Perhaps the biggest issue on the ballot this fall is the fate of the Millionaires Tax. To change Washington’s regressive tax system or to not change it? That is the question.
Initiative 645, an initiative effort from Let’s Go Washington, the group behind the other anti-trans and anti-LGBTQ initiatives on the ballot, would repeal the Millionaires Tax, which is expected to raise $3 billion annually by taxing roughly 21,000 eligible Washington households. Repealing it would lose millions of dollars for funding for schools, health care, and other critical services.
The whole purpose of the Millionaires Tax was to find more state funding in a time when unaffordability has reached an all-time high. It could also pave the way for more progressive tax reform. But first the tax must withstand the multiple challenges against it, including this initiative effort, which has raised millions to oppose it. A campaign to counter I-645 has far outfundraised the repeal effort.
The pro-tax side believes repealing it would be devastating. Adam Glickman, secretary-treasurer of SEIU 775, which represents service workers, says the initiative “would cut critical services that people rely on.”
According to Washington Education Association president Janie White, “The Millionaires Tax would help the state fund schools, health care, services for seniors and people with disabilities, and more.” Some of that funding could pay for special education, additional staffing, and behavioral health resources.
Pivotally, keeping the Millionaires Tax would enable the state to trim its high sales tax, which disproportionately affects the lower income brackets, according to Glickman.
You’ve heard it over and over: Washington has the second most regressive tax system in the country. The Institute on Taxation and Economic Policy (ITEP) mapped out this regressiveness in a 2024 report.
In Washington in 2024, ITEP said the top 1 percent earned more than $878,400 in a year and paid an estimated 4.1 percent of its income in state taxes. The next 19 percent earned $162,000 to $878,400 annually, paying 9.3 percent or less of its income in state taxes. That also meant that less than 20 percent of Washington’s taxpayers earned more than $250,000—a new key political benchmark—that year. The bottom 20 percent earned less than $33,500 a year, while paying 13.8 percent of its income in state taxes.
For many years, legislators talked about fixing this regressiveness, but never did. Until last year.
An Origin Story
The Millionaires Tax was born from the 2025 legislative session when Democratic legislative leaders determined that the state government would need more money. Then President Donald Trump passed his “One Big Beautiful Bill.”
“Enormous tax cuts for corporations and the really wealthy individuals added fuel to the fire,” says state Senate Majority Leader Jamie Pedersen, D-Washington.
Trump’s bill cut taxes for the rich, plus health and social programs. It was so dire, it supposedly put moderate legislators and their constituents in the mood to tax the incomes of Washington’s wealthiest residents for the first time in decades, Democratic leaders speculated.
So, Pedersen and other Democratic leaders seized the moment. They had to convince both leftists and moderates to pass the complicated Millionaires Tax bill. Every Republican was dead set against it.
Pedersen remembered being nervous. “I wasn’t confident it would get through the House till a few days before it passed,” he says.
They had to convince moderates that any income tax wasn’t a kiss of death. The struggling economy and Trump’s bill helped persuade them. Leftists wanted and got major changes in the bill. They stripped out a $550 million tax break for large companies. They moved a sunset of an expansion of the sales tax on services from 2030 to 2029. The legislature eliminated a sales tax on diapers and boosted a working family tax credit. The final version of the tax puts a 9.9 percent tax on persons earning more than $1 million a year, with the first $1 million being exempt. The state plans to start collecting the tax in 2029 on 2028 incomes.
Lighting a Fuse
Aside from the realities of the economic hellscape, the timing for the Millionaires Tax was also right because of the current Washington State Supreme Court. The legislative Democrats thought the court might be ready to reverse or modify a 1933 ruling that has stood in the way of a state income tax for nearly a century. The tax could be the bomb to blow up that ruling.
The key words are “income tax” and “graduated.” Written in 1889, Washington’s constitution does not contain the phrase “income tax”—a fringe idea in the 19th century. The 1889 constitution does address “property taxes,” including the fact that the same property tax rate must apply equally to everyone.
Washington adopted its first income tax in 1932. The next year, the state supreme court ruled an income tax is also a property tax, and since that income tax was levied at different rates for different incomes, the 1933 court ruled it unconstitutional.
Over time, the word “graduated” faded from the state’s political memory. Meanwhile, the words “income tax” became kryptonite to the state’s legislators and voters. Make no mistake, the 2026 millionaires’ income tax is a graduated tax. Pedersen hopes today’s supreme court is more comfortable with the idea that property and income taxes are separate entities than their 1933 counterparts. The court’s ruling could change the state’s tax code.
But in early April, former state attorney general Rob McKenna, former Supreme Court justice Phil Talmadge, and the Citizen Action Defense Fund filed a lawsuit in Klickitat County arguing that earlier rulings by the Washington State Supreme Court have set a strong precedent that an income tax is a property tax.
Pedersen acknowledged: “It’s a big thing to strike down a precedent.”
McKenna and Jackson Maynard, head of the Citizen Action Defense Fund, each donated $500 to the anti-tax ballot initiative.
Conservative interests are financially supporting state supreme court candidates they believe will kill the tax when it inevitably hits the high court. Meanwhile, liberal interests are doing the same thing with a different slate of candidates.
If that conservative strategy to kill the tax doesn’t work, there’s always the ballot measure.
The Money
Yes on I-645, the group trying to repeal the tax, has raised almost $6 million. They’ve spent nearly $4 million of that so far, much of it on just getting enough signatures to get the repeal measure on November’s ballot.
Spread across two political action committees, the big money against the Millionaires Tax comes from the usual suspects: a handful of wealthy people and business interests on the anti-tax side.
The biggest donors to the PAC are hedge fund manager Brian Heywood ($545,000) and retired trucking company executive Steve Gordon ($275,000), the leaders of Let’s Go Washington, the group behind this initiative and the other two initiatives on the ballot. The rest of the list includes Steve’s parents, Larry and Virgina Gordon ($450,000), retired tech multimillionaire Lawrence Hughes ($250,000), the investment firm Madrona Venture Group ($250,000), and Bellevue shopping center developer and landlord Kemper Holdings ($200,000).
Those seven contributed $1.97 million of the almost $6 million the PAC has collected. Several people and business interests donated in five figures, plus numerous smaller individual donors. Microsoft Azure president Girish Bablani donated $1,000.
The side supporting the tax, No on I-645 and another PAC, have massively out-fundraised the Yes campaign. They’ve raised roughly $12.8 million.
Unions are the main bankrollers of the pro-tax side—spread across three PACs. These include various branches of the Washington Education Association ($3.14 million), SEIU 775 ($1.64 million), the National Education Association ($1 million), and the Washington Federation of State Employees ($1 million). Contributions under a million came from the American Federation of State, County and Municipal Employees ($500,000), UFCW 3000 ($250,000), and the Washington State Nurses Association ($100,000). The only individual in the top donors is retired software developer and current official of a philanthropic organization David Habib, who donated $150,000. Habib and the six unions account for $7.8 million of the total $12.8 million raised by the Millionaires Tax supporters.
That should be enough to counter the repeal campaign. But its talking points are persuasive.
A Bit of Spin
Along with the $6 million that Yes on I-645’s two PACs have raised, the anti-tax movement is also relying on a few key talking points to win voters to its side.
One major argument against the tax is that the Millionaires Tax is a gateway drug to an income tax on the everyman, not just millionaires.
“Senator Pedersen has made his desire for a universal statewide income tax abundantly clear. In no uncertain terms, he has outlined that he will do whatever it takes to change the law to pass an income tax for all residents. What he fails to understand is that voters don’t trust Olympia with their money,” said Hallie Herzberg, spokeswoman for Let’s Go Washington.
Tax opponents point to a recent KUOW interview with State Rep. Cindy Ryu, D-Shoreline, who is running for the state senate. She argued the income threshold should be lowered from $1 million to $250,000.
Pedersen pushed back against this narrative. According to him, the Democrats don’t have the long-term political capital to lower the tax’s threshold from $1 million. He pointed to Gov. Bob Ferguson saying last legislative session that he would veto any bill that lowered the $1 million tax threshold. Pedersen also believed that those necessary Democratic moderate votes wouldn’t support lowering the threshold for many years because of the potential political blowback.
The other high-profile argument against the Millionaires Tax is that it will drive business leaders and high earners out of state. While this phenomenon has been studied nationally, local research is scarce. Almost all evidence of an elite exodus from Washington is anecdotal.
“Every day we receive messages from people who have left, or are preparing to leave. We have real estate agents telling us that people are putting their homes on the market. There are news stories weekly about the wealthy leaving and taking their businesses with them,” says Morgan Irwin, the Association of Washington Business’s vice president of government affairs.
The AWB routinely surveys its members. The latest took place this July, with 378 responses out of roughly 8,000 members. That’s 4 percent of their membership. The respondents were the only people who wanted to volunteer an opinion, as opposed to having a truly random poll.
Thirty-three percent of those respondents say they plan to expand their businesses outside of Washington, chiefly because of this state’s overall tax situation—the new Millionaires Tax plus several other new taxes. Forty-five percent of the business owners plan to move out of Washington themselves.
“People aren’t leaving because of a new tax; they’re leaving because of another and another and another tax,” Irwin says.
Let’s Go Washington’s leader, multimillionaire hedge fund manager Brian Heywood of Redmond, declined to be interviewed. Let’s Go Washington’s spokeswoman declined to speculate whether he would leave Washington if the Millionaires Tax survives.
The AWB said some of Washington’s top money earners have moved to Florida, Texas, Tennessee, and Wyoming, all of which don’t have income taxes.
But the ITEP report countered: “States described as ‘low tax’ are often high tax for low-income families. States such as Florida, Tennessee, and Texas are often described as ‘low tax’ due to their lack of personal income taxes. While this characterization holds true for high-income families, these states levy some of the nation’s highest tax rates on the poor.”
Meanwhile, Cornell University sociology professor Cristobal Young has studied millionaire tax flight for roughly 20 years. His research is heavily based on analyzing Internal Revenue Service documents.
In a 2025 Cornell University article, Young said some millionaire tax flight exists, but only a tiny amount. “Only about 2.4 percent of millionaires move each year—and only a fraction of those moves reduce their taxes—overall tax migration ends up being a small fraction of a small fraction,” he wrote.
The people who are really doing the moving? “Recent college graduates who are brimming with potential, searching for work and unburdened by major responsibilities. Their rate of migration from one state to another is over 12 percent, more than four times the rate of millionaires,” Young wrote.
It’s harder for a millionaire to move. The people with the highest tax brackets usually are older, are married, and have children.
“Their social lives and their economic success are linked to local networks of colleagues, clients, and connections built up over a long career. Moving away from those networks means giving up a great deal of social capital and starting over somewhere new,” Young wrote.
The bottom line is that the pro-tax and anti-tax crowds are painting conflicting visions of a taxation dystopia if the other side wins.
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