How Washington's new income tax treats public pensions
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Public employee pensions have become a flashpoint in the debate over Washington's new income tax, which is set to affect households making over $1 million per year.
Why it matters: Campaign ads urging voters to repeal the new tax argue it puts the pensions of teachers and firefighters at risk — even though none of those employees currently make $1 million a year in public pension benefits.
Zoom in: Washington law previously contained language explicitly exempting public employee pension benefits from state taxes.
- State lawmakers removed those exemptions when they passed the income tax, allowing pension income to count toward the $1 million threshold.
Supporters of Initiative 645, which would repeal the income tax, argue the change leaves pensions vulnerable to taxation if lawmakers lower the income threshold in the future.
- "Why include our retirement benefits if they aren't coming after them?" asks one campaign ad from the perspective of a retired teacher.
Under the new income tax law, the $1 million income threshold is set to rise with inflation over time.
By the numbers: The highest annual pension in Washington's state retirement system was about $385,000 as of June 2026, according to the Department of Retirement Systems.
- "No one earns a pension of a million per year," agency spokesperson Adam Torgerson told Axios.
- Under the state's default teacher pension plan, educators with more than 30 years of service who retired in 2023–24 received an average annual pension of about $71,500.
The other side: Senate Majority Leader Jamie Pedersen (D-Seattle), the lead author of the income tax law, said lawmakers wanted the new tax to follow the federal approach of counting income from all sources, including pensions.
- Pedersen said he also believes someone earning $800,000 per year in rental property income, for example, shouldn't be able to exclude a substantial public pension if it pushes their total income above $1 million.
- "I don't ever see a world where we would want to expand the tax down to people whose sole income is their pension or their Social Security," Pedersen told Axios.
The bottom line: Public pensions alone don't reach the new tax's threshold, but pension benefits could count toward it when combined with other income. Opponents' broader concern is about what future lawmakers might do.