For decades, Washington state's lack of a personal income tax was one of its defining economic advantages, a feature that drew executives, entrepreneurs, and high earners across the region. That era is ending.

The Washington State Legislature passed Senate Bill 6346 on March 12, imposing a 9.9% tax on household income exceeding $1 million annually. Gov. Bob Ferguson signed the "millionaires' tax" into law March 30. The tax takes effect Jan. 1, 2028, with first returns and payments due in 2029.

Most coverage has focused on the impact to Washington state residents. But, for business owners in Kootenai County, the implications are closer to home than many realize and the two-year runway before the tax kicks in is shorter than it appears.

The cross-border reality 

The tax doesn't stop at the Washington-Idaho state line. Under the new law, the 9.9% rate applies not only to Washington residents but to anyone with Washington-source income, including wages, pass-through entity income, and investment returns connected to Washington operations.

For a North Idaho business owner with employees, clients, or a legal entity domiciled in Washington, that exposure is real regardless of where they sleep at night.

This isn't a theoretical risk. The Spokane-Coeur d'Alene area is defined by cross-border business activity. Companies with dual-state operations, executives who split time between markets, and S-corporation or partnership owners with Washington-source income all need to understand how this tax applies to their specific situation before 2028 arrives.

Companies are already responding

The business community isn't waiting for legal challenges to play out. Across the Inland Northwest, companies are already modeling the financial impact and making structural decisions accordingly.

One Coeur d'Alene-based energy company with operations in both the Seattle area and in North Idaho recently made the decision to consolidate all operations into Idaho and exit Washington entirely. The calculus wasn't complicated: between the new income tax, Washington's existing payroll taxes, and the operational costs of maintaining a cross-state presence, the cost of relocating was lower than the cost of staying. They'll also benefit from Idaho's significantly lower payroll tax burden going forward.

This story will not be unique. For businesses on the margin of Washington-Idaho operations, the "millionaires' tax" tips the math in favor of consolidation, and North Idaho stands to be a direct beneficiary.

The planning window

The Jan. 1, 2028, effective date is two budget cycles and one full tax planning year away. For affected business owners, that window is meaningful, but it requires action now rather than later.

The most important immediate step is reviewing entity structure. How a business is organized, whether as an S-corporation, C-corporation, partnership, or sole proprietorship, determines how income flows, where it's sourced, and ultimately how much of it falls under Washington's new tax. Structures that made sense before SB 6346 may no longer be optimal.

The second step is tax modeling. Business owners with Washington-source income should be working with their certified public accountant to run projections under different scenarios: What does the tax liability look like if current structure is maintained? What changes in 2028 if income is restructured, accelerated, or shifted? Are there legitimate opportunities to recognize income in 2026 or 2027 before the tax takes effect? 

The answers are fact-specific and vary significantly depending on business type, income level, and ownership structure.

For owners considering whether Washington operations still make economic sense, the modeling should include a full comparison, tax burden, payroll costs, operational overhead, and the long-term trajectory of Washington's tax environment, against alternatives.

The bigger picture

Washington's "millionaires' tax" doesn't exist in isolation. It follows business and occupation tax increases, new payroll surcharges, luxury taxes, and estate tax changes that have steadily shifted Washington's business climate over the past two years. For high-earning individuals and businesses with flexibility about where they operate, the cumulative picture matters.

Kootenai County has long attracted businesses and residents looking for a lower-tax, business-friendly environment. That competitive advantage just became more pronounced.

The question for North Idaho business owners isn't whether this tax is fair or whether it will survive a legal challenge. The question is whether your current structure is optimized for the environment that takes effect in two years, and whether you're using the time you have to find out.

Collin Kane owns Coeur d'Alene-based Kane Tax & Accounting PLLC, which serves individuals and small businesses across the Spokane-Coeur d'Alene area. He can be reached at [email protected].