Washington’s Millionaire Tax Proposal Raises Fears of Wider Taxes and Economic Fallout

GOP Chair Warns Washington’s ‘Millionaire Tax’ Could Expand Beyond the Wealthy

Washington State Republican Party Chairman Jim Walsh is sounding the alarm over Gov. Bob Ferguson’s proposed “millionaire tax,” arguing that the plan could ultimately open the door to a broad-based income tax affecting far more residents than just the ultra-wealthy.

Walsh contends that while the proposal is marketed as targeting only high earners, it could have lasting legal and economic consequences for the state.

Details of the Proposed Millionaire Tax

Gov. Ferguson unveiled the proposal in late December, calling for a new 9.9% income tax on individuals earning more than $1 million annually. The plan would take effect following the 2026 legislative session.

The tax would apply strictly to income levels above the $1 million threshold and would not be based on net worth or asset values, such as home equity. Ferguson has emphasized that the threshold would remain fixed and would not be lowered in the future.

Ferguson Says Tax Aims to Fix Inequality

In announcing the proposal, Ferguson’s office argued that Washington’s tax system is among the least equitable in the country. According to the governor, households in the bottom 20% of earners pay roughly 13.8% of their income in taxes, while those in the top 1% pay about 4.1%.

Ferguson said the tax is intended to rebalance the system, generate revenue for working families and small businesses, and address affordability pressures across the state. His office did not respond to requests for comment regarding criticism of the proposal.

Walsh Raises Constitutional and Political Concerns

Walsh told local media that Washington’s Supreme Court could ultimately rule that taxing only one income group violates the state constitution. If that happens, he warned, lawmakers could use the ruling to justify imposing an income tax on a much broader segment of residents.

He dismissed assurances that the tax would never expand. “We don’t buy it,” Walsh said. “Nobody buys it.”

FOX Business also reached out to Walsh’s office for additional comment.

Tax Foundation Warns of Economic Impact

An analysis by the Tax Foundation found that the proposed measure could push effective top income tax rates above 18% for certain earners in Seattle, including those receiving restricted stock units (RSUs). That would make Washington’s rate the highest in the nation.

The group noted that relatively few people earn more than $1 million strictly through salary. Instead, income at that level often comes from capital gains, dividends, pass-through businesses, and stock-based compensation.

Small Businesses and Tech Workers Could Be Hit Hardest

According to the Tax Foundation, small business owners and tech employees receiving RSUs could face the greatest impact. Washington is home to nearly 700,000 small businesses and about 360,000 technology-related jobs, based on state and federal data.

“A tax this aggressive would do real damage to Washington’s economy,” wrote Jared Walczak, senior fellow at the Tax Foundation. He warned that the measure could push future business expansion — and potentially existing jobs — to other states.

How Ferguson Plans to Use the Revenue

Ferguson has said revenue from the tax would be directed toward increasing K-12 education funding and eliminating sales taxes on essential goods. These include personal hygiene items like shampoo and toothpaste, baby necessities such as diapers and formula, and certain affordable clothing items.

Supporters say the plan would ease financial pressure on families, while critics argue the long-term risks outweigh the promised benefits.