Washington state on Monday enacted a new tax on incomes over $1 million, becoming the latest Democrat-led state to target high earners with new levies.
Gov. Bob Ferguson signed the law, which creates a 9.9% tax on income above $1 million beginning in 2028.
The measure marks a significant shift for Washington, which previously had no state income tax, reports The Wall Street Journal on Tuesday.
Revenue from the tax will fund child care programs, free school meals, tax credits for working families, and tax breaks for small businesses, according to state officials.
Ferguson said the law was necessary to address disparities in the state's tax system.
"This disparity was made much worse by President [Donald] Trump's massive tax cuts for the wealthy — paid for, by the way, with cuts to necessities like healthcare and food assistance that have tremendous harm to the people of Washington state," Ferguson said.
He added the policy would "rebalance an unfair system," noting that residents in the bottom 20% of the income distribution pay about 13.8% of their income in state and local taxes, while higher earners pay a smaller share.
The move comes as other Democrat-led states consider similar taxes on wealthy households.
Supporters say such measures are needed to address income inequality and offset anticipated budget pressures tied to federal cuts to health and nutrition programs included in a tax bill signed last year by Trump.
Massachusetts voters approved a comparable surtax in 2022, adding a 4% tax on income above $1 million. Revenue from that measure rose to nearly $3 billion in fiscal 2025, up from $2.46 billion the previous year.
Republicans in Washington and elsewhere have raised concerns that higher taxes on wealthy residents could prompt migration to lower-tax states and reduce investment.
Earlier this month, Starbucks founder Howard Schultz said he and his family are leaving Seattle for Florida, announcing the move the same day Washington state lawmakers approved a new tax on high-income earners. Schultz shared the decision in a LinkedIn post, saying he and his wife, Sheri, are entering the retirement phase of their lives after more than four decades in Seattle.
Speaking before the bill was signed, state House Minority Leader Drew Stokesbary said the measure could discourage entrepreneurship and warned it might eventually expand to affect more taxpayers. He also pointed to rising state spending as the source of budget challenges.
Similar proposals are advancing in other parts of the country.
New York City Mayor Zohran Mamdani is urging state lawmakers to raise taxes on high-income households as well, while Democrats and progressive groups in Rhode Island and Colorado are backing measures targeting top earners.
In Colorado, a proposed ballot measure would replace the state's flat income tax with a graduated system, increasing taxes for those earning more than $500,000 while lowering them for others.
In California, a service workers union is pursuing a different approach, pushing for a November referendum to impose a one-time 5% wealth tax on individuals with net worth above $1 billion. The proposal has drawn opposition from top Democrats, including Gov. Gavin Newsom.
Meanwhile, several Republican-led states are moving in the opposite direction.
Mississippi and Oklahoma have taken steps toward eliminating personal income taxes, while South Carolina is working to reduce its top rate to 1.99%. Missouri voters may consider a plan this fall to phase out income taxes and expand sales taxes.
In Washington, officials say the new tax will allow the state to expand its Working Families Tax Credit to an additional 460,000 households. The program provides payments ranging from $300 to $1,300 to eligible families.
The state also plans to use the revenue to provide free breakfast and lunch to all K-12 students, reduce taxes for about 138,000 small businesses, and eliminate sales taxes on diapers, over-the-counter medications, and hygiene products.
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