Washington’s Millionaires’ Tax: Economic Disaster?

The U.S. Capitol building with an American flag flying against a blue sky

Washington Democrats just rammed through a 9.9% “Millionaires’ Tax” on incomes over $1 million, risking a tech exodus that could devastate jobs and echo the fiscal mismanagement conservatives fought against under Biden.

Story Highlights

Senate Bill 6346 imposes 9.9% tax on personal income above $1 million, effective January 1, 2028, targeting roughly 21,000 high earners in a state with no prior broad income tax.
Bill passed both chambers in early 2026 session to plug multibillion-dollar budget hole, awaits Governor Bob Ferguson’s signature.
Projected $3.5 billion annual revenue funds education, health care, and rebates, but critics warn of wealth flight from Seattle’s tech hub.
Combines with existing capital gains tax, potentially pushing top rates to 18% with local taxes, threatening job losses and small businesses.

Bill Passage and Key Details

Senate Bill 6346 passed the Washington Senate on February 16, 2026, with House approval following in late February or early March, concluding the 60-day session. The measure imposes a 9.9% tax on personal income exceeding $1 million after an inflation-indexed deduction, applicable to both residents and nonresidents on Washington-sourced income. First payments arrive in 2029. This marks Washington’s first broad income tax, though narrowly targeted at about 0.5% of households, or 21,000 individuals and couples. The tax excludes income already hit by the state’s capital gains tax.

Democratic Push Amid Fiscal Pressures

Governor Bob Ferguson, a Democrat, champions the tax as historic progress for fairness, promising rebates like $1.9 billion in sales tax relief and expansions to the Working Families Tax Credit. Democratic majorities in both chambers drove passage to address a multibillion-dollar deficit fueling demands for K-12 education, health care, and childcare. Washington historically shunned wage income taxes, leaning on regressive sales, property, and excise levies that hit lower-income families hardest. Proponents argue this shifts the burden to the wealthiest for system stability.

Economic Risks and Wealth Flight Concerns

Critics, including Tax Foundation analyst Jared Walczak, warn the tax inflicts real damage as the last straw for Washington’s tech sector, home to 360,000 Seattle jobs and 695,695 small businesses. Combined with the 7-9.9% capital gains tax and local levies, top rates could hit 18% in Seattle, among the nation’s highest. High earners may flee to low-tax states like Texas or Florida, mirroring post-2021 capital gains tax debates. This exodus risks job losses and hampers growth, punishing success that drives prosperity for all.

Washington should expect high-income earners to leave the state in response to its exorbitant tax on millionaires’ income. https://t.co/Pgs9CVEdix

— reason (@reason) March 17, 2026

Projected Impacts and Broader Precedent

The tax promises over $3.5 billion yearly starting 2029 for services, rebates like sales tax holidays and family credits for diapers. Short-term, it aids low-income affordability; long-term, it progresses the tax code but sets a precedent for government overreach. With President Trump now slashing federal overspending and Biden-era inflation, states like Washington doubling down on soak-the-rich schemes ignore lessons of economic distortion. Conservatives see this as another leftist policy eroding incentives for achievement, potentially influencing other no-income-tax holdouts.