Washington passes "millionaires tax" despite concerns of wealth flight
Washington state lawmakers on Wednesday passed a so-called "millionaires tax," a move criticism said could lead to an exodus of high-income earners.
The State Senate passed the measure with a day left in the 2026 legislative session, following a hotly contested 24-hour marathon in the State House.
The bill would impose a 9.9% tax on income over $1 million for individuals or couples in a household.
The funds generated from the tax would address the state budget, which is currently dealing with a multi-billion dollar deficit, Fox Seattle reported.
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Funds would also go toward programs to improve affordability for working families and small business owners. The legislation would go into effect on Jan. 1, 2028, with tax payments starting in 2029.
It is expected to impact 21,000 residents across the state. The bill now heads to the desk of Gov. Bob Ferguson, who has backed the measure.
On Tuesday, he said the bill "represents historic progress in rebalancing our unfair system. It sends significant dollars back to Washington families and small businesses."
"It saves working parents money and ensures our kids are prepared to learn by funding free breakfast and lunch for all Washington K-12 students, which has been a priority of mine since I ran for governor," he wrote on X. "The Millionaires’ Tax will apply to less than one half of one percent of Washingtonians, but make life more affordable for millions. I look forward to signing it."
A Tax Foundation analysis found that the proposed tax would yield a top rate of more than 18% on wage income and restricted stock units (RSU) vesting in Seattle, making it the highest rate in the U.S.
Washington state has 695,695 small businesses and nearly 360,000 employees in technology-related jobs, according to the Small Business Administration and Washington State Department of Commerce, respectively.
"A tax this aggressive would do real damage to Washington’s economy, sending jobs and economic opportunity elsewhere," wrote Jared Walczak, a senior fellow at the Tax Foundation. "In particular, for significant swaths of the state’s tech sector, already the target of anomalously high business taxes, a 9.9 percent income tax could prove the last straw, driving any subsequent expansion to other states, and quite possibly taking existing jobs with them."
The bill has raised concerns from critics who said it could force Washington's highest earners to leave for more tax-friendly states.
"If a Starbucks or a Boeing or other people start to diminish their presence in Washington State, guess what happens?" said Republican lawmaker Andrew Barkisduring the State House’s debate this week, according to the New York Times. "Those high-paying jobs? They are going to leave. It is happening."
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Former Starbucks CEO Howard Schultz said in a LinkedIn post this week that he and his wife are moving from Seattle to Florida after more than four decades in the city. He didn't mention the tax in his post but said he hopes Washington "will remain a place for business and entrepreneurship to thrive."
Fox Business' Daniella Genovese contributed to this report.