A version of this article first appeared in CNBC’s Inside Wealth newsletter with Robert Frank, a weekly guide to the high-net-worth investor and consumer. Sign up to receive future editions, straight to your inbox.

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 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, such as 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 are the same for joint and single filers.

In California, bracket thresholds double for joint filers, except for the 1% Mental Health Services Act, which applies to income above $1 million for both single and married filers.

Jared Walczak, senior fellow of the Tax Foundation, said the marriage penalties in New York and California are relatively small, amounting to a 1% tax rate difference in California and a 0.65% difference in New York. In Washington state, however, the difference can be up to 9.9%.

“In the most extreme case, if you had two single filers who both earned exactly $1 million, they would owe $0, but if they married and earned the same income, they would owe $99,000,” he said. “Washington’s marriage penalty will be the largest by far.”

The state’s Democratic lawmakers and governor haven’t specifically addressed concerns about the marriage penalty. State Sen. Noel Frame, who leads fiscal policy for the state Senate Democrats, said the standard deduction of $1 million per household is the same structure used for the state’s capital gains excise tax, passed by voters in 2021.

“As we work to make the two separate tax structures work together, having consistency in the deduction helps with both administration of the tax by our Department of Revenue and simplicity for taxpayers,” she said in a statement. “Since the tax doesn’t apply to income less than $1 million, there are many high-earning couples that still won’t see much of a tax impact even if their combined incomes are more than $1 million.”

Yet in a state that depends on highly skilled, highly paid workers at companies such as Amazon, Microsoft and other tech companies, many dual-income families could get hit with the tax, analysts said.

“There’s this idea that, ‘We’re just taxing rich dudes with yachts,'” said Brian Heywood, a Washington hedge-fund manager who founded Let’s Go Washington, a conservative political action committee opposed to the tax. “They’ve been less than honest with who they’re going after and what the numbers are.”

Wallin joked that some dual-earning couples might even explore a legal divorce for tax reasons, even if they want to stay effectively married. “The tax savings alone would more than pay the costs of a divorce lawyer,” he said.

The marriage penalty is the latest controversy for Washington’s new income tax, which has become a beacon in the Democratic Party’s movement to raise taxes on the wealthy. From Rhode Island and New York to Virginia and Michigan, Democrats in state legislatures are seeking to counteract rising inequality and federal funding cuts to health care by raising taxes on top earners. California is considering a ballot initiative to create the first state wealth tax, taxing the total net worth of the state’s billionaires.

Washington will be a closely watched experiment in the debate over the impact of higher state taxes on wealth migration.

Two of the state’s most celebrated entrepreneurs — Jeff Bezos of Amazon and Howard Schultz of Starbucks — have already left the state for Florida, which has no income tax. Bezos announced his move to Miami in 2023, after the state’s new capital gains tax of 7% took effect. He sold more than $9 billion worth of Amazon stock in 2024, effectively saving over $600 million in capital gains taxes that he would have had to pay to Washington state.

Schultz recently announced that he had moved from Seattle after 44 years. He said his family office will also move to Miami but that his foundation would continue to operate in Seattle.

“It is our hope that Washington will remain a place for business and entrepreneurship to thrive, creating essential opportunity for those in Seattle and the surrounding areas,” he wrote.

Hargreaves Lansdown, a leading UK retail investment platform, has issued an apology to its customers following widespread IT issues that left them unable to access accounts during a period of significant financial market volatility.

The platform confirmed it was grappling with technical problems impacting sections of its website and mobile application.

This prevented clients from logging in, viewing their portfolios, executing transactions, or utilising other essential services.

Hargreaves Lansdown sought to reassure users, stating there was “no evidence of a cyber incident or a data breach” and that “all customers’ assets and data was secure”.

The company added it was “working to restore the services as soon as possible”.

The disruption was corroborated by service monitoring website Downdetector, which recorded a significant surge in reported problems throughout Thursday evening and Friday morning.

The outage meant some services were unavailable, including placing trades or adding or withdrawing money from accounts.

Hargreaves Lansdown is the UK’s biggest DIY investment platform, offering services including investment and savings ISAs and pension accounts.

It comes less than two weeks before the financial year draws to a close at the end of March.

The issues are also occurring in the context of heightened volatility in the world’s financial markets, with oil and gas prices rising and falling sharply in response to developments to the conflict in the Middle East.

Stocks and shares have also had a rollercoaster week with the UK’s FTSE 100 dropping to a more than three-month low on Thursday, before recovering some of the losses on Friday.