and the law sets aside no reserve” True (high confidence): IRS data show $1M+ filers' total AGI fell 45% in 2001, 34% in 2022; ESSB 6346 creates no reserve. Reviewed October 22, 2026. https://facthub.org/n/article/wa-millionaires-tax-volatility/5

One-minute summary

What the evidence establishes

Established. The AGI of Washington returns with income of $1 million or more fell 44.6% in 2001 and 34.0% in 2022 (IRS); it also rose by more than half in 1998, 1999, 2012 and 2021.
Established. The state's general fund revenue fell 9.6% in its worst year (FY2009); retail sales tax fell 12.5% that year.
Established. Year-to-year swings in the total AGI of $1M+ filers (standard deviation about 33%) are about six times those of the sales or B&O tax (about 5-6%) and about seven times total general fund revenue's (4.8%).
Established. ESSB 6346 sends the revenue to the general fund with no reserve, spending cap or threshold for above-normal receipts; only the constitution's 1% transfer to the rainy-day fund applies.
Context. The law moves most long-term capital gains to the existing capital gains tax through a credit, so a 2022-style market drop would hit the income tax much less than a 2001-style drop in wages and stock options.
Context. Volatility cuts both ways: top-end taxes, including Washington's capital gains tax, have often beaten their estimates.
Not shown. Whether a future downturn will leave a budget hole depends on the next downturn and on decisions lawmakers have not made yet.

Important context: ESSB 6346 (2026) taxes household income above $1 million at 9.9%, starting with 2028 income; first payments arrive in April 2029, and I-645 on the November 2026 ballot would repeal it. Volatility means how much a revenue source rises and falls from year to year. This check compares the income the new tax would reach, reported to the IRS by Washington returns with adjusted gross income of $1 million or more, with the taxes the state already collects, and reads the law for any reserve, spending cap or diversion of above-normal receipts. Dollar figures for future downturns are FactHub illustrations from historical drops, not forecasts. The law leaves long-term capital gains mainly to Washington's separate capital gains tax, so the income tax by itself is somewhat less volatile than total $1 million-plus income.

The evidence

The conclusion rests on the combined record. Expand each item to see its role and limitations.

Independence note: This check uses 6 methods across 13 institutions and 1 country or international grouping.

Evidence map
Method	Institution / country	Year(s)	What it shows	Key limitation	Primary links
IRS Statistics of Income state tables for Washington returns with AGI of $1 million or more, 1997-2023, compiled with year-over-year changes in a FactHub dataset	Internal Revenue Service, FactHub United States	1997, 2001, 2013, 2021, 2022, 2023	Washington $1M+ AGI fell from $22.3 billion to $12.4 billion in 2001 (-44.6%), from $29.2 billion to $22.0 billion in 2013 (-24.6%), and from $100.0 billion to $66.0 billion in 2022 (-34.0%). Across the 17 years with data, the standard deviation of annual changes is about 33%. A 9.9% tax on income above $1 million would have fallen 49% in 2001 and 38% in 2022 (our illustration).	The IRS publishes no Washington $1 million class for 2002-2009, so the 2001-02 and 2007-09 downturns are covered only partly (2001) or through U.S. data. The 1997-2001 files are a different IRS product from later years. Returns are not households, and the $1 million line is not adjusted for inflation.	FactHub
Washington general fund revenue by source (DOR) and in total (ERFC), fiscal years 1998-2025, compared with national evidence on tax volatility	Washington Department of Revenue, Economic and Revenue Forecast Council, Pew Charitable Trusts, Rockefeller Institute of Government United States	2001, 2002, 2009, 2010, 2024	Total general fund revenue fell 9.6% in FY2009 and 4.1% in FY2010; retail sales tax fell 12.5% and 5.9%. In the dot-com bust, when Washington's $1M+ income fell 45%, sales tax revenue dipped 1.2% and B&O revenue 2.4% in FY2002. Nationally, Pew scores personal income taxes at 10.1 on its 15-year volatility measure, and a Rockefeller Institute study for Pew links the deepest income tax drops to capital gains.	Revenue figures mix DOR accounting-basis and ERFC cash-basis data, and include the effects of tax-law changes. The comparison sets tax-year income against fiscal-year revenue, so it compares the size of swings, not their timing. Pew measures personal income taxes as a whole, not top-end income alone.	FactHub Pew Charitable Trusts Donald Boyd, Rockefeller Institute of Government (for Pew)
Reading of the enacted session law (ch. 238, Laws of 2026) and the state constitution's rainy-day fund rules	Washington State Legislature United States	2026	Section 202 deposits all revenue in the general fund to pay for the bill's tax relief, the expanded Working Families Tax Credit and 'public investments' in schools, health care and higher education, with 5% of the previous year's collections sent to the Fair Start for Kids account. The act contains no reserve account, no cap on spending the revenue and no threshold like the capital gains tax's $500 million split. The constitution moves 1% of all general state revenues to the Budget Stabilization Account each year, which would include this tax.	A statute's silence does not stop a future Legislature from creating a reserve; it shows only what voters are deciding on. The constitution's general 1% transfer still applies to this revenue.	Washington State Legislature Washington State Legislature
Reading of sections 302 and 205 of ESSB 6346 and comparison of the back-cast with and without capital gains	Washington State Legislature, FactHub United States	2001, 2022, 2026	The law removes long-term capital gains from the income tax base, adds back only gains taxed under the capital gains tax, and credits the capital gains tax paid. So the income tax leans mostly on wages, business income and other non-gain income. Removing net capital gains, the illustrative tax falls 15% in 2022 instead of 38%, but still 42% in 2001, when Washington $1M+ wages fell from $10.2 billion to $5.6 billion as stock-option income collapsed.	The variant without capital gains also removes short-term gains, which stay in the income tax's base, so it overstates how much the design shields the tax. The two taxes' revenues go to different accounts, so the general fund's exposure and the state's total exposure differ.	Washington State Legislature FactHub
FactHub illustration applying historical drops in the $1M+ income base to the official revenue estimates, compared with ERFC's reserve projections and the fiscal note's committed costs	FactHub, Economic and Revenue Forecast Council, Office of Financial Management, Washington Research Council United States	2026, 2029, 2030, 2031	Against ERFC's September 2026 estimate (about $4.7 billion a year in FY2030-31) or the fiscal note's $3.7 billion for FY2030, a 2001-style year would cut the income tax by about $1.6-2.3 billion and a 2022-style year by about $0.5-1.8 billion, depending on how much capital gains exposure remains. ERFC projects total reserves of about $1.9 billion at the end of 2025-27, after lawmakers moved $880 million out of the rainy-day fund. About 30% of the tax's revenue is committed to tax relief and the Working Families Tax Credit, about $1 billion a year, which does not fall when revenue does. ERFC itself raised its first-year estimate by 30% in one quarter.	Not a forecast: a future downturn may be larger, smaller or of a different kind, and the baselines are themselves estimates. The official estimate is static, assuming no behavioral response. Reserves and commitments will change before 2029.	FactHub Washington Economic and Revenue Forecast Council Washington Economic and Revenue Forecast Council Washington Research Council (Emily Makings) Office of Financial Management (Department of Revenue estimate) Washington Economic and Revenue Forecast Council
Official fiscal-office reports from Connecticut, California and Massachusetts	Connecticut Office of Fiscal Analysis, Connecticut Office of Legislative Research, Yale Tobin Center, California Legislative Analyst's Office, Massachusetts Taxpayers Foundation United States	2017, 2023, 2024, 2025	Connecticut's April 2017 income tax collections fell $300 million short, partly because the top 100 taxpayers paid about $200 million less, leaving a deficit larger than its reserve. Its 2017 volatility cap now sends estimated and final income tax payments above a threshold to the rainy-day fund and then to pensions: $8.6 billion over 2018-2023. California's Legislative Analyst calls the state near the top in revenue volatility but below average in reserves. Massachusetts caps spending from its 4% surtax below expected collections.	Other states' tax structures differ from Washington's, and their shortfalls had several causes, including spending decisions. The Massachusetts Taxpayers Foundation is business-supported. Connecticut's cap was exceeded every year since 2018, so it has worked as forced saving more than as two-way smoothing.	Connecticut Office of Fiscal Analysis Connecticut Office of Legislative Research Yale Tobin Center for Economic Policy California Legislative Analyst's Office Massachusetts Taxpayers Foundation

1. IRS data: total AGI of Washington's $1M+ filers fell 45% in 2001 and 34% in 2022 IRS Statistics of Income state tables for Washington returns with AGI of $1 million or more, 1997-2023, compiled with year-over-year changes in a FactHub dataset

Washington $1M+ AGI fell from $22.3 billion to $12.4 billion in 2001 (-44.6%), from $29.2 billion to $22.0 billion in 2013 (-24.6%), and from $100.0 billion to $66.0 billion in 2022 (-34.0%). Across the 17 years with data, the standard deviation of annual changes is about 33%. A 9.9% tax on income above $1 million would have fallen 49% in 2001 and 38% in 2022 (our illustration).

Limit: The IRS publishes no Washington $1 million class for 2002-2009, so the 2001-02 and 2007-09 downturns are covered only partly (2001) or through U.S. data. The 1997-2001 files are a different IRS product from later years. Returns are not households, and the $1 million line is not adjusted for inflation.

Verify: Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast (dataset version 1)

Washington $1M+ AGI changed -44.6% (2001), -24.6% (2013) and -34.0% (2022); general fund revenue's worst year was -9.6% (FY2009). FactHub
Illustrative 9.9% tax: -49% (2001) and -38% (2022) with all income; -42% and -15% without net capital gains (our illustration). FactHub · Qualifies
Standard deviation of annual changes: $1M+ AGI 32.9%, retail sales tax 5.4%, B&O 5.8%, total general fund 4.8%. FactHub

The income of Washington's $1M+ filers fell 45% in 2001 and 34% in 2022, while the state's sales tax and general fund revenue fell at most 12.5% and 9.6% in a year (FY2009). Source: IRS Statistics of Income, Washington DOR, ERFC; FactHub dataset. View source chart

2. Washington's existing taxes swing far less Washington general fund revenue by source (DOR) and in total (ERFC), fiscal years 1998-2025, compared with national evidence on tax volatility

Total general fund revenue fell 9.6% in FY2009 and 4.1% in FY2010; retail sales tax fell 12.5% and 5.9%. In the dot-com bust, when Washington's $1M+ income fell 45%, sales tax revenue dipped 1.2% and B&O revenue 2.4% in FY2002. Nationally, Pew scores personal income taxes at 10.1 on its 15-year volatility measure, and a Rockefeller Institute study for Pew links the deepest income tax drops to capital gains.

Limit: Revenue figures mix DOR accounting-basis and ERFC cash-basis data, and include the effects of tax-law changes. The comparison sets tax-year income against fiscal-year revenue, so it compares the size of swings, not their timing. Pew measures personal income taxes as a whole, not top-end income alone.

Verify: Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast (dataset version 1) Fiscal 50: Tax Revenue Volatility (updated April 9, 2026) State Tax Revenue Volatility and Its Impact on State Governments (June 30, 2022)

Standard deviation of annual changes: $1M+ AGI 32.9%, retail sales tax 5.4%, B&O 5.8%, total general fund 4.8%. FactHub
Nationally, personal income taxes score 10.1 on Pew's 15-year volatility measure, with wide variation by state. Pew Charitable Trusts
The deepest income tax declines in recessions accompanied large capital gains declines. Donald Boyd, Rockefeller Institute of Government (for Pew)
The evidence that capital gains drive volatility differs by state and episode. Donald Boyd, Rockefeller Institute of Government (for Pew) · Qualifies

3. The law builds in no reserve, cap or threshold Reading of the enacted session law (ch. 238, Laws of 2026) and the state constitution's rainy-day fund rules

Section 202 deposits all revenue in the general fund to pay for the bill's tax relief, the expanded Working Families Tax Credit and 'public investments' in schools, health care and higher education, with 5% of the previous year's collections sent to the Fair Start for Kids account. The act contains no reserve account, no cap on spending the revenue and no threshold like the capital gains tax's $500 million split. The constitution moves 1% of all general state revenues to the Budget Stabilization Account each year, which would include this tax.

Limit: A statute's silence does not stop a future Legislature from creating a reserve; it shows only what voters are deciding on. The constitution's general 1% transfer still applies to this revenue.

Verify: ESSB 6346, Chapter 238, Laws of 2026 (session law) Washington State Constitution, Article VII, Section 12 (Budget Stabilization Account)

All revenue goes to the general fund to fund the bill's tax relief, the WFTC and public investments; no reserve is created. Washington State Legislature
Five percent of the previous fiscal year's collections goes to the Fair Start for Kids account. Washington State Legislature · Qualifies
One percent of general state revenues, which would include this tax, goes to the rainy-day fund each year. Washington State Legislature · Qualifies

4. What the law already does: capital gains go to the capital gains tax Reading of sections 302 and 205 of ESSB 6346 and comparison of the back-cast with and without capital gains

The law removes long-term capital gains from the income tax base, adds back only gains taxed under the capital gains tax, and credits the capital gains tax paid. So the income tax leans mostly on wages, business income and other non-gain income. Removing net capital gains, the illustrative tax falls 15% in 2022 instead of 38%, but still 42% in 2001, when Washington $1M+ wages fell from $10.2 billion to $5.6 billion as stock-option income collapsed.

Limit: The variant without capital gains also removes short-term gains, which stay in the income tax's base, so it overstates how much the design shields the tax. The two taxes' revenues go to different accounts, so the general fund's exposure and the state's total exposure differ.

Verify: ESSB 6346, Chapter 238, Laws of 2026 (session law) Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast (dataset version 1)

Long-term gains are replaced in the base by gains taxed under the capital gains tax. Washington State Legislature · Qualifies
Capital gains tax paid is credited against the income tax, so gains are taxed mainly by the capital gains tax. Washington State Legislature · Qualifies
Illustrative 9.9% tax: -49% (2001) and -38% (2022) with all income; -42% and -15% without net capital gains (our illustration). FactHub · Qualifies

Washington's existing capital gains tax, which the new law relies on to tax most long-term gains, halved from tax year 2022 to 2023 and then rose to about $1.5 billion. Source: Washington DOR; FactHub dataset. View source chart

5. Illustration: a downturn like 2001 or 2022, set against reserves and commitments FactHub illustration applying historical drops in the $1M+ income base to the official revenue estimates, compared with ERFC's reserve projections and the fiscal note's committed costs

Against ERFC's September 2026 estimate (about $4.7 billion a year in FY2030-31) or the fiscal note's $3.7 billion for FY2030, a 2001-style year would cut the income tax by about $1.6-2.3 billion and a 2022-style year by about $0.5-1.8 billion, depending on how much capital gains exposure remains. ERFC projects total reserves of about $1.9 billion at the end of 2025-27, after lawmakers moved $880 million out of the rainy-day fund. About 30% of the tax's revenue is committed to tax relief and the Working Families Tax Credit, about $1 billion a year, which does not fall when revenue does. ERFC itself raised its first-year estimate by 30% in one quarter.

Limit: Not a forecast: a future downturn may be larger, smaller or of a different kind, and the baselines are themselves estimates. The official estimate is static, assuming no behavioral response. Reserves and commitments will change before 2029.

Verify: Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast (dataset version 1) Economic and Revenue Forecast, September 2026 (Chapter 3, balance sheet) Four-year balance sheet methodology, enacted 2026 supplemental budget (April 22, 2026) State will retain about 70% of annual income tax revenues (March 31, 2026) Fiscal note package 77653, ESSB 6346 (2026) Revenue Review, September 25, 2026

Illustrative annual losses: about $1.6-2.3 billion in a 2001-style year and $0.5-1.8 billion in a 2022-style year (our illustration). FactHub
Total reserves at the end of 2025-27 are projected at about $1.9 billion (the text's '$1,899 billion' is $1,899.2 million in the table). Washington Economic and Revenue Forecast Council
The 2026 budget moved $880 million out of the rainy-day fund, which the outlook assumes will be repaid in FY2029. Washington Economic and Revenue Forecast Council
About 30% of the income tax's revenue is committed to tax relief and WFTC payments. Washington Research Council (Emily Makings)
The expanded Working Families Tax Credit is expected to pay $231 million in FY2030. Office of Financial Management (Department of Revenue estimate)
ERFC's estimate of the income tax rose sharply in one quarter with no change in law. Washington Economic and Revenue Forecast Council
The official estimate assumes high earners do not reduce taxable income in response to the tax. Office of Financial Management (Department of Revenue estimate) · Qualifies

6. Other states: volatile top-end revenue caused shortfalls, and Connecticut built a cap Official fiscal-office reports from Connecticut, California and Massachusetts

Connecticut's April 2017 income tax collections fell $300 million short, partly because the top 100 taxpayers paid about $200 million less, leaving a deficit larger than its reserve. Its 2017 volatility cap now sends estimated and final income tax payments above a threshold to the rainy-day fund and then to pensions: $8.6 billion over 2018-2023. California's Legislative Analyst calls the state near the top in revenue volatility but below average in reserves. Massachusetts caps spending from its 4% surtax below expected collections.

Limit: Other states' tax structures differ from Washington's, and their shortfalls had several causes, including spending decisions. The Massachusetts Taxpayers Foundation is business-supported. Connecticut's cap was exceeded every year since 2018, so it has worked as forced saving more than as two-way smoothing.

Verify: FY 17 General Fund Budget Projection (May 5, 2017) Budget Reserve Fund and Volatility Cap, report 2024-R-0019 (January 12, 2024) Connecticut's Volatility Cap: A Closer Look (December 2024) Rethinking California's Reserve Policy (April 10, 2025) FY2025 Budget: A Closer Look - Income Surtax (February 23, 2024)

Connecticut's 2017 shortfall came partly from its top 100 taxpayers paying about $200 million less. Connecticut Office of Fiscal Analysis
Connecticut caps how much volatile income tax revenue can balance the budget and sends the excess to its reserve fund. Connecticut Office of Legislative Research
Connecticut's volatile revenue exceeded the cap every year from 2018 to 2023, by $1.4 billion a year on average. Yale Tobin Center for Economic Policy · Qualifies
Connecticut moved $8.6 billion to its reserve fund and pensions over 2018-2023. Yale Tobin Center for Economic Policy
California, which relies heavily on top earners, has high revenue volatility and below-average reserves. California Legislative Analyst's Office
Massachusetts deliberately caps surtax-funded spending below expected collections. Massachusetts Taxpayers Foundation

Common questions

“Taxes like this usually bring in more than forecast, so volatility is not a real problem.”

Short answer: Often true, but not the point

Top-end taxes often beat their estimates. Washington's capital gains tax brought in 1.48 times the 2021 fiscal note's capital gains estimate in its first year, and tax year 2025 alone exceeded the estimate for the whole 2025-27 biennium; Massachusetts' surtax brought in $3 billion in FY2025 against a $1.3 billion spending cap. But Washington's capital gains tax also halved after its first year, and tax years 2023 and 2024 together came in about 16% below their estimate. Beating a forecast on average does not prevent a one-year drop, and the risk lies in treating good years as the baseline for ongoing commitments.

Washington's capital gains tax collected 1.48 times the fiscal note's capital gains estimate for tax year 2022 and 0.84 times for tax years 2023-2024 combined, halving from 2022 to 2023. FactHub · Qualifies
Massachusetts' surtax brought in $3 billion in FY2025, $1.7 billion above its spending cap: a windfall, not a shortfall. Massachusetts Taxpayers Foundation · Qualifies

“The law already moves capital gains out of the income tax, so the market can't hurt it much.”

Short answer: Partly

That is the law's most important design feature, and it is correct that a 2022-style drop in gains would hit the income tax far less: our illustration falls 15% without capital gains, against 38% with them. But a downturn in wages, bonuses and stock options, as in 2001, still cuts the base by about 40%. And the capital gains tax that absorbs the gains is itself volatile; it halved between tax years 2022 and 2023.

Illustrative 9.9% tax: -49% (2001) and -38% (2022) with all income; -42% and -15% without net capital gains (our illustration). FactHub · Qualifies
Capital gains tax paid is credited against the income tax, so gains are taxed mainly by the capital gains tax. Washington State Legislature · Qualifies
Washington's capital gains tax collected 1.48 times the fiscal note's capital gains estimate for tax year 2022 and 0.84 times for tax years 2023-2024 combined, halving from 2022 to 2023. FactHub · Qualifies

“Every tax falls in a recession; the sales tax fell too.”

Short answer: Yes, by far less

Retail sales tax revenue fell 12.5% in FY2009 and 17.6% from peak to trough over two years, and the general fund fell 13.3%. The $1M+ income base fell 34-45% in single years. Adding a volatile source to a budget raises the stakes of a downturn unless the extra volatility is set aside.

Standard deviation of annual changes: $1M+ AGI 32.9%, retail sales tax 5.4%, B&O 5.8%, total general fund 4.8%. FactHub

“The rainy-day fund already covers this, and lawmakers can add a reserve later.”

Short answer: Partly

The constitution's 1% transfer applies to this revenue, roughly $35-50 million a year at expected levels (our calculation), and a future Legislature could add a Connecticut-style cap. But the law voters are deciding on has none, and Washington has recently drawn reserves down rather than built them: the 2026 budget moved $880 million out of the rainy-day fund, and lawmakers sent all 2025-27 capital gains receipts to the education trust account instead of the school construction share the $500 million split would have funded.

One percent of general state revenues, which would include this tax, goes to the rainy-day fund each year. Washington State Legislature · Qualifies
The 2026 budget moved $880 million out of the rainy-day fund, which the outlook assumes will be repaid in FY2029. Washington Economic and Revenue Forecast Council
For 2025-27 lawmakers sent all capital gains tax receipts to the education trust account, setting aside the $500 million split. Washington State Legislature

“So the millionaires tax will leave a budget hole when the market crashes.”

Short answer: Not shown

That is a prediction, not something the evidence can settle. Whether a downturn leaves a hole depends on its size and kind, on how much lawmakers commit in good years, and on whether they set aside reserves. What the evidence does show is that the income base can fall by a third or more in a year, that about $1 billion a year of commitments would not fall with it, and that the law includes no buffer.

Illustrative annual losses: about $1.6-2.3 billion in a 2001-style year and $0.5-1.8 billion in a 2022-style year (our illustration). FactHub
About 30% of the income tax's revenue is committed to tax relief and WFTC payments. Washington Research Council (Emily Makings)

Conclusion

The evidence supports each part of the claim. IRS data show that the total adjusted gross income reported by Washington returns with income of $1 million or more fell 44.6% in 2001 and 34.0% in 2022, and 24.6% in 2013. The state's general fund, by contrast, fell 9.6% in its worst year (FY2009), and its sales tax 12.5%. Measured over every year with data, the total AGI of $1M+ filers swings about six times as much as the sales or B&O tax and about seven times as much as total general fund revenue. And the enacted text of ESSB 6346 sends the revenue to the general fund with no reserve, spending cap or diversion of above-normal receipts. Confidence is high because the income data, revenue records and statute are primary and agree with national evidence from Pew and with other states' experience. Three points cut the other way, and they matter. First, the law leaves most long-term capital gains to the existing capital gains tax, through a credit. That shields the income tax from a market crash of the 2022 kind (our illustration: -15% instead of -38% for the income above $1 million), though not from a 2001-style collapse in wages and stock options (-42%), which is plausible in a technology-heavy state. Second, volatility brings windfalls too: Washington's capital gains tax and Massachusetts' surtax have collected well above their estimates. Third, most top-end taxes have beaten their forecasts on average; the shortfalls came in recessions. The defensible concern is therefore not that the money will fail to arrive, but what happens in a bad year. About 30% of the revenue, roughly $1 billion a year, is committed to tax relief and the Working Families Tax Credit, which do not shrink when the tax does. The state's total reserves are projected at about $1.9 billion at the end of 2025-27, about the size of a single bad year's loss in our illustrations. Connecticut, after a 2017 shortfall driven partly by its top 100 taxpayers, adopted a cap that sends above-threshold volatile revenue to savings and pensions; California and Massachusetts have similar rules for capital gains or surtax revenue. Washington's own capital gains tax has a $500 million split, which lawmakers set aside for 2025-27. ESSB 6346 has nothing comparable. What remains unknown is how large and what kind the next downturn will be, how much lawmakers will commit before it, and whether they will add a reserve. Those are choices and predictions, not facts this check can rate.

How we checked

Defined the claim as three parts: the largest one-year drops in the income of Washington's $1M+ filers, how they compare with the state's worst general-fund drop, and whether ESSB 6346 sets aside any reserve.
Compiled Washington $1M+ returns, AGI and income components from IRS Historic Table 2 for every available year (1997-2001 and 2010-2023), with U.S. data for 2002-2009, and Washington revenue by source from DOR and ERFC for FY1998-2025, in a FactHub dataset with scripts that recompute every figure.
Read the full ESSB 6346 session law for reserve, stabilization, threshold and spending-cap provisions, and sections 202, 205 and 302 on where revenue goes and how capital gains are treated.
Built a labeled illustration applying historical drops to the official estimates, with and without capital gains, and compared it with ERFC's reserve projections and the fiscal note's committed costs.
Checked independent lines: Pew's national volatility scores, the Rockefeller Institute study, and fiscal-office reports from Connecticut, California and Massachusetts, including evidence that cuts against the claim's implication (windfalls, forecasts beaten, Connecticut's cap always exceeded).
Recorded the limits of each line, including the IRS data gap for 2002-2009.

Editorial note: Scope: This article checks how much the income reached by Washington's millionaires tax has varied from year to year, compares it with the state's existing revenue, and reads ESSB 6346 for any buffer against downturns. It does not forecast the next downturn, rate whether I-645 should pass, or estimate behavioral responses; a related FactHub article covers the static revenue estimate. Dollar amounts for downturns are labeled illustrations. External review: No external specialist review has been recorded. To verify yourself: (1) open the FactHub dataset and rerun volatility.js on its two tables; (2) check the Washington rows of IRS Historic Table 2 for 2000-2001 and 2021-2022; (3) search the ESSB 6346 session law for 'reserve', 'stabilization' and 'Sec. 202'; (4) read Connecticut OLR report 2024-R-0019 on the volatility cap. Challenge this fact-check: Identify the specific conclusion you dispute and provide verifiable evidence that could change it. Credible challenges deserve review and a visible response through FactHub's challenge submission process.

Expert-review status

No external specialist review has been recorded for this article.

Funding and conflicts

Funding: No external funding was received for this article or its datasets and charts.

Ownership: Published by the FactHub Research Team.

Conflicts: None known.

Sources

Sources are labeled by kind, with what this fact check takes from each, so readers can check the evidence independently.

Government Washington State Legislature. ESSB 6346, Chapter 238, Laws of 2026 (session law)
Enacted text of the tax on household income over $1 million.

Reliability: The law itself as signed March 30, 2026.
- All revenue goes to the general fund to fund the bill's tax relief, the WFTC and public investments; no reserve is created.
  
  What the source says
  
  Taxes collected under this chapter must be deposited in the state general fund to fund the sales and use tax relief in sections 903 through 908 of this act, the working families' tax credit program, including its expansion in section 901 of this act, and the business and occupation tax relief in sections 909 through 911 of this act, and to make public investments in K-12 education, health care, human services, and higher education.
  Sec. 202(1)
- Qualifies: Five percent of the previous fiscal year's collections goes to the Fair Start for Kids account.
  
  What the source says
  
  the state treasurer must deposit five percent of the revenues collected pursuant to this chapter during the previous fiscal year into the fair start for kids account
  Sec. 202(2)
- Qualifies: Long-term gains are replaced in the base by gains taxed under the capital gains tax.
  
  What the source says
  
  a taxpayer must add to the taxpayer's federal adjusted gross income the amount of Washington capital gains subject to tax under chapter 82.87 RCW for the same taxable year, plus the amount deducted under RCW 82.87.060 (1).
  Sec. 302(3)
- Qualifies: Capital gains tax paid is credited against the income tax, so gains are taxed mainly by the capital gains tax.
  
  What the source says
  
  a nonrefundable credit is allowed against taxes due under this chapter for the amount of tax imposed on Washington capital gains for the same tax year.
  Sec. 205(1)
Government Washington State Legislature. Washington State Constitution, Article VII, Section 12 (Budget Stabilization Account)
Constitutional rules for the state's rainy-day fund.

Reliability: The constitutional text as amended in 2011.
- Qualifies: One percent of general state revenues, which would include this tax, goes to the rainy-day fund each year.
  
  What the source says
  
  an amount equal to one percent of the general state revenues for that fiscal year shall be transferred to the budget stabilization account.
  Art. VII, sec. 12(b)
Government Washington State Legislature. RCW 82.87.030, Distribution of capital gains tax revenue
Statute splitting capital gains tax revenue between the Education Legacy Trust Account and school construction.

Reliability: The statute itself, as amended in 2026.
- For 2025-27 lawmakers sent all capital gains tax receipts to the education trust account, setting aside the $500 million split.
  
  What the source says
  
  During the 2025-2027 fiscal biennium, all taxes, interest, and penalties collected under this chapter shall be deposited into the education legacy trust account.
  Subsection (3)
Government Office of Financial Management (Department of Revenue estimate). Fiscal note package 77653, ESSB 6346 (2026)
Multi-agency fiscal note for the enacted bill, including DOR's revenue estimate and the WFTC costs.

Reliability: Official estimate prepared for the Legislature; it is static by its own assumptions.
- Qualifies: The official estimate assumes high earners do not reduce taxable income in response to the tax.
  
  What the source says
  
  In response to the new tax, affected taxpayers do not reduce taxable income.
  DOR assumptions
- The expanded Working Families Tax Credit is expected to pay $231 million in FY2030.
  
  What the source says
  
  WFTC payments to qualifying applicants of $231,000,000.
  DOR expenditure assumptions, FY2030
Advocacy group Washington Research Council (Emily Makings). State will retain about 70% of annual income tax revenues (March 31, 2026)
Analysis of the fiscal note's tax relief and WFTC costs against the income tax revenue.

Reliability: Business-supported nonprofit that analyzes Washington fiscal policy; its table restates the DOR fiscal note.
- About 30% of the income tax's revenue is committed to tax relief and WFTC payments.
  
  What the source says
  
  After the tax reductions and WFTC remittances, the state will retain about 70% of annual income tax revenues for general spending.
  Main text
Government Washington Economic and Revenue Forecast Council. Revenue Review, September 25, 2026
The state forecast council's September 2026 revenue forecast summary, history tables and risk slides.

Reliability: The state's official, bipartisan revenue forecaster. It publishes no separate risk analysis of the new income tax.
- ERFC's estimate of the income tax rose sharply in one quarter with no change in law.
  
  What the source says
  
  an increase of $2.443 billion driven largely by an upward revision of the estimated receipts from the Individual Income Tax (IIT).
  Summary bullets
Government Washington Economic and Revenue Forecast Council. Economic and Revenue Forecast, September 2026 (Chapter 3, balance sheet)
Full September 2026 forecast publication, including the enacted budget balance sheet.

Reliability: Official forecast publication. Its narrative prints total reserves as '$1,899 billion'; its balance sheet shows $1,899.2 million.
- Total reserves at the end of 2025-27 are projected at about $1.9 billion (the text's '$1,899 billion' is $1,899.2 million in the table).
  
  What the source says
  
  total reserves for the GF-S, ELTA, OPA, WEIA, and FSKA accounts are projected at $1,899 billion.
  Chapter 3, p. 57
Government Washington Economic and Revenue Forecast Council. Four-year balance sheet methodology, enacted 2026 supplemental budget (April 22, 2026)
Assumptions behind the official four-year budget outlook.

Reliability: Official outlook methodology adopted by ERFC.
- The 2026 budget moved $880 million out of the rainy-day fund, which the outlook assumes will be repaid in FY2029.
  
  What the source says
  
  the Outlook assumes repayment in FY 2029 of $880 million to the Budget Stabilization Account (BSA) from the Pension Surplus Holding Account
  Resource assumptions
Other Pew Charitable Trusts. Fiscal 50: Tax Revenue Volatility (updated April 9, 2026)
National comparison of the volatility of state tax revenue by tax type.

Reliability: Nonpartisan research organization; scores are standard deviations of year-over-year change with policy effects removed.
- Nationally, personal income taxes score 10.1 on Pew's 15-year volatility measure, with wide variation by state.
  
  What the source says
  
  Total personal income taxes in these states had a volatility score of 10.1 for the 15 years ending in fiscal 2024, ranging from 30.3 in New Mexico to 5.1 in Alabama.
  Personal income taxes section
Academic Donald Boyd, Rockefeller Institute of Government (for Pew). State Tax Revenue Volatility and Its Impact on State Governments (June 30, 2022)
Study of state tax volatility across recessions.

Reliability: Written by a public finance researcher for Pew; uses Census and state revenue data.
- The deepest income tax declines in recessions accompanied large capital gains declines.
  
  What the source says
  
  Even in mild recessions, large income tax declines were associated with large capital gains declines.
  Findings
- Qualifies: The evidence that capital gains drive volatility differs by state and episode.
  
  What the source says
  
  The evidence on capital gains and volatility is mixed
  Findings
Government Connecticut Office of Fiscal Analysis. FY 17 General Fund Budget Projection (May 5, 2017)
Nonpartisan legislative fiscal office's budget projection after April 2017 income tax collections.

Reliability: Connecticut's nonpartisan legislative fiscal office.
- Connecticut's 2017 shortfall came partly from its top 100 taxpayers paying about $200 million less.
  
  What the source says
  
  The decline in collections is due in part to the state receiving approximately $200 million less from the top 100 tax payers.
  Revenue section
Government Connecticut Office of Legislative Research. Budget Reserve Fund and Volatility Cap, report 2024-R-0019 (January 12, 2024)
Nonpartisan backgrounder on Connecticut's volatility cap.

Reliability: Connecticut's nonpartisan legislative research office.
- Connecticut caps how much volatile income tax revenue can balance the budget and sends the excess to its reserve fund.
  
  What the source says
  
  The cap effectively limits the amount of revenue from these two sources that may be used to balance the budget and requires any excess amounts to be transferred to the BRF
  Volatility cap
Academic Yale Tobin Center for Economic Policy. Connecticut's Volatility Cap: A Closer Look (December 2024)
Academic review of Connecticut's volatility cap results.

Reliability: University policy center; it also argues the cap's base was set without a thorough look at trends.
- Qualifies: Connecticut's volatile revenue exceeded the cap every year from 2018 to 2023, by $1.4 billion a year on average.
  
  What the source says
  
  From 2018 to 2023, the amount of volatile revenue that exceeded the volatility cap in a given year ranged from $530 million to nearly $3 billion, with an average of $1.4 billion per year
  Findings
- Connecticut moved $8.6 billion to its reserve fund and pensions over 2018-2023.
  
  What the source says
  
  $8.6 billion transferred to the BRF and pensions over the same six years.
  Findings
Government California Legislative Analyst's Office. Rethinking California's Reserve Policy (April 10, 2025)
Nonpartisan analysis of California's reserves and revenue volatility.

Reliability: California's nonpartisan legislative fiscal adviser.
- California, which relies heavily on top earners, has high revenue volatility and below-average reserves.
  
  What the source says
  
  California ranks near the top in terms of revenue volatility, but below average in terms of reserves.
  Summary
Industry Massachusetts Taxpayers Foundation. FY2025 Budget: A Closer Look - Income Surtax (February 23, 2024)
Analysis of how Massachusetts budgets its 4% surtax on income over $1 million.

Reliability: Business-supported research group that recommended the surtax spending cap.
- Massachusetts deliberately caps surtax-funded spending below expected collections.
  
  What the source says
  
  The cap is purposefully set below the level of collections anticipated in any year
  Spending cap section
Industry Massachusetts Taxpayers Foundation. FY 2025 Closeout Supplemental Budget & Fiscal Update (October 14, 2025)
Year-end review of Massachusetts surtax and capital gains collections.

Reliability: Business-supported research group; figures restate state collections.
- Qualifies: Massachusetts' surtax brought in $3 billion in FY2025, $1.7 billion above its spending cap: a windfall, not a shortfall.
  
  What the source says
  
  Surtax revenues totaled $3 billion in FY 2025, exceeding the $1.3 billion surtax spending cap reflected in revenue benchmarks by $1.7 billion
  Revenue section
FactHub record FactHub. Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast (dataset version 1)
FactHub dataset with IRS, DOR and ERFC tables, scripts and saved analyses behind this article's numbers.
- Washington $1M+ AGI changed -44.6% (2001), -24.6% (2013) and -34.0% (2022); general fund revenue's worst year was -9.6% (FY2009).
- Standard deviation of annual changes: $1M+ AGI 32.9%, retail sales tax 5.4%, B&O 5.8%, total general fund 4.8%.
- Qualifies: Illustrative 9.9% tax: -49% (2001) and -38% (2022) with all income; -42% and -15% without net capital gains (our illustration).
- Illustrative annual losses: about $1.6-2.3 billion in a 2001-style year and $0.5-1.8 billion in a 2022-style year (our illustration).
FactHub record FactHub. Washington capital gains tax: collections by tax year and concentration of payments, 2022-2025 (dataset version 2)
FactHub dataset of DOR capital gains tax collections and fiscal note estimates.
- Qualifies: Washington's capital gains tax collected 1.48 times the fiscal note's capital gains estimate for tax year 2022 and 0.84 times for tax years 2023-2024 combined, halving from 2022 to 2023.
FactHub dataset Washington's $1 million-plus earners: IRS income data 1997-2023, revenue volatility and an illustrative back-cast
- Tables: irs-high-income, wa-revenue-by-source
  
  Saved analysis agi-vs-revenue-change
- Tables: irs-high-income, wa-revenue-by-source
  
  Saved analysis volatility-summary
- Tables: backcast
  
  Saved analysis illustrative-backcast
- Tables: crash-scenarios
  
  Saved analysis crash-scenarios
FactHub dataset Washington capital gains tax: collections by tax year and concentration of payments, 2022-2025
Tables: cg-estimates

Saved analysis actual-vs-fiscal-note
FactHub chart wa-millionaire-income-vs-revenue-swings
FactHub chart wa-capital-gains-collections-by-year

Update history

October 22, 2026 Initial version, with two FactHub datasets and two charts. Main image: Space Needle and skyline from Kerry Park, 2000 (Seattle Municipal Archives, CC BY 2.0).
October 22, 2026 Version 2: disclosure wording standardized; link to a related draft removed until it is final. Capital gains ratios confirmed against fiscal note package 63363 (FY2023-25 estimates of $442M, $469M and $505M).
October 22, 2026 Version 3: capital gains tax comparison with the 2021 fiscal note now uses its capital gains receipts ($527M for FY2023) rather than the bill's net total ($442M, after B&O credits): first-year ratio 1.48, tax years 2023-2024 0.84 of the biennium estimate. Cites capital gains dataset and chart version 2.
October 22, 2026 Version 4: 'six to seven times' corrected to about six times (sales and B&O) and about seven times (general fund); the 45% and 34% drops described as the total AGI of $1M+ filers; new main image (downtown Seattle from the Space Needle, M.O. Stevens, CC BY-SA 3.0).
October 22, 2026 Conflicts disclosure standardized.

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{"@context":"https://schema.org","@type":"ClaimReview","url":"https://facthub.org/n/article/wa-millionaires-tax-volatility/5","datePublished":"2026-10-22","dateModified":"2026-10-22","author":{"@type":"Organization","name":"FactHub","url":"https://facthub.org/"},"claimReviewed":"The income Washington\u0027s millionaires tax relies on has fallen by a third to a half in a single year, several times the state\u0027s worst general-fund drop, and the law sets aside no reserve.","reviewRating":{"@type":"Rating","alternateName":"True"},"image":"https://facthub.org/node-assets-v2/article/wa-millionaires-tax-volatility/5/seattle-downtown-2011/social-1200x630.jpg"}

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Technical details: node handle article:wa-millionaires-tax-volatility

Washington's top-earner income swings sharply, and its new tax has no reserve.

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