Washington state lawmakers on Wednesday passed a so-called “millionaires tax”, a criticized decision which could lead to an exodus of high-income earners.
The state Senate passed the measure one day before 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 above $1 million for individuals or couples in a household.
The funds generated by the tax would be used to finance the state budget, which currently faces a multibillion-dollar deficit, Fox Seattle reported.
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An aerial view of the Washington State Capitol in Olympia. (Joe Sohm/Visions of America/Universal Images Group via Getty Images / Getty Images)
The funds would also go toward programs aimed at improving affordability for working families and small business owners. The legislation would take effect on January 1, 2028, and tax payments would begin in 2029.
It is expected to affect 21,000 residents across the state. The invoice now heads to the desk of Gov. Bob Ferguson, who supported the measure.
On Tuesday, he said the bill “represents historic progress in rebalancing our unfair system. It returns important dollars to Washington families and small businesses.”
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The Seattle skyline. Washington state lawmakers this week passed a so-called “millionaires tax” on high-income earners. (Juan Mabromata/AFP via Getty Images / Getty Images)
“It saves working parents money and ensures our children are ready to learn by funding free breakfast and lunch for all Washington students in grades K-12, which has been a priority of mine since I ran for governor,” he wrote on sign.”
A Analysis of tax foundations found that the proposed tax would result in a top rate of more than 18% on wage and restricted stock unit (RSU) vesting income in Seattle, making it the highest rate in the United States.
Washington State has 695,695 small businesses and almost 360,000 employees in technology-related jobs, according to the Small Business Administration and the Washington State Department of Commerce, respectively.
“Such an aggressive tax would do real damage to Washington’s economy, sending jobs and economic opportunities elsewhere,” wrote Jared Walczak, a senior fellow at the Tax Foundation. “In particular, for significant parts of the state’s technology sector, already the target of abnormally high corporate taxes, a 9.9 percent income tax could prove to be the final straw, driving any further expansion to other states, and quite possibly taking existing jobs with them.”
The bill sparked concerns from critics who said it could force Washington’s top earners to leave for more tax-friendly states.
“If a Starbucks or a Boeing or others start to diminish their presence in Washington state, guess what will happen?” Republican lawmaker Andrew Barkis said during the State House debate this week, according to the New York Times. “Those good-paying jobs? They’re going to go away. It’s 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 did not mention the tax in his message, but said he hopes that Washington “will remain a place conducive to the development of business and entrepreneurship.”
Daniella Genovese of Fox Business contributed to this report.
