Pros and cons of the new ‘Millionaires Tax’ | In Focus

Published 11:00 am Wednesday, March 18, 2026

Is the newly passed “Millionaires’ Tax” good or bad for Washington State?

As with all Legislative decisions, it depends.

Washington State has had a long history of being a regressive tax state: According to the Economic Opportunity Institute: “Due to the absence of a graduated income tax and a heavy reliance on the sales tax, Washington state’s tax system has evolved to the point of being rated the most regressive tax system in the country.”

That means the poorer a person is the higher the proportion of their income goes to taxes. When the legislature passed the Revenue Act of 1935, it started the sales tax and the business and occupation (B&O) tax. Since then, voters have voted down a state income tax ten times. Washington is one of eight states that does not have a state income tax.

Additionally, “Washington is the only state in the nation that levies business taxes upon gross revenues” [rather than on business net income]…. In addition, the tax imposes a heavier burden on new and small businesses that may not be as profitable as larger well established firms. “

Property taxes also pose a problem since they make up a lot of income, especially for local government funding. Property taxes increase as the valuation of the property increases through housing scarcity and inflation. This especially affects those on fixed incomes. The advantage of property taxes is that “they do offer a relatively predictable and stable source of government revenue” (Economic Opportunity Institute)

In 1902 the Washington Supreme Court interpreted the inheritance tax passed in 1901 as an excise tax “on the privilege of inheriting property” rather than as a property tax. This new type of taxation opened the door for motor vehicle license taxes in 1905 and the fuel tax in 1921.

Meanwhile, “Stocks, bonds and money market accounts are an increasingly important source of wealth in today’s economy but they still remain exempt under Washington’s tax system” (Economic Opportunity Institute).That is, until 2021 when the capital gains tax was passed and deemed constitutional by the State Supreme Court in 2023.

This was an excise tax on profits gained from selling assets like stocks, bonds, and business interest. “Under that law: For most taxpayers, long-term capital gains over the standard exemption ($278,000 for 2025) are taxed at a 7% rate. For gains above $1 million, the rate jumps to 9.9%…. For most Washington residents earning under $1 million, Washington remains a no-income -tax state in practical terms.” (Kiplinger.com).

So, Washington State now will have a capital gains tax and a “Millionaires’ Tax” for couples who make over $1 million/year.

Those who oppose this new tax argue that it will drive millionaires to leave the state for states that have no income taxes. But it is much more complicated than opponents threaten. According to Quantum Planning,even if you move, and your business is still in Washington, the wealthy will still be liable to pay the tax, no matter the owner’s residence. Also, moving to Idaho for instance, will mean there no such Millionaires’ Tax, but Idaho has a state income tax that has to be considered.

While a state referendum is not a way of striking this new tax down (the new law forbids such a referendum), a citizens’ initiative drive could be an option. A lawsuit taken to the Washington Supreme Court is also a possibility, but the Court is liberal as shown by its recent Capital Gains decision. That’s an iffy proposition.

My concern is that this Millionaires’ Tax is only a-foot-in-the-door. Once it is in place in 2028, and taxes begin to be collected in 2029, the level of those taxed will gradually be decreased and more and more Washingtonians will end up paying income taxes.

Democrats have had no real competition since Washington state had its last Republican governor in 1985. Democrats have had no real check on their power for most of that time. They have gotten arrogant and, as the previous week’s Courier Herald political cartoon noted, Democrats aren’t listening to all the objections across the state. Unfortunately, since being a Republican candidate is seen as being in the pocket of President Trump, conditions are not likely to improve for the GOP.

State taxation has been a mess since 1889. Recent taxes make the state less regressive but more anti-business. Now the problem is the lack of Democratic self-control and an unwillingness to listen and compromise.

Governor Bob Ferguson promised to push for cutting expenses, and he mitigated some of the problems, but political pressure from his own party seems to be too strong for him to resist.