Legislators in Washington state on Wednesday enacted a measure dubbed the "millionaires' tax," a step critics warn could prompt an outflow of affluent residents.
The State Senate approved the provision with a single day remaining in the 2026 parliamentary term, subsequent to an intensely debated, 24-hour protracted discussion in the State House.
The proposed legislation would levy a 9.9% tax on earnings exceeding $1 million for households with individual or joint incomes.
The revenue derived from this tax would alleviate pressures on the state budget, which is currently facing a shortfall amounting to billions of dollars, Fox Seattle reported.
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A panoramic perspective of Washington State Capitol in Olympia. ( Joe Sohm/Visions of America/Universal Images Group via Getty Images / Getty Images)
Additionally, resources would be allocated to programs designed to enhance economic accessibility for laboring households and proprietors of small enterprises. The legislation would become operative on Jan. 1, 2028, with remittances commencing in 2029.
The measure is projected to affect 21,000 state residents. It now advances to the desk of Gov. Bob Ferguson, who has supported the initiative.
On Tuesday, he stated that the bill "marks a significant advancement in redressing the imbalance in our inequitable framework. It channels substantial funds toward Washington families and small businesses."
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The cityscape of Seattle. Washington state lawmakers this week enacted a measure dubbed the "millionaires' tax" on high-income earners. (Juan Mabromata/AFP via Getty Images / Getty Images)
He further posted on X, "It reduces expenses for working parents and guarantees our children are equipped for education through providing free breakfast and lunch for all Washington K-12 students, a personal imperative of mine since I contested the governorship." He continued, "The Millionaires’ Tax is projected to affect under 0.5% of Washingtonians, yet will enhance affordability for millions of residents. I eagerly anticipate endorsing it."
A Tax Foundation assessment revealed that the suggested levy would generate a maximum rate exceeding 18% on earnings from employment and the vesting of restricted stock units (RSU) in Seattle, positioning it as the highest rate in the U.S.
Washington state is home to 695,695 small businesses and approximately 360,000 individuals employed in tech-focused occupations, as per the Small Business Administration and Washington State Department of Commerce, respectively.
Jared Walczak, a senior fellow at the Tax Foundation, wrote, "A tax this severe would inflict considerable harm on Washington’s economy, relocating employment and financial prospects elsewhere." He elaborated, "In particular, for large segments of the state’s technology industry, already burdened by unusually high corporate levies, a 9.9 percent income tax could prove the final catalyst, propelling future growth to other states, and potentially displacing current employment with them."
The legislation has elicited apprehension from detractors who contend it could compel Washington's wealthiest residents to relocate to jurisdictions with more favorable tax regimes.
“If entities like Starbucks or Boeing, or other corporations, begin to reduce their footprint in Washington State, what then transpires?” queried Republican lawmaker Andrew Barkis during the State House’s debate this week, as reported by the New York Times. “Those lucrative positions? They are going to depart. This is already occurring.”
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Former Starbucks CEO Howard Schultz announced via a LinkedIn update this week that he and his wife are relocating from Seattle to Florida, following over forty years in the city. He did not explicitly reference the levy in his post but expressed his wish that Washington “will continue as an environment for commerce and enterprise to flourish.”
Daniella Genovese of Fox Business provided input for this article.