Washington’s Landmark Millionaires’ Tax and the Vote That Could Reshape the State

As voters prepare to decide the fate of Washington’s new millionaires’ tax on the November ballot, the state remains split on the issue, with supporters pointing to needed funding for education and essential services while opponents warn about economic consequences, constitutional questions, and an exodus of high earners.

In March, Washington Governor Bob Ferguson signed Senate Bill 6346, better known as the millionaires’ tax. This law will impose a 9.9% income tax on Washingtonians, with a $1 million deduction. However, Initiative 645, led by Republican and multimillionaire Brian Heywood and his group, Let's Go Washington, aims to repeal the millionaires' tax and ban future taxes on Washingtonians' income. Washington state voters will have the opportunity to vote on Initiative 645 this November.

Senate Bill 6346 was an incredibly polarizing topic in the legislature. The House of Representatives spent 24 grueling hours on the floor debating it. Outside the Capitol, there was just as much discourse. Brian Heywood and his team lobbied and collected signatures to get Initiative 645 to counter the bill on the November ballot, while Governor Ferguson spoke at many rallies to uphold the millionaires’ tax. Washington voters are split as well. 

If upheld, the millionaires’ tax would be a turning point in Washington state history. The state has been known for not having an income tax, leading prominent tech companies like Amazon to base themselves in Seattle. This lack of income tax also has made Washington an appealing destination for high-income earners. While Washington had no state income tax, it implemented a capital gains tax in 2024. The capital gains tax was also highly contested, especially by Republicans. However, the Supreme Court deemed the tax constitutional, and voters upheld it. When asked about Washington having both an income tax and a capital gains tax, D.G., a Mercer Island lawyer who asked to be identified by his initials, said, “As a matter of policy, the millionaires’ tax should be repealed. It makes WA among the highest income tax states for people with incomes over $1M. Many of them will leave and thus lower the tax base. In addition, many people will not come to WA. We moved to WA due to its moderate policies and no income tax.” 

Many wonder whether this tax is constitutional or legal, as the Washington State Supreme Court has historically deemed graduated income taxes unconstitutional on the grounds that income is property. Because the Supreme Court has ruled that income is property, an income tax would be a property tax, but property taxes in Washington state must be uniform and capped at 1%, which precludes a graduated income tax. 

Additionally, on March 4, 2024, the Washington legislature passed Initiative 2111, which “would prohibit the state, counties, cities, and other local jurisdictions from imposing or collecting income taxes, defined as having the same meaning as ‘gross income’ in the Internal Revenue Code.” These factors have made some voters wary of the tax. There was a citizen referendum attempt to overturn this law, but the Supreme Court struck it down because “measures deemed necessary for state government operations cannot be challenged via referendum.” Another case is currently working its way through the lower-level courts, but due to the progressive nature of the courts, even if it makes its way to the Supreme Court, many believe the millionaires’ tax will be upheld.

Washington State is projected to face a $4.3 billion deficit for the 2027-29 biennium. This millionaires’ tax aims to close this deficit without having to cut essential programs. The millionaires’ tax is estimated to bring in $3.5 billion a year. Funds from the tax are to be allocated toward tax reductions, expansion of the Working Families Tax Credit, reduction of the B&O tax, K-12 education, health care, higher education, human services, essential government services, free breakfast and lunch in schools, the Fair Start for Kids Account, and local government mitigation. Many Washingtonians who support the tax argue it is necessary to improve education in the state as well as to ensure that Washington's low-income families receive tax exemptions. 

On the other hand, many Washingtonians fear what this tax will do for future state revenue. Although the millionaires’ tax is not currently a graduated income tax, the verbiage in the bill is such that it could be amended to eventually become a statewide income tax. Andrea Dalton, who is originally from Connecticut and moved to Washington five years ago, remembered the effects on Connecticut when they adopted their income tax: “When there was no income tax in Connecticut, people talked about how great that was and how it made Connecticut an even more attractive place to live and work. Pushed as a solution to a state budget crisis during an economic downturn, the income tax was eventually implemented at a low level (<2%) in the early 90s. That put in place the institutional framework for collecting the income tax, and over the years since, legislators couldn’t resist returning to the well until, for the last decade, the high end has been just under 7 percent.”

This is similar to what many fear will happen in Washington. Another common concern is that the new tax will result in many of the state's millionaires moving to other states without an income tax or will make Washington less appealing to people looking to relocate. Washington currently has approximately 20,000 people with an earned income of over a million dollars, representing the wealthiest 1% in the state. Dalton remembers numerous people who followed the financial incentive and moved out of Connecticut to Florida or other states with low or no income tax.

The potential erosion of the state’s tax base from departing residents isn’t Dalton’s only concern: “As an investor located in CT, I was familiar with businesses located in the state and was aware that many did not view Connecticut as the most attractive place for investing or growing their businesses [anymore]. I’m afraid the people in this area are going to learn the hard way that financial incentives drive behavior. The reality is that all states compete for business, investment dollars, and talent. States with more attractive tax environments will continue to draw them all in greater numbers than Washington with its pending millionaires’ tax.”

Several community members shared this same fear about a flight of wealth, development, and investment from the state. Seattle, in particular, has been a global tech hub, but with the new millionaires’ tax, many fear the city will be phased out of growing industries, including AI, potentially costing the state billions in future revenue.

Although the tax is currently only aimed at the top 1% of earners, this new reality is still hitting hard. M.H., an author and longtime Washington resident who asked not to be fully named, plans to vote to repeal the millionaires’ tax in November. M.H., 68, and her husband raised five kids and lived month-to-month for most of their lives. Due to a diagnosis of multiple sclerosis, her husband had to stop working at 59. While this upcoming year will be the first time their income will exceed $1 million, she worries that the tax will “take away money we genuinely need to prepare for the future.” 

M.H. wants voters to know that not all situations are created equal. “Most people hear ‘a million dollars’ and think it’s a huge amount of money—and it certainly is a lot—but it doesn’t go as far as people might assume, especially with the rising cost of healthcare and long-term care. I had planned to retire at 67, but I’m still working because I need to make sure we’ll have enough to pay for my husband’s care. I also don’t know how many more years I’ll be able to continue working, which makes saving now even more important.” 

Washingtonians will vote to uphold or repeal the millionaires’ tax on November 3.