Washington Proposes Income Tax, Raising Concerns Over Business Exodus

Critics argue the new tax would undermine the state's economy by driving businesses, investment, and jobs elsewhere.

Published on Feb. 3, 2026

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Washington state is considering a new 9.9% income tax on individuals with taxable income above $1 million, starting in 2028. The proposed legislation, framed as a way to fund education and social services, has sparked concerns that it could drive businesses and high-earning individuals out of the state. Critics argue the tax would make Washington less attractive for entrepreneurs and companies, potentially leading to job losses, reduced investment, and an eroding tax base.

Why it matters

Washington has long relied on a tax system focused on sales, business and occupation, and property taxes, which has helped make the state attractive for businesses. The proposed income tax, combined with other recent tax increases, could push Washington's top tax rate to over 18%, the highest in the nation. This raises fears that the state could experience an exodus of high-earning individuals and companies, similar to what has occurred in other high-tax states like California and New York.

The details

The proposed income tax, outlined in Senate Bill 6346 and House Bill 2724, would target the top 0.5% of households in Washington. Proponents argue it would fund critical services, but critics warn it could have severe economic consequences. They point to data showing Washington is already experiencing net losses of affluent households, with high-earning millennials and Gen Z professionals leaving the state. Companies like Amazon, Tesla, and Microsoft have also shifted operations and executive residences to lower-tax states like Florida and Texas in recent years.

  • The proposed income tax would take effect in January 2028.
  • According to state legislators, the tax could expand to impact more residents within a few years of implementation.

The players

Mark Harmsworth

The director of the Small Business Center at the Washington Policy Center, who argues the proposed income tax would undermine the state's economy.

Larry Springer

A Democratic state legislator who suggests the income tax could eventually impact more than just the top 0.5% of households.

Jeff Bezos

The founder of Amazon, who relocated to Miami in 2023, drawn to Florida's zero-income-tax environment.

Elon Musk

The CEO of Tesla and SpaceX, who moved operations and residence to Texas, another state with no income tax.

Brad Smith

The president of Microsoft, who has warned of "lasting damage" to Washington's innovation economy if the income tax is implemented.

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What they’re saying

“And if you think it won't touch you since you don't make a million dollars a year, think again. According to Larry Springer (D), within a few years, it will be on everyone.”

— Larry Springer, State Legislator (clarkcountytoday.com)

“Microsoft President Brad Smith has warned of 'lasting damage' to the state's innovation economy.”

— Brad Smith, President, Microsoft (clarkcountytoday.com)

What’s next

The proposed income tax legislation, Senate Bill 6346 and House Bill 2724, is currently under consideration by the Washington state legislature. If passed, the tax would take effect in January 2028.

The takeaway

Washington's proposed income tax has raised significant concerns that it could undermine the state's business-friendly tax environment and lead to an exodus of high-earning individuals and companies. Critics argue the tax could shrink the state's tax base, reduce entrepreneurial activity, and cost jobs, particularly in the tech and finance sectors. As other high-tax states have experienced, Washington risks losing the competitive advantage of its current no-income-tax status if the legislation is enacted.