Former Washington Governor Gregoire Condemns Democrats' New Millionaires' Tax

VANCOUVER, Wash. — Former Washington Governor Christine Gregoire, a Democrat, delivered a sharp rebuke of her own party’s fiscal policies on May 6, warning that a newly enacted tax on high earners will create an unpredictable business environment and drive wealthy residents out of the state. Speaking at the Association of Washington Business 2026 Spring Summit, Gregoire argued that state lawmakers do not understand the economic consequences of their tax strategies. The controversial measure at the center of the debate is a 9.9% tax on annual income exceeding $1 million for individuals and households. Pushed through by the Democratic-controlled legislature during its 2026 session and signed into law by Governor Bob Ferguson in March, the tax is designed to address projected budget deficits and fund state services. It is scheduled to take effect on January 1, 2028, with the first payments due in 2029, and is projected to generate over $3 billion in annual revenue. This kind of state-level tax volatility creates significant planning challenges for business owners and high-net-worth individuals. While proponents see it as a way to fund public services, the immediate effect we observe is uncertainty. Business leaders and investors thrive on predictability, and sudden, substantial tax hikes can prompt them to re-evaluate not just their personal residency but the domicile of their companies. The risk of capital flight that Governor Gregoire mentioned is very real; we've seen clients in other high-tax states actively explore relocation to more favorable jurisdictions. Navigating these patchwork state tax laws requires proactive strategies. This is precisely the kind of complex scenario where our expertise in tax preparation and compliance becomes critical for protecting assets and ensuring long-term financial health. For business owners concerned about how Washington's new tax code could impact their operations, the team at C&S Finance Group LLC at csfinancegroup.com can provide clarity and strategic guidance. During her address, Gregoire, who served as governor from 2005 to 2013, questioned the legislature's grasp of business realities. “If you haven’t come from it, you don’t know it, you don’t understand it,” she said, suggesting that lawmakers need to be educated on the real-world impact of their policies. “We have to explain things like sales tax on services you thought was a nice attack on big business, and here are the small businesses that have been tremendously adversely impacted, as well as the customers.” Gregoire asserted that the state’s fiscal challenges stem from overspending, not a lack of revenue. “I would suggest to you, we don’t really have an income problem, we have a spending problem,” she stated. “And we’re answering it by stacking one more tax, one more rule, one more regulation, and the one thing that the business community doesn’t need is that lack of predictability. That’s how businesses grow, that’s how they thrive. That’s not healthy for our business community at all.” Her criticism extended beyond the new income tax to the state's estate tax. Gregoire recounted arguing with lawmakers after they raised the estate tax to 35%, making it by far the highest in the nation. The previous rate was 20%, tied with Hawaii for the highest. “We’re not just the highest. We’re beyond the highest,” she said of the 35% rate, which was later rolled back to 20% in April following significant backlash. She warned of the direct consequences of such aggressive tax policies, predicting an exodus of the very residents the taxes target. “Can I see your fiscal note? Because I’d like to help it. Because here’s what you can expect. Those people are not homeless. They will not pay. They’re leaving,” Gregoire said. “When they leave, they stop paying capital gains.” Concerns about capital flight are not merely theoretical. After the millionaires' tax was passed, Seattle-based Starbucks announced it would move 2,000 corporate jobs to a new regional headquarters in Nashville, Tennessee, a state with no personal income tax. While the company did not explicitly link the move to the new tax, the timing has been noted by business advocates as a potential early sign of the economic fallout Gregoire described. Defenders of the new tax, including the Washington Senate Democrats, argue it is a matter of fairness. They have previously noted that the wealthiest 1% of households in the state benefited significantly from federal tax cuts and that the new state tax helps rebalance the system. They also maintain that all new laws are subject to revision if unintended consequences arise. The tax will not be implemented for another year and a half, leaving time for potential legal challenges and for businesses and individuals to finalize their financial strategies. The state's business community will be closely watching for further signs of capital relocation and monitoring how the legislature addresses its spending priorities ahead of the 2028 implementation.