Washington State’s Millionaire Tax: A Democrat’s Case Against the Wrong Solution

I Worked These Campaigns

I need to say something at the outset, because the argument I am about to make will be misread by both sides if I don’t establish where I stand.

In 2024, I worked on No on 2117, the campaign to defend the Climate Commitment Act and the most funded initiative campaign on the ballot that year. That work introduced me to FUSE Washington, and together we fought three other conservative ballot initiatives brought by Let’s Go Washington: I-2066, which sought to roll back building electrification standards; I-2124, which would have let workers opt out of the state’s long-term care program; and I-2109, which sought to repeal Washington’s capital gains tax entirely.

Our field director and political director on that campaign—Beth Doglio and Joe Fitzgibbon, both of whom I have great respect for—are both sponsors of HB 2724, the House version of the very bill this paper is about (Fitzgibbon is the primary sponsor—he wrote it). Three of those four initiatives failed with very large margins, including both 2117 and 2109; only I-2066 passed. The No On 2117 team was terrific and I was very proud that we went three-for-four. A .750 average would get you a long career in the MLB.

On a night that in hindsight now feels like a fever dream—Donald Trump won his second term—Washington State was the only state in the union that had a smidgen of blue hope for us Democrats, because our initiative process proved that direct democracy is still the best way to do things. A lot more on that later.

I say all that to say that I am not writing this to carry water for the billionaire class—I worked to keep the capital gains tax. I believe the wealthy should pay more. I wrote my undergraduate capstone on Washington State tax policy—specifically on how Washington ranks 49th out of 50 states in tax fairness, a distinction we have carried for decades and that every serious policy researcher in the state knows by heart. The Institute on Taxation and Economic Policy has us ranked as the second most regressive tax system in the nation, behind only Florida. I have been doing a lot of research on our messed-up tax system and ways to make it better for a long time.

All of that can be true—Washington’s tax system can be deeply unfair, the wealthy can be undertaxed, I can be a Democrat who has worked on progressive campaigns—and this can still be a bad bill.

There are two places in American politics where I feel like a nomad. The first is tax policy. The second is in our homelessness policy, which will be addressed in a future one of these things that I am calling Insights. On tax policy, progressives propose performative bills that sound good but damage the state economy; moderates won’t actually help working people in material ways; the status quo is somewhat effective at generating revenue but structurally unfair; and whatever good incremental change does exist isn’t outpacing inflation.

The idea of a wealth tax or a higher tax on wealthier individuals is not a new one, and this bill was no secret—I had heard about this being a legislative goal from quite a few people before last session. The moment the bill text dropped, I started writing. Not because I was surprised by what it contained, but because I recognized immediately that it would be popular, that it would pass at least one chamber, and that almost nobody in the progressive coalition would say what needed to be said: that it is designed to make us feel good without doing good.

This paper is my attempt to say it.

What SB 6346 Actually Does

Senate Bill 6346 imposes a 9.9% tax on individual income above $1 million. The most recent fiscal analysis projects it would generate approximately $3.4 billion annually from an estimated 21,000 filers—though supporters initially cited $3.7 billion and 30,000 households. The bill passed the Senate on February 16, 2026, by a vote of 27–22. It was not a party-line vote: three Democrats—Sens. Adrian Cortes (D-Battle Ground), Drew Hansen (D-Bainbridge Island), and Deb Krishnadasan (D-Gig Harbor)—joined all 19 Republicans in opposition. Its companion bill, HB 2724, sits in the House Finance Committee, with an executive session scheduled for February 27 and the legislative session ending March 12.

Remember I-2109—before we fought to keep the capital gains tax in place, it had to go through this same “how a bill becomes a law” process (shoutout to Schoolhouse Rock). The millionaires tax is on the same path now.

The bill’s primary sponsor is Senator Jamie Pedersen. Governor Bob Ferguson has expressed conditional support, setting several requirements before he would sign the bill into law. Ferguson’s conditions include: $1 billion in small business B&O tax relief; an expanded Working Families Tax Credit that would reach 460,000 additional households; two annual sales tax holidays for items under $1,000 (one three-day weekend and one two-day period); elimination of state sales tax on hygiene products and baby supplies; and a requirement that the $1 million threshold rise with inflation.

Revenue would flow to the general fund—which supporters frame as funding education, early learning, childcare, and healthcare, though there are no dedicated allocations requiring it. The bill reads like anything a progressive would want: tax the rich, fund schools, help families. It polled well before it was introduced. It will poll well after.

There is also a critical structural feature that most coverage has ignored: the bill contains a null-and-void clause stating that if a court strikes down the income tax provision, the entire act dies—including all the consumer and small business tax relief. The sales tax holidays, the B&O cuts, the expanded Working Families Tax Credit—all of it goes away if the income tax is invalidated. This is a legislative poison pill. It means the tax relief that voters would actually benefit from is held hostage to the survival of the income tax that economists and legal scholars broadly expect to be challenged in court.

Washington voters have rejected income tax proposals eleven times since 1932. The state constitution and existing statute are widely interpreted to prohibit it. Ferguson himself has acknowledged that litigation is inevitable. The millionaires tax is not a settled piece of policy. It is the opening move in a legal and political fight that will consume years of legislative energy and judicial resources. The question is whether it is worth the fight. I believe it is not.

The Lesson We Already Learned: The Capital Gains Tax and Jeff Bezos

We do not need to speculate about what happens when Washington taxes the wealthy. We have a case study.

SB 5096, the capital gains tax, was signed into law on May 4, 2021. It imposed a 7% tax on capital gains above $250,000. First-year revenue was $896 million—nearly double the projected $500 million. Progressives celebrated. The tax was working.

But the revenue picture told a story that should have given everyone pause. An earlier version of the bill would have drawn 97% of its revenue from just four individuals: Jeff Bezos, Bill Gates, Melinda French Gates, and Steve Ballmer. Even under the enacted version, half of the first-year revenue came from just ten families. This was not a broad-based tax on a wealthy class. It was a tax whose revenue base was dominated by a handful of people whose continued presence in Washington State was voluntary.

Here is what Jeff Bezos actually did. His last sale of Amazon stock in Washington was in November 2021—weeks before the capital gains tax took effect on January 1, 2022. He then sold zero stock for two full years. In November 2023, he announced he was moving to Miami. And then, once he was safely a Florida resident, he executed the largest stock sale of his career: approximately $16.5 billion in Amazon shares throughout 2024. At Washington’s 7% capital gains rate, those sales would have generated roughly $1.1 billion in state tax revenue. He paid nothing. He never paid a dime of the capital gains tax.

Bezos did not just leave after the tax was passed. He planned around it from the moment it was signed. He stopped selling, waited, moved, and then sold—in that order. This is not a story about a billionaire fleeing a tax. It is a story about a billionaire who saw the tax coming, reorganized his financial life accordingly, and executed a plan that cost Washington over a billion dollars in revenue it will never collect.

Meanwhile, the capital gains tax revenue itself tells a story about the fragility of taxing concentrated wealth—even without Bezos in the picture. Revenue dropped from $896 million in 2022 to $433 million in 2023, then partially recovered to $561 million in 2024. The decline was driven by market volatility and taxpayer behavioral adaptation—wealthy filers learning how to time and restructure their gains around the tax. None of that decline was caused by Bezos, because he was never paying in the first place.

The tax still generates meaningful revenue, and I supported keeping it when I-2109 tried to repeal it. But the Bezos case demonstrates an iron law of state-level taxation: the ultra-wealthy do not wait to be taxed. They plan around it. And when the revenue base is this concentrated—half the first-year collection from just ten families—even modest behavioral adaptation can crater your projections.

The capital gains tax rate was subsequently increased to 9.9% for gains above $1 million in May 2025. Now the millionaires tax proposes to layer a 9.9% income tax on top of it. The lesson of the capital gains tax was that concentration risk is real and that the ultra-wealthy have both the means and the demonstrated willingness to relocate. The bill ignores that lesson entirely.

The Millionaire Math Is Fake

I want to address a specific talking point that was very clearly made by a comms staffer who knows how to frame numbers that will engage with the public—one that is going to be circling around among progressive circles in Washington.

A colleague of mine who works for FUSE wrote on a Facebook post that Washington had 463,000 millionaires in 2021 compared to 681,000 today. A 47% increase. The implication was clear: the capital gains tax hasn’t driven away wealth. Look at all these millionaires! They’re staying!

This argument sounds compelling until you look at what happened to the stock market over the same period.

On May 4, 2021—the day Governor Inslee signed the capital gains tax into law—the S&P 500 closed at approximately 4,192. The Nasdaq closed at roughly 13,633. The Dow Jones closed near 34,113.

As of February 2026, the S&P 500 sits near 6,880. The Nasdaq is above 22,700. The Dow is above 49,600.

The S&P 500 has risen approximately 64% since the capital gains tax was signed. The Nasdaq has risen 66%. The Dow is up 45%. The number of millionaires grew 47% over the same period. In other words, the growth in millionaires tracks closely with the growth in equity markets. The stock market created those millionaires. Not Washington policy. Not evidence that the tax isn’t causing flight.

If your house appreciates 50%, you didn’t get richer. Your house costs more. The same principle applies here. Asset inflation pushed people above the millionaire threshold who weren’t there before. A tech worker whose 401(k) crossed $1 million because Amazon stock doubled is now a “millionaire” in the statistical count—but their life didn’t change, their spending power barely moved, and they certainly didn’t make a decision to stay in Washington because the capital gains tax was working well for them. They stayed because their job is here.

The people who actually matter to revenue projections—the ultra-wealthy whose investment income drives the bulk of tax collections—have a different calculation entirely. And Bezos already showed us what that calculation looks like.

The True Rich Don’t Get Paid in Income

This is the core structural flaw in the millionaires tax, and it is the one that most progressive advocates either do not understand or choose to ignore: wealth is not income. But here is what makes it worse—the bill will hit people its authors never talk about in their press conferences.

Consider how a senior technology executive in Seattle actually gets paid. A VP-level engineer at Amazon or Microsoft might have a base salary of $300,000 to $400,000. That is below the $1 million threshold. But their total compensation—including restricted stock units, stock options, and deferred compensation—could easily reach $2 million to $5 million annually. Here is what the bill’s authors either do not understand or choose not to explain: RSUs are taxed as ordinary income when they vest. Not as capital gains. The fair market value at vesting hits your W-2 as wage income. The millionaires tax would apply to every dollar of that vesting event above $1 million.

Amazon uses a back-loaded vesting schedule—5% in year one, 15% in year two, then 40% and 40% in years three and four. A senior employee with a standard grant could see hundreds of thousands of dollars vest in a single quarter. Now imagine a startup employee who has been accumulating stock over five years. The company goes public. All of those shares vest at once. Suddenly they owe 9.9% to Washington State on years of accumulated compensation in a single tax event—on top of the 37% federal rate and Medicare taxes. That is not taxing the rich. That is punishing the people who took the risk of joining a startup instead of taking a safe job at a bank.

The avoidance mechanisms are straightforward for anyone who can plan ahead. Employees can physically relocate to a no-income-tax state before major vesting events. Companies can shift compensation toward stock options instead of RSUs, giving employees more control over when taxable events occur. Deferred compensation structures can push taxable events into future years or other jurisdictions. For Washington taxpayers with adjusted gross income above $1 million, 28% of their income comes from wages and RSU vesting—and that is the income most sensitive to relocation.

The people who cannot restructure are the high-earning W-2 employees in fields where compensation is predominantly salary: doctors, lawyers, senior accountants, mid-level tech managers, small business owners who pay themselves through their businesses. A cardiologist in Bellevue making $1.2 million doesn’t have a compensation committee that can time her pay around a vesting schedule. A trial lawyer in Seattle can’t reclassify his income as equity. These are the people the millionaires tax will actually catch. Not Jeff Bezos. Not the tech billionaires. The upper-middle class professionals who earn well but don’t have the structural flexibility to avoid the tax.

This is the fundamental dishonesty of the bill. It is marketed as a tax on the rich. In practice, it is a tax on the highest-earning workers—people who are wealthy by any reasonable standard but who are not the billionaires the bill’s advocates invoke when making the case for it. The truly wealthy don’t earn income. They hold equity. And when they do receive equity compensation, they have the resources and flexibility to make sure they are not in Washington when the taxable event occurs.

Capital Flight Is Real (Even if Progressives Don’t Want It to Be)

I have been told, more than once, that making this argument is “carrying water for billionaires.” That it amounts to “bootlicking.” That raising capital flight concerns is a right-wing talking point designed to scare progressives out of taxing the wealthy.

Let me be unequivocal: I want the wealthy to pay more. I have worked on campaigns to ensure they do. I supported the capital gains tax and opposed its repeal. The question is not whether the wealthy should contribute more. The question is whether the millionaires tax will actually make them do so—or whether it will drive them to jurisdictions where they contribute nothing at all.

The evidence is not ambiguous. Bezos left—and he planned it. He stopped selling stock before the tax took effect, waited two years, relocated to Florida, and then sold $16.5 billion in shares tax-free. His departure cost the state over $1.1 billion in foregone capital gains revenue on those 2024 sales alone. That is not a hypothetical. That is arithmetic.

The broader data tells a consistent story. Bloomberg reported in March 2025 that Nevada realtors were closing deals of $8 million and above from Seattle transplants at an accelerating pace. SmartAsset’s analysis of IRS migration data found that Washington lost a net 222 high-earning millennial households between 2021 and 2022—the eighth-highest loss nationally. These are not retirees cashing out. These are high-earning professionals in their prime working years choosing to live somewhere else.

I want to engage honestly with the counterargument, because there is a serious academic case to be made that capital flight is overstated. Cristobal Young, a Stanford sociologist, has published extensive research showing that most millionaires stay put after tax increases. His book The Myth of Millionaire Tax Flight presents compelling evidence that the average millionaire is rooted—they have families, businesses, social networks, and professional obligations that make moving costly and disruptive. He is right about the average millionaire.

But the average millionaire is not the problem. The problem is the outliers—the ultra-wealthy individuals who generate a wildly disproportionate share of tax revenue. Young’s research focuses on the broad population of millionaires. The tax revenue, however, is concentrated in the hands of a few dozen families. When half your first-year revenue comes from ten families, it doesn’t matter that 99% of millionaires stay. It matters that one Bezos leaves.

This is the asymmetry that makes state-level wealth taxation so fragile. You need the average millionaire to stay, but you need the outlier billionaire to stay even more. And the outlier billionaire is precisely the person with the most resources, the most flexibility, and the least attachment to any particular state. They have homes in multiple jurisdictions. They have staff who can manage a relocation. They have accountants who can quantify, to the dollar, the savings from moving. The calculus is not emotional. It is mathematical.

What made Seattle Seattle—what made Washington Washington—is the opportunity to grow, to build, to become what it became. The no-income-tax environment was a foundational piece of that story. We should not throw that away.

Capital flows to where it is treated best. Washington competes for high-earning residents against Texas, Florida, Tennessee, and Nevada—states with no income tax and real business ecosystems. I am not talking about New Hampshire or South Dakota. Nobody is relocating Amazon to Concord. But Austin, Miami, Nashville, Reno—those are real alternatives with real infrastructure, real talent pipelines, and zero income tax. The millionaires tax does not create a level playing field. It creates a competitive disadvantage for Washington among the very jurisdictions its wealthiest residents are most likely to consider.

The Myth of Millionaire Tax Flight says people won’t leave Washington State. Fine. But what if Amazon does? What if those jobs all do? Then the people will follow. That is the risk nobody wants to talk about.

Why Would They Choose Seattle?

Washington’s single greatest competitive advantage in attracting and retaining high-earning talent has been the absence of an income tax. The millionaires tax eliminates that advantage for anyone earning above $1 million.

Consider the full tax burden. Seattle’s combined state and local sales tax rate is 10.55%—among the highest of any major American city. Washington already ranks 45th on the Tax Foundation’s State Tax Competitiveness Index. The JumpStart payroll tax, enacted in 2020, adds an additional 0.7% to 2.4% on high-earning employees at large companies. Layer a 9.9% income tax on top of that, and the question for any high-earning professional becomes straightforward: why am I here?

The answers used to be obvious. No income tax. World-class employers. A stunning natural environment. The University of Washington pipeline. A vibrant tech ecosystem. Those factors haven’t disappeared, but most of them are no longer unique to Seattle. Austin offers the UT pipeline, a growing tech scene, and no state income tax. Miami has no income tax and a rapidly expanding financial and tech sector. Even San Francisco, which is losing people, still has the deepest tech ecosystem in the world. Nashville, Denver, and Raleigh-Durham are all competing aggressively for the same talent pool.

The University of Washington is an excellent institution. But so is UT Austin. So is Georgia Tech. So is the entire Florida state university system. The moat that once protected Seattle’s talent base is getting shallower every year, and the millionaires tax is proposing to drain it further.

I want to note what the comparison table reveals: Washington’s 9.9% rate would not be the highest in the nation. California’s top rate is 13.3%, Hawaii’s is 11%, New York’s is 10.9%, and New Jersey’s is 10.75%. SB 6346 would not make Washington the worst. But those states have always had income taxes—their residents priced them in when they chose to live there. Washington would be going from 0% to 9.9% overnight—or more precisely, by 2028 when collections begin, but the signal is sent the moment the bill is signed. That is not an incremental change. It is the largest single jump any state has ever attempted, and it fundamentally alters the calculus for every high-earning person who chose Washington specifically because of the absence of an income tax.

The Sales Tax Holiday Is a Joke

Governor Ferguson’s condition that the bill include two annual sales tax holidays deserves particular scrutiny, because it is being presented as a meaningful benefit for working families. It is not.

The proposal: two sales tax holidays per year, applying to purchases under $1,000. One three-day weekend and one two-day period. Items under $1,000 purchased during those windows would be exempt from state sales tax.

What costs under $1,000? Clothing. Small electronics. School supplies. Groceries (which are already exempt from sales tax in Washington). A pair of shoes. A backpack. These are the purchases that working families make every week, and a two-day window in which they’re slightly cheaper does not materially change anyone’s financial trajectory.

What doesn’t qualify? Cars. Most laptops (most now exceed $1,000). Major appliances. Furniture. Rent. Healthcare. Childcare. The expenses that are actually crushing working families in Washington—the ones that consume 30%, 40%, 50% of their income—are completely untouched by a sales tax holiday. You cannot save your way to economic stability by buying a discounted toaster twice a year.

Eighteen states already run sales tax holidays. Florida, Texas, and Alabama among them. The economic literature on their effectiveness is damning. They shift the timing of purchases without meaningfully increasing total consumer spending. Retailers often raise prices during holiday windows to capture the savings. And the administrative costs of implementing the holidays—programming point-of-sale systems, training staff, handling edge cases—fall disproportionately on the small businesses that are supposed to benefit from the B&O tax relief in the same bill. That may get cheaper with the advancement of AI, but at this point that is speculative—and the small businesses absorbing these costs today are the ones the bill claims to help.

The real problem is not that the sales tax is too high during certain weekends. The real problem is that the sales tax exists at the rate it does. Washington’s reliance on the sales tax is a structural feature of its tax system, driven by the absence of an income tax. Adding an income tax for millionaires while keeping the sales tax at 10.55% means poor people still pay a double-digit tax rate on every purchase they make, every day of the year. They just now have company at the top.

If you want to fix regressivity, you replace the regressive tax. You don’t supplement it.

What This Actually Looks Like for Workers

The promise of the millionaires tax is that it will help working families. Let me describe what working families will actually experience if the bill becomes law.

A single mother working as a medical assistant in Tacoma, earning $42,000 a year, will continue to pay 10.55% sales tax on every non-grocery purchase she makes. Her effective state and local tax rate, as a percentage of income, will remain among the highest in the nation—because Washington’s regressive structure means low-income earners pay a far larger share of their income to state and local taxes than wealthy earners do. Before the capital gains tax, ITEP’s 6th Edition estimated that the poorest 20% of Washingtonians paid 17.8% of their income in state and local taxes while the top 1% paid just 3.0%. The capital gains tax improved this somewhat: ITEP’s current 7th Edition now puts those figures at 13.8% and 4.1% respectively. Progress—but a three-to-one gap between what the poorest and wealthiest pay is not a fair tax system.

Under the bill, the expanded Working Families Tax Credit would reach additional households, and that is a genuine benefit. I do not dismiss it. But it is a benefit that could be funded without creating a new tax structure that invites capital flight and legal challenges. It is a benefit held hostage, through the bill’s null-and-void clause, to the survival of an income tax that every legal observer expects to be challenged and that voters have rejected eleven times.

Middle-class workers who do not qualify for the expanded tax credit will see no direct benefit whatsoever. Their sales tax rate doesn’t change. Their property tax doesn’t change. Their cost of living doesn’t change. The revenue from the millionaires tax goes to programs they may benefit from indirectly—education, healthcare, childcare—but those same programs could be funded through mechanisms that don’t put the state’s competitive position at risk.

And then there is the concern that Republicans have raised, and that progressives should take seriously even when the source is uncomfortable: the $1 million threshold is a deduction, not a constitutional floor. It can be lowered by a simple majority vote. The infrastructure for an income tax, once built, is permanent. The threshold is not. Today it is $1 million. The next budget shortfall, it could be $500,000. Then $250,000. Then $100,000. The history of income taxes in other states is unambiguous on this point: they start narrow and they widen. The federal income tax began in 1913 at a rate of 1% on income above $3,000 (roughly $100,000 today). Within five years it was 77% on income above $1 million.

I am not arguing that the millionaires tax will inevitably lead to a broad income tax on all Washingtonians. I am arguing that it builds the infrastructure that makes it possible, and that pretending otherwise is dishonest.

The Emergency Clause: An Affront to Direct Democracy

There is a provision in the millionaires tax that has received far less attention than it deserves, and it is, in my view, one of the most troubling features of the bill.

Those ballot initiatives that I worked so hard to make sure didn’t overturn the hard work of the legislature—I still believe Brian Heywood and Let’s Go Washington had a right to put them on the ballot. That is how direct democracy works. You make your case to the voters, and the voters decide. I fought those initiatives because I thought they were bad policy, not because I thought the process was illegitimate.

SB 6346 is crafted as emergency legislation—deemed “necessary for the support of the state government and its existing public institutions.” Under the Washington Constitution, that designation exempts the law from referendum. Opponents cannot gather signatures to suspend the law and put the question to voters. The only path to overturn the tax would be a full initiative campaign, which requires a longer timeline and an affirmative vote to repeal rather than simply blocking implementation.

Senator John Braun, the Republican caucus leader, put it bluntly: the bill includes a clause that prevents the people from overturning it through referendum.

This matters because Washington has one of the strongest traditions of direct democracy in the nation. The initiative and referendum process is embedded in our political culture. It is how we legalize marijuana, raise the minimum wage, and reject policies we disagree with. Washington voters have used this process to reject income tax proposals eleven times. The emergency clause is the legislature’s way of saying: we know you would reject this, so we are not going to let you try.

The use of emergency clauses to bypass the referendum process has a long and contentious history in Washington. The legislature discovered years ago that by attaching an emergency designation to legislation, they could make it invulnerable to referendum petitions. The practice has been criticized by scholars of direct democracy and by voters across the political spectrum who view it as a procedural end-run around constitutional rights.

The pretextual nature of the “emergency” designation is transparent. The state is not in a fiscal emergency. The general fund has reserves. The revenue from the income tax flows to the general fund, not to dedicated accounts for existing obligations. If this is an emergency, it is one that the legislature manufactured for the purpose of avoiding voter scrutiny.

I have worked on progressive ballot measure campaigns. I believe in the initiative process. I believe that sometimes voters get it wrong—I-2066 passed, and I think that was a mistake. But the solution to voters getting it wrong is to make a better case, not to take the question away from them. A progressive movement that claims to represent the people while simultaneously designing legislation to prevent the people from weighing in is a movement that has lost its way.

The emergency clause will almost certainly face legal challenge. Critics will argue, with some justification, that the language is pretextual and that the tax is not genuinely “necessary” for the support of existing institutions. That challenge will add another layer of litigation to a bill already destined for the courts. The legal fees alone—borne by the state, which is to say by taxpayers—could run into the millions before any revenue is collected.

The Constitutional Battle Ahead

Let me be direct about the legal reality of a potential income tax in Washington, because the bill’s proponents have been remarkably vague about it.

Article VII, Section 1 of the Washington State Constitution states that all taxes shall be uniform upon the same class of property within the territorial limits of the authority levying the tax. A 1930 voter-approved amendment defined “property” in the broadest possible terms: “everything, whether tangible or intangible, subject to ownership.” In Culliton v. Chase (1933), the Washington Supreme Court held that income is property under Article VII. That classification means that any tax on income must be uniform—the same rate applied to all income. A graduated structure—0% up to $1 million, 9.9% above it—is the precise opposite of uniform. The court affirmed this interpretation in 1936, 1951, and 1960. Nearly a century of case law, upheld across multiple courts and multiple decades, stands between SB 6346 and constitutionality.

Proponents point to Quinn v. State (2023), in which the Washington Supreme Court upheld the capital gains tax. But that decision is narrower than it appears. The court upheld the capital gains tax by characterizing it as an excise tax on the transaction—the sale or exchange of assets—not a tax on income itself. SB 6346 is different in kind. It taxes aggregate annual income above $1 million, not a specific transactional event. The legal framing that saved the capital gains tax does not extend to a broad income tax, and the court was explicit about that distinction.

Governor Ferguson—a very talented lawyer who I respect a lot—believes he can win this legal fight. He is filling seats on the Washington Supreme Court, and the current court has signaled willingness to revisit the income-as-property doctrine through the Quinn decision. I do not doubt his legal acumen. But I have questions that his office has not answered.

Would a successful defense require the court to overturn Culliton—a nearly century-old precedent? If so, what is the argument for overturning it that doesn’t open the door to graduated income taxes at any threshold? If the Washington Supreme Court upholds SB 6346, would the U.S. Supreme Court take the case under the Fourteenth Amendment’s equal protection clause or the uniformity principles that govern state taxation? And if the U.S. Supreme Court declines to intervene, does the Washington Supreme Court’s decision effectively rewrite Article VII of the state constitution without a constitutional amendment—bypassing the very voters who have rejected that amendment eleven times?

The proper mechanism for allowing a graduated income tax in Washington has always been a constitutional amendment. It requires 33 votes in the Senate. The income tax vote received 27. It would have failed by six votes as a constitutional amendment. Rather than build the coalition for a constitutional solution, the legislature is asking the courts to do what the voters will not. The six previous times the Washington Legislature considered an income tax, it understood that a constitutional amendment was required. This legislature decided the constitution was optional.

There is a deep irony here. In section X, I argued that the emergency clause was an affront to direct democracy because it prevents voters from challenging the law through referendum. Here, the constitutional argument compounds the offense: the bill’s proponents are asking the courts to reinterpret the constitution in a way that voters have explicitly and repeatedly refused to amend. They are circumventing both the referendum process and the amendment process. They are, in effect, saying: the voters are wrong, the constitution is outdated, and the courts should fix both.

That may be legally viable. Ferguson is a skilled litigator and the court’s composition matters. But it is not democratic governance. It is governance by litigation strategy, and it sets a precedent that should alarm anyone who values institutional integrity regardless of where they sit on the political spectrum.

Meanwhile, the litigation will consume years. If the bill is signed and immediately challenged—as it certainly will be—the case could take two to three years to reach the Washington Supreme Court. If it is appealed to the U.S. Supreme Court, add another one to two years. During that entire period, the state will be collecting a tax whose constitutionality is actively disputed, creating uncertainty for taxpayers, businesses, and the programs the revenue is supposed to fund. If the tax is ultimately struck down, the null-and-void clause ensures that every accompanying benefit—the B&O relief, the Working Families Tax Credit expansion, the sales tax holidays—dies with it. The state will have spent millions in litigation costs and delivered nothing.

What I Would Do Instead

1. Stop Being Performative

2. The Real Reform: Replace What’s Broken

Here is what I think is actually going on. The legislature wants the political credit for “taxing the rich” without doing the hard thing, which is restructuring the system. The millionaires tax is a targeted tax on 21,000 filers that does not touch the sales tax, does not replace the B&O tax, and does not address the fundamental regressivity that makes Washington’s system the second-worst in the nation. If you are going to pick the political fight of introducing an income tax—a fight that has been lost eleven times—why would you design one that changes so little?

So I ran the numbers on what a serious reform would look like. The proposal: a 4% flat tax on personal income and a 6% flat tax on corporate net income, both with a $100,000 exemption. The personal tax replaces the state property tax, REET, capital gains tax, and estate tax. The corporate tax replaces the B&O—Washington’s punitive gross receipts tax that penalizes low-margin businesses regardless of profitability. I pulled data from multiple sources because the starting point matters, and I want readers to see the full picture.

The Bureau of Economic Analysis reports Washington’s total personal income at approximately $668 billion in 2024. But that figure includes employer-paid health insurance, government transfer payments, imputed rent, and other items that no state income tax would touch. The actual taxable base—adjusted gross income reported to the IRS—is approximately $416 billion, or roughly 62% of the BEA headline. I use the IRS figure as the conservative baseline for personal income tax modeling below, projected forward to 2026 at the same ~5% annual growth rate confirmed by both BEA and FRED data.

For corporate income, Washington has never levied a corporate income tax, so there is no direct state-level measurement of corporate taxable income. I derived an estimate using Washington’s share of national GDP (~2.9%) applied to IRS-reported national corporate taxable income ($2.4 trillion, TY 2021), adjusted for single-sales-factor apportionment—which taxes income based on where sales are made, not where headquarters sit. The result: an estimated $65–75 billion in taxable corporate income. This is validated by Colorado, which generated $2.6 billion in corporate income tax revenue at a 4.4% rate from a state GDP roughly 44% smaller than Washington’s.

For each scenario below, I apply three levels of behavioral response—bear (15% haircut), base (10%), and bull (5%)—to give readers a range rather than a single point estimate.

Here is what Washington currently collects from the five non-sales taxes this reform would replace:

The question is simple: can a combination of personal and corporate income taxes replace those five taxes? Here is the model.

The chart tells the story. At a 4% corporate rate, the math does not work. At 5%, it gets close. At 6%, it hits the target. The recommended combination: 4% on personal income, 6% on corporate income, both with a $100,000 exemption.

The corporate piece matters because it replaces the B&O tax—which is one of the worst-designed taxes in the country. The B&O taxes gross revenue. That means a grocery store barely scraping by on thin margins pays the same rate as a software company printing money. A corporate income tax fixes that by taxing profit instead of revenue. The grocery store’s burden drops. The software company pays more—on income it can afford.

Put both pieces together and you can eliminate five taxes at once—the B&O, the state property tax, the REET, the capital gains tax, and the estate tax—while keeping the sales tax in place. Here is what that actually looks like for real people:

A family earning $60,000 pays zero income tax and saves money on property tax and lower consumer prices as B&O costs stop getting passed through. A family at $150,000 comes out ahead—$2,000 in income tax more than offset by ~$4,800 in eliminated property tax. An earner at $2 million pays $76,000—a real number, but substantially less than the millionaires tax’s $99,000 layered on top of every other tax they already pay. And the small business owner running a grocery store on thin margins? Their tax burden drops to zero, because a corporate income tax only hits profit, not revenue.

The rates are competitive nationally. A 4% personal rate would put Washington alongside Colorado (4.4%), below Michigan (4.25% post-recent changes), and well below the eight states above 5%. Eleven states currently have flat personal income tax rates between 3% and 5%. A 6% corporate rate would sit below Oregon (7.6%), New Jersey (11.5%), and the national median of state corporate rates. Neither rate is an outlier. Both are middle of the pack.

This is, of course, hypothetical—any version of this would face the same constitutional barriers, legal challenges, and interest group opposition that every tax reform proposal in Washington has faced for nearly a century.

What about eliminating the sales tax entirely? The sales tax generates an additional ~$13.5 billion, bringing the full replacement target to $26.9 billion. Even with a corporate income tax, getting there would require personal rates above 8%—higher than every state except California and New York at the top of their brackets. That is a flight risk, not a reform. The honest path is to replace the five non-sales taxes first, prove the model works, and then reduce the sales tax rate incrementally over time. That is how you actually build a fair tax system. Not in one performative vote, but in a sequence of structural reforms that each make the system better than the one before.

3. Tax Net Worth and Close the Loopholes—but Do It Federally

The only mechanism capable of reaching the truly wealthy is federal. Tax net worth directly, close the loopholes that allow billionaires to pass unrealized gains to heirs tax-free, eliminate the carried interest loophole, and end the stepped-up basis at death. These are not radical propositions. They are the positions of some of the most respected economists in the world.

Emmanuel Saez and Gabriel Zucman of UC Berkeley—the economists who designed Elizabeth Warren’s 2020 wealth tax proposal and Bernie Sanders’s more progressive version—have argued in their book The Triumph of Injustice (2019) and in their Brookings Papers on Economic Activity paper “Progressive Wealth Taxation” (2019) that the U.S. tax system has become effectively regressive at the very top. They calculate that in 2018, the 400 richest Americans paid an overall effective tax rate of approximately 23%—lower than the bottom 50% of earners when all taxes are considered. Their proposed solution: a 2% annual tax on net worth above $50 million and 3% above $1 billion (Warren later raised the billionaire rate to 6%). The Warren version was estimated to raise $2.75 trillion over 10 years, affecting roughly 75,000 households. Sanders’s more graduated version—ranging from 1% on wealth over $32 million to 8% on wealth over $10 billion—was projected at $4.35 trillion.

Thomas Piketty, whose Capital in the Twenty-First Century (2014) launched the modern wealth tax debate, argued that the tendency for the return on capital to exceed economic growth (r > g) means that wealth concentrates inexorably absent progressive taxation. His proposed solution: a progressive annual tax on net worth, with rates from 1% on wealth above 1 million euros to 5–10% on the largest fortunes, coordinated internationally.

The Nobel laureates Joseph Stiglitz, Paul Krugman, and Abhijit Banerjee have all written in support of wealth taxation as a tool to address inequality. The academic consensus is not that taxing the wealthy is wrong. It is that the mechanism matters—and that a state-level income tax is the wrong mechanism.

The key insight is that a federal net worth tax eliminates the interstate competition problem that makes state-level taxation so fragile. Jeff Bezos can move from Seattle to Miami to avoid a Washington income tax. He cannot move from the United States to avoid a federal wealth tax without renouncing his citizenship—and even then, the proposal includes an exit tax on accumulated unrealized gains. The competitive dynamic that cripples state-level policy simply does not exist at the federal level in the same way, because the cost of leaving the country entirely is orders of magnitude higher than the cost of crossing a state line.

Some critics will say that waiting for federal action is naive—that states need to act because Congress will not. I understand the frustration. But the response to federal inaction cannot be a state-level tax that triggers capital flight and delivers less revenue than it promised. The right response is to fix what is broken at the state level—which is what the broad-based reform above does—while continuing to push for federal wealth taxation through the electoral process. Do what you can at the state level without triggering the flight that undermines your own revenue base.

The millionaires tax does not do any of this. It adds a tax. It does not replace one. The B&O stays. The property tax stays. The sales tax stays at 10.55%. The working poor continue to pay a higher effective rate than the wealthy. The bill changes the distribution at the top without touching the distribution at the bottom. That is not progressive policy. That is theater.

What This Means for Leaders

Whether you run a business, lead a nonprofit, represent constituents, or simply pay taxes in Washington State, the passage of the millionaires tax through the Senate has created a new policy reality that demands engagement.

For business leaders: Evaluate your Washington exposure and compensation structures now. If you have key employees above the $1 million income threshold, understand that they might be doing the math on relocation. The competitive pressure from no-income-tax states is real and will intensify the moment the bill is signed. Consider how your talent retention strategy accounts for a 9.9% income tax that your competitors in Texas, Florida, and Tennessee do not bear. This is not hypothetical planning. This is operational risk management.

For political candidates: This bill polls well. It sounds good. And you will be tempted to run on it. Be prepared to explain the nuance—that a bill marketed as “taxing the rich” actually captures high-earning professionals, that the revenue base is concentrated and fragile, that the emergency clause undermines the direct democracy process you claim to champion. If you cannot explain those things, you are not being a leader. You are being a press release.

For nonprofit leaders: The revenue promises sound transformative—$3.4 billion annually for education, healthcare, and childcare. But revenue projections for taxes with concentrated bases are notoriously unreliable. If capital flight reduces collections below projections—and the Bezos case study suggests it will—the programs funded by this tax will face cuts within five years. Plan your organizational budgets accordingly. Do not build capacity on revenue that may not arrive.

For working families: This bill was written for you, but it won’t help you in the ways its authors promise. The sales tax is still there. Your rent is still going up. The millionaires it targets are already planning their exits. And the expanded tax credit—the one provision that would actually help—is tied to an income tax that may not survive the courts. You deserve better than a performative bill. You deserve structural reform.

Conclusion

I said at the top of this paper that I worked the No on 2117 campaign. I fought to keep the capital gains tax when Let’s Go Washington tried to repeal it. I wrote my capstone on how messed up Washington’s tax system is. I believe the wealthy should pay more. All of that is still true. And I still think the millionaires tax is the kind of bill that makes progressives feel good without doing good.

The truly wealthy do not earn income. They hold equity. The wealth that matters most in this state—the billions in unrealized stock gains sitting in the portfolios of tech founders and venture capitalists—is not touched by an income tax. The people who get touched are the high-earning professionals who cannot restructure their compensation: the surgeon, the trial lawyer, the small business owner who had one good year. The bill catches the upper middle class and misses the ultra-rich. That is not progressive taxation. That is a design failure.

And the capital flight risk is not a conservative talking point—it is just what happens. Jeff Bezos never paid a dime of Washington’s capital gains tax. He stopped selling stock before it took effect, moved to Florida, and then sold $16.5 billion in shares tax-free. That cost the state over $1.1 billion in foregone revenue on one person’s sales alone. The millionaires tax proposes to increase the incentive to do exactly what Bezos did.

The emergency clause is an insult to Washington’s tradition of direct democracy. Voters have rejected income taxes eleven times. Rather than making a better case, the legislature decided to take the question off the table entirely. I cannot overstate how much that bothers me. We went three-for-four on election night because we made the case to voters and they agreed with us. That is how you do it. You do not strip the voters of their right to weigh in because you are afraid of what they might say.

The sales tax holiday is a gimmick. The null-and-void clause holds working families hostage. The $1 million threshold is a deduction, not a floor. The whole thing is built on legal uncertainty, political calculation, and economic assumptions that the state’s own recent history contradicts.

If you want to make the tax system fair, you do not add another tax on top of the unfair one. You replace the unfair one. And if you want to tax the truly wealthy—the ones holding equity, not earning salaries—you do it at the federal level, where the competitive dynamics of interstate tax arbitrage cannot undermine your revenue base.

There is a better path. A 4% personal income tax with a $100,000 exemption and a 6% corporate income tax could replace five of the state’s existing non-sales taxes while generating the same revenue. It would lower the burden on working families, shift the corporate tax base from gross revenue to net profit, stabilize the revenue base, and eliminate the capital flight incentive that makes the millionaires tax so fragile. That is the bill the legislature should be writing.

Washington deserves a better bill than this. Working families deserve better than this. And Democrats deserve a party that has the courage to say so.