In Brief:
- Washington doesn’t have any income tax. The state Supreme Court ruled in 1933 that graduated income taxes and income taxes over 1 percent violate the state’s constitution.
- Supporters say the proposed millionaires’ tax would help solve fundamental problems with how Washington raises money. The state’s tax structure is deeply regressive and doesn’t raise enough to meet growing needs, they say.
- Detractors say millionaires will just leave, taking tax dollars with them, and that the state needs to find ways to reduce spending, not raise new revenue.
It’s far from the first time the state has considered implementing some kind of income tax. Just 16 years ago, another bid to tax high earners failed at the ballot.
But now Gov. Bob Ferguson has thrown his support behind a proposed 9.9 percent tax on income over a million dollars. Democratic lawmaker Jamie Pedersen, the senate majority leader and sponsor of the forthcoming tax bill, says that if the proposal makes it into law, it will almost certainly have to survive both a ballot measure bid to repeal it and a state Supreme Court challenge.
“We want the state Supreme Court to reconsider its ruling,” Pedersen says. “That is not a bug; that is a feature of the proposal.”
Pedersen believes it’s time Washington overhauled its tax system and broke free of the 1933 ruling that deemed income a kind of property. The effects of that ruling are twofold: the state constitution limits property tax to 1 percent, and requires the tax to be applied uniformly, barring a graduated tax. Income tax was still a fairly new concept back then; however, the U.S. constitutional amendment enabling a federal income tax was ratified in 1913, just 20 years earlier. Pederson hopes that a modern court will rule differently.
The state faces a $2.3 billion shortfall, and the governor’s proposed supplemental budget for FY2027 uses $1 billion of rainy-day funds and makes $800 million of cuts, as well as shifting around unspent money.
But Republican Rep. Travis Couture, the ranking minority member of the House Appropriations Committee, says the state doesn’t need more money. “We don't have a revenue problem. We have a spending addiction problem,” he says.
Washington isn’t the only state to weigh taxing the incomes of the wealthiest. Massachusetts passed a surtax on incomes over $1 million in 2022, with revenue earmarked for public education and transportation. A Michigan ballot initiative would impose a surtax on incomes over $500,000 to fund K-12 education, and New York City Mayor Zohran Mamdani proposed a millionaire’s surtax. California Gov. Gavin Newsom, meanwhile, came out against a proposed billionaire’s tax.
Will Millionaires Flee?
Detractors like Couture say the plan is sure to backfire. Not only does the state not really need new income, but a millionaire’s tax is likely to spur wealthy residents and entrepreneurs to leave the state, taking money and jobs with them.
At present, the millionaire’s tax would only impact 0.1 percent of state residents and is projected to raise $3 billion per year. But with such a small pool of taxpayers, even just a few leaving makes the revenue picture wobbly, Couture says. What’s more, the richest people are the most adept at shielding their money from taxation, armed with lawyers and accountants to help them find every strategy to evade paying.
“[Democrats] are attempting to tap the most sophisticated taxpayers in our society — the ones who have extreme abilities to move money and move assets and have lawyers and accountants and all sorts of other things,” Couture says.
California’s Newsom also opposes his state’s billionaire tax proposal out of concern that wealthy residents will leave. Reportedly, some have considered departing, while others say they won’t.
Proponents of such taxes often say the wealthy decide where to live based on many factors, not just taxes. Pedersen says any Washington residents looking for an income-tax-free state would have to choose one with a very different political climate, making the move a big choice.
Millionaires do not appear to have fled Massachusetts after the state passed its 2022 surtax. There’s limited data available on whether people with incomes over $1 million fled after the tax, but the share of households with net worths over $1 million rose sharply from 2022-2025. Median household incomes rose from 2022-2024, the state gained two more Forbes 400-listed billionaires, and in fiscal year 2025 Massachusetts took in nearly $2 billion more millionaire surtax revenue than it had expected.
However, Amazon owner Jeff Bezos left Washington state for capital gains-tax-free Florida in 2023, after the state introduced a capital gains tax. The billionaire said he was moving to be nearer to his parents, girlfriend and one of his companies’ operations, but many questioned whether taxes were a factor. One international money management firm reportedly shifted its headquarters out of Washington because of that capital gains tax.
Do Voters Want it?
Voters in 2010 shot down a proposed tax on incomes over $200,000. But Pedersen believes there are key differences from today’s proposal, including the revenue threshold and national climate. That 2010 vote came amid a national anti-tax movement, exemplified by the rise of the Tea Party, while the current proposal comes in the wake of the One Big Beautiful Bill Act, which cut social safety net spending while giving tax reductions to the more affluent. Plus, today’s proposal would include some relief, like crediting millionaires for any business and occupation tax they already pay.
And voters have sometimes supported taxes; in 2024 they rejected a ballot proposal to repeal the state’s capital gains tax.
But in 2024, Let’s Go Washington, a political action committee, sponsored an initiative to the Legislature to bar state and local governments from enacting personal income taxes. Lawmakers had three options: allow the initiative to go to voters at the ballot, propose an alternative measure and let both proposals go to voters, or accept the initiative as is and make it law. Legislators chose to make the income tax ban law. Just two years later, lawmakers are now pushing for a millionaire’s tax — seemingly going back on their earlier stance, Couture says.
Pedersen argues that it’s not uncommon for later laws to amend prior ones, and that, if passed, the new tax would simply amend that earlier ban, exempting millionaires from the 2024 law.
The bill is in early stages, but Pedersen says early polling shows residents become more favorable to a millionaire’s tax when told repealing such a law (should it pass) would reduce funding for public schools, health care and higher education.
Washington has the 49th most regressive tax structure in the nation, and Pedersen and Gov. Ferguson both have said that they want a millionaire’s tax to be paired with other changes that ease tax burdens on regular people. Ferguson reportedly hopes that the new income would allow for expanding the Working Families Tax Credit and reducing certain sales tax and taxes on small businesses. Pedersen suggests that the majority of the millionaires tax go to the general fund while a significant portion be set aside to fund cuts to property taxes and other taxes.
Pedersen plans to formally introduce the bill later in the session.
