(The Center Square) – Washington state’s percolating “millionaire’s tax” would result in a top marginal rate of more than 18% for high-income earners in Seattle, based on the combined effects of several state and local layers.
During his State of the State address on Tuesday, Gov. Bob Ferguson prioritized a 9.9% tax on annual adjusted gross income exceeding $1 million, estimated to generate up to $3.5 billion per year to help fund education, tax relief and infrastructure.
Assuming such a tax was passed by lawmakers and signed into law by the governor, revenues wouldn’t reach state coffers for several years due to anticipated legal challenges.
The Washington State Constitution does not explicitly prohibit an income tax, but the state Supreme Court has historically interpreted its tax provisions to classify income as “property,” which imposes strict uniformity requirements that have effectively blocked a non-uniform income tax.
Although not yet a formal bill in this session, the tax has been a major topic of discussion.
Adding the proposed 9.9% millionaire’s tax in Washington would yield a top rate of more than 18% on wage income and on restricted stock units, or RSUs, vesting in Seattle, the highest in the country.
That state and local total in Seattle is derived by adding the proposed millionaire’s tax (9.9%), the WA Cares tax (.58%), the Seattle Social Housing tax (5%) and the Seattle JumpStart tax (2.557%).
Jared Walczak is a Senior Fellow at the Tax Foundation, a Washington, D.C.-based think tank. He penned a Wednesday piece critical of the millionaire’s tax, noting it would largely fall on small business owners and on tech workers receiving RSUs in compensation.
RSUs are a common form of employee compensation where a company promises to grant shares of its stock after certain conditions, called vesting requirements, are met, usually over a set time or performance goals
Walczak’s article says the millionaire’s tax would be particularly detrimental to employees at startups that have yet to go public and whose RSUs could all vest at once.
“The Seattle area is a major tech hub, but increasingly, Seattle-based tech companies are expanding almost entirely outside the state,” Walczak emailed The Center Square.
Tech behemoths Amazon and Microsoft are headquartered in Seattle. The Emerald City is also home to significant offices for Google, Apple and Meta.
“Imposing the nation’s highest top state and local rate on individual income will only accelerate that transition, making the city and the state less attractive to tech employees, particularly those working for startups,” Walczak continued.
He pointed out the already significant tax burden on businesses through the state’s business and occupation tax and broad sales tax, which, as of late last year, now taxes many digital and IT services, increasing costs for businesses and users of these services
“Washington already has a high-rate gross receipts tax and a high-rate sales tax that applies to an unusually broad array of business inputs, including digital automated services,” Walczak said. “Adopting a high-rate income tax atop Seattle’s own high-rate payroll taxes undercuts whatever advantage the region historically offered on taxes, making Washington in general, and Seattle in particular, unattractive to tech workers, entrepreneurs, and small business owners.”
“Our system takes too much in taxes from hardworking families and not enough from the wealthy,” Ferguson said during his State of the State address on Tuesday, the second day of the 60-day 2026 legislative session.
He continued: “That’s not fair. That’s not right, and that’s why I’m calling for something truly historic – a millionaire’s tax.”
He urged the Legislature to “seize this opportunity to make the tax system more fair.”
Ferguson proposed using the revenue to expand the Working Families Tax Credit, fund K-12 education, and lower taxes on small businesses.
