Washington State Is Driving Out Its Wealth Creators

A new income tax is pushing away the people and firms it depends on.

Courtesy Thom Milkovic/Unsplash

A guest post by Ryan Frost

Last week, Starbucks announced plans to open a second headquarters in Nashville, signaling a major shift away from its home state of Washington. The decision seemed to come as a surprise to Seattle officials. It shouldn’t have.

Just weeks earlier, Governor Bob Ferguson signed Washington’s first-ever income tax—a 9.9 percent levy on household income above $1 million, set to take effect in 2028. Proponents call it a “millionaires’ tax” aimed only at the state’s wealthiest residents. But Starbucks’s decision is an early reminder that tax policy targeting the rich has a way of reaching much further.

Washington has been trending toward higher taxes on wealthy residents for years, pushing them and their businesses increasingly out of the state. After the state implemented a capital gains tax in 2023, Jeff Bezos, once Washington’s highest-income resident, decamped to Miami. The move saved him an estimated $600 million in capital gains taxes. That same year, Fisher Investments, which manages nearly $200 billion, began moving its headquarters from Camas, Washington, to Plano, Texas.

The new income tax appears to be accelerating that trend. Seattle entrepreneur Marc Barros announced last month that he has pulled his photography equipment company Movement out of the state. At Starbucks, both past and present leadership have drawn the same conclusion. Howard Schultz, the company’s former CEO, announced his relocation to Florida the same night the millionaires’ tax passed the state House. His successor, Brian Niccol, is now positioning the firm for growth in more tax-friendly locales.

Even some of the state’s most committed tax-hike advocates are sounding the alarm. Nick Hanauer, the progressive Seattle venture capitalist who spent millions backing Washington’s capital-gains tax, recently warned that the state’s policies are causing entrepreneurs to flee the state.

“Virtually every wealthy friend I have has either left or is planning to,” Hanauer wrote last week. “It’s a catastrophe.” Hanauer now admits that the cumulative burden of new taxes has made Washington “the least attractive place in the country for wealthy citizens.”

The broader data back him up. The Association of Washington Business’s quarterly survey shows 44 percent of Washington business leaders are considering moving their personal residence out of state. The share planning to move their businesses out of state has nearly doubled in a year, from 9 percent to 17 percent. State population data show net migration falling by 7,500 people year over year, with domestic in-migration down 18 percent relative to pre-pandemic levels. Those leaving are disproportionately high-income earners.

But the economic consequences are only part of the story. Washington’s income tax also faces serious legal questions. The state Supreme Court ruled in Culliton v. Chase (1933) that income is property under the state constitution, and that any property tax must apply uniformly and cannot exceed 1 percent. The new 9.9 percent tax on millionaires, which essentially functions as a graduated personal income tax, conflicts directly with that ruling.

Every subsequent court to consider Culliton has affirmed it. Voters have rejected constitutional amendments to allow a graduated income tax six times since 1934. Including other ballot measures, Washingtonians have voted down an income tax 11 times since 1933.

Lawmakers were well aware of these constraints as they drafted the current income tax legislation. Nearly 1,000 pages of internal emails obtained by The Center Square through a public records request show the bill was drafted through close coordination between legislative leaders and the attorney general’s office, with the explicit goal of prompting the state Supreme Court to revisit—and potentially overturn—Culliton. The solicitor general even personally recommended statutory intent language designed to shape how justices might interpret the law once challenged.

That challenge is now underway. Former state attorney general Rob McKenna and former state Supreme Court Justice Phil Talmadge, a Democrat, have filed suit, arguing the income tax violates the state constitution’s uniformity clause and one-percent cap. The case is expected to reach the state Supreme Court next year.

Yet even if the tax survives judicial scrutiny, the underlying problem remains. Washington’s fiscal challenges stem less from a lack of revenue than from rapid spending growth. Since 2015, state spending has more than doubled, outpacing population growth and inflation by roughly 50 percent. Governor Ferguson pledged in his governor-elect press release that new taxes would be “a last resort.” Instead, he has signed the two largest tax increases in state history.

The state’s competitiveness has deteriorated accordingly. The Tax Foundation’s 2026 State Tax Competitiveness Index ranks Washington 45th out of 50. In 2014, it ranked sixth.

Readers from other states should take note: the Washington that fostered some of the world’s most innovative companies, built on low taxes and a light regulatory touch, is now being dismantled. It is not a model worth emulating, but a lesson in how quickly bad policy can undo decades of economic success.

Ryan Frost is the director of budget and tax policy at Washington Policy Center.