WASHINGTON, October 13, 2026 – As Washington state legislators enacted Senate Bill 6346 earlier this year, advocates of the measure presented it as a much-needed solution to generate revenue from the highest-income taxpayers in the state. A recent economic study suggests that there may be a hefty cost to the state.
Entitled “Washington’s Tax Gamble”, the study was produced by the Washington Policy Center and Buckeye Institute. It examines the 9.9% tax on household incomes exceeding one million dollars introduced by Governor Bob Ferguson earlier this year, starting from incomes generated since January 1, 2028.
And here is the trade-off that lies at the heart of the controversy: according to the study, the state economy would incur losses amounting to nearly $2 worth of economic activity for each dollar collected through the tax, with the ratio increasing to $2.50 by 2036.
What the model projects
In 2028, the first year when the tax will be imposed, the report shows that the state GDP will shrink by $4.9 billion compared to its benchmark. Consumer expenditure will fall by $3.6 billion, private investment will decrease by $3.1 billion, while 7,800 jobs will be lost, although there will be an increase of $2.6 billion in state tax revenues.
The projected negative impact increases by 2036. The GDP will be $8.3 billion below its benchmark level, while the state will lose 18,800 jobs compared to the benchmark. There will be an increase in revenues to $3.3 billion.
The Office of Financial Management suggests that the number of taxpayers will amount to approximately 25,000 households, and there will be income from the tax equal to $3.1 billion in the fiscal year 2029 and approximately $4 billion every subsequent year. They are mainly businesspeople or technology workers who are paid in restricted stock units.
The migration debate
The study calculates that up to 575 very rich people—or 2.67% of 21,530 Washington taxpayers who earned more than $1 million on their tax returns—will be leaving in the future, bringing with them some $1.76 billion of annual income. In addition, there could be an 11.9% decline in the number of startups, meaning 1,400 fewer new companies and 6,100 fewer jobs every year.
These are estimates from the model, and do not necessarily reflect the actual numbers. However, the report cites examples of businesses relocating for reasons related to taxes and which, according to it, must worry the policymakers: the investment firm Fisher Investments has moved to Texas following a decision by the Washington Supreme Court confirming the tax on capital gains in 2023; the photo technology firm Moment founded in Seattle announced a move to Wyoming, as its CEO referred to the changes in taxation laws; and Starbucks co-founder Howard Schultz moved to Florida.
However, Seattle Mayor Katie Wilson is skeptical of the claims. “I think the claims that millionaires are going to leave our state are like super overblown, and the ones that leave, like, bye,” she said at a Seattle University event this spring.
A narrow tax base
Context is key here.
The state’s business environment has deteriorated on the Tax Foundation list, going from number six in the nation in 2014 all the way down to sixth-worst this year. In a spring poll conducted by the Association of Washington Business, 72 per cent of over 400 businesses listed the overall tax burden as a primary concern, while 24 per cent stated that they were looking at moving out of state.
The report further goes on to point out that the state will be dependent upon a handful of taxpayers. Capital gains tax for the first year netted about $896 million in revenue, where the largest 10 payments were responsible for 56 per cent of the total.
The authors also bring up how New York State implemented a “temporary” three-year tax on high earners, which was enacted in 2009 and has now been extended to 2032. They warn of the same risk here.
Voters get the final word.
But the controversy is moving forward to the ballot. Initiative 645, which would repeal the tax if passed, will appear on the November 3 ballot.
Whether Washington continues with the tax, repeals it, or ultimately reformulates it, the real question still stands as to whether the state can finance its priorities without destroying the economic base that finances them. According to the study, the answer is no. But regardless of the validity of its criticism, the heated debate about wealth taxation is far from over.
