Voters in Washington state will soon decide the fate of the state’s so-called “millionaire tax” – a 9.9% income tax on earnings above $1m that was signed into law in March and is now facing a conservative-backed effort to repeal it. An initiative on November’s ballot aims to overturn the tax, claiming that the tax represents a slippery slope, and would eventually result in taxes for more than just millionaires. A coalition of advocacy groups and unions opposing the initiative say taxing the state’s 20,000 highest-earning households could raise approximately $3.5bn in necessary annual revenue to fund core priorities like education and healthcare, and expand tax credits and sales tax exemptions.
Facing dwindling federal funds under the Trump administration yet home to substantial tech-industry wealth, including prominent billionaires such as Bill Gates, Steve Ballmer, and, until recently, Jeff Bezos, Washington has joined other states and municipalities by turning to its wealthiest earners as a source of revenue. Massachusetts, Maine, and New York already impose a unique tax rate on millionaires, and Hawaii passed a similar measure in May. California, whose resident billionaires possess a collective net worth hovering above $2tn, will see voters decide on a proposed one-time, 5% tax on billionaires’ wealth.
The measure is opposed by most billionaires as well as Gavin Newsom, the governor; some progressive groups also question the long-term benefits of the one-off tax. Washington governor Bob Ferguson has said he would veto any effort to expand the millionaire tax to encompass lower-earning households. And, after decades of voter-rejected efforts to reform the state’s tax structure, which has historically lacked an income tax and instead levied sales taxes, property taxes, and fees, Washingtonians in recent years have approved new progressive revenue streams, including a capital gains tax.
Advocates claim that the millionaire tax is part of a clear mandate to better align the state’s largely regressive tax code with its progressive values. The statewide fight over an income tax really began in the 1930s, according to Washington state senate majority leader Jamie Pedersen, an architect of the millionaire tax. Nearly 100 years ago, the state’s supreme court ruled that income taxes constituted a property tax, hamstringing efforts to diversify beyond flat-rate excises.
By 2002, a state commission led by Bill Gates Sr concluded that Washington’s tax code was uniquely regressive, and called for a state-level income tax. But, in 2010, voters still voted by wide margins against a proposed tax for those earning above $200,000; Steve Ballmer, Microsoft’s then CEO, was the leading contributor to the campaign opposing the tax, and Amazon founder Jeff Bezos ranked fourth. A reliance on sales, property, and other taxes leaves the state with “the second-worst tax code in the nation when it comes to who actually pays as a share of their income”, said Emily Vyhnanek of the Washington State Budget and Policy Center, a nonpartisan research group.
Those in the lowest-earning quintile spend up to 13.8% of their annual income on state taxes, while those in the top 1% currently spend about 4%, she said. In 2021, lawmakers passed a 7% tax on capital gains above $250,000, which survived a constitutional challenge and a conservative-led ballot initiative aiming to overturn it in 2024. The initiative’s resounding defeat was “some indication that voters were willing to vote for something that the opponents labeled as an income tax”, Pedersen said.
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