Washington Enacts 9.9% 'Millionaire's Tax,' Affecting Nearly 21,000 High-Income Residents and Fueling Relocation Fears

OLYMPIA, Wash. – Governor Bob Ferguson signed into law on March 30, 2026, a controversial new tax on the state's highest earners, a move that supporters say will rebalance a regressive tax system but that opponents warn will trigger an exodus of wealth. The legislation, known as the “millionaire’s tax,” imposes a 9.9% tax on annual personal income exceeding $1 million. The new tax is scheduled to take effect in 2029. According to an analysis by the Washington State Department of Revenue (DOR), the tax is projected to affect approximately 20,791 taxpayers and raise over $3 billion in its first year of collection for tax year 2028. The law marks a significant policy shift for Washington, which was previously one of only nine states without a personal income tax. Supporters, like State Rep. Sharlett Mena, argue the measure is necessary to provide tax relief for working families and small businesses, while opponents contend it is unconstitutional and will drive successful entrepreneurs and investors to more tax-friendly states. From our perspective, the immediate impact of this new tax is less about the 9.9% rate itself and more about the introduction of profound uncertainty into long-term financial planning for business owners. High-net-worth individuals and company founders build their strategies around predictable fiscal environments. This law not only introduces a new state-level income tax but also opens the door for future expansions, as has been seen in other states. This creates a volatile climate where business owners are forced to model for constantly shifting goalposts, complicating everything from succession planning to capital investment. The conversation quickly moves from simple compliance to a complex optimization problem: is the business better served by remaining in Washington or relocating to a state with a more stable tax structure? Navigating these strategic decisions requires a deep understanding of multi-state tax implications and long-range financial modeling. This is precisely the kind of complex scenario where expert guidance in tax preparation and compliance becomes critical for protecting assets and ensuring a company’s continued growth. We have seen that proactive planning can mitigate the risks associated with such significant legislative changes. For business owners evaluating their options in light of this new law, the team at C&S Finance Group LLC at csfinancegroup.com provides the strategic advisory needed to make informed decisions. Even before the governor’s signature, the legislation spurred activity in the real estate market. Realtors in Washington and neighboring states report that wealthy residents are already exploring relocation. Michael Wendland, a real estate agent in Coeur d’Alene, Idaho, noted a “major influx” of affluent Washingtonians considering a move across the border. Similarly, Kirkland-based realtor Susan Culverhouse told The Center Square that many high-net-worth clients are not waiting to see the effects, instead putting their primary residences up for sale. Some are not leaving the Pacific Northwest entirely but are changing their legal residency. Culverhouse observed a trend of clients selling their large Washington estates, purchasing smaller “lock and leave” condos in areas like Bellevue, and establishing official residency in states without income or estate taxes. This allows them to maintain a presence in the state while legally avoiding the new tax burden. This phenomenon, often termed “millionaire migration,” is a subject of intense debate. Critics of the tax, including Chris Cargill, CEO of the Mountain States Policy Center, argue that wealth is mobile and that once it leaves, it rarely returns. He noted that Washington reportedly lost half a billion dollars in wealth between 2022 and 2023. House Republican Floor Leader April Connors of Kennewick said she personally knows of affluent residents in the Tri-Cities area who have already left due to the state's rising tax burden. Academic studies suggest these concerns are not unfounded. Research cited by policy analysts indicates that high earners are responsive to tax differentials. One study found that top earners in California were 40% more likely to leave the state following a tax increase. Another analysis of IRS migration data found that a one-percentage-point increase in a state's top marginal tax rate was correlated with a 2.6% increase in out-migration among high-income households. The Department of Revenue data provides a granular look at who will be affected. In the Spokane area, for instance, an estimated 790 millionaires residing in local legislative districts will be subject to the new tax. Statewide, the levy is expected to impact fewer than 0.5% of all Washingtonians, according to Ferguson’s administration. Proponents argue this small group can afford to contribute more to fund critical services. Opponents, however, are preparing legal challenges, arguing the tax is unconstitutional under state law. Internal documents obtained by critics reportedly suggest the legislation was intentionally designed as a legal test case to overturn Washington's long-standing ban on progressive income taxes, further fueling distrust among business leaders. A lawsuit has already been filed by business owners, including a Kent-based trucking company owner who warns the tax will ultimately harm his employees. As the 2029 implementation date approaches, all eyes will be on the state's court system to see how the expected legal battles unfold. Business owners and high-net-worth individuals, meanwhile, will be closely watching these proceedings and analyzing migration data as they make critical decisions about their financial futures and where to call home.