Washington state just made history, and may have started a fight that plays out in statehouses from Providence to Sacramento.
Gov. Bob Ferguson signed a 9.9 percent tax on household income above $1 million on Monday, making Washington the most concrete test case yet for a policy idea that’s been circulating in Democratic-controlled legislatures for years.
In a statement, Ferguson said that “Adoption of the historic Millionaires’ Tax makes our tax system more fair, and means free meals for K-12 students, the largest tax break in state history for small businesses, eliminating the sales tax for baby diapers, and sending a check to nearly 500,000 working families to make life more affordable.”
The law, however, faces an uncertain road before any of that becomes reality.
The states that have already tried it
Massachusetts is the closest thing to a proof of concept. Voters approved a 4 percent surtax on income above $1 million in 2022, and the results surprised even supporters. The state pulled in $2.46 billion in the first year and nearly $3 billion in the second — more than double initial expectations. The feared millionaire exodus never came. Massachusetts recorded its largest population increase in 60 years between July 2023 and July 2024.
Los Angeles tells a more complicated story and offers a cautionary counterpoint. The city’s 2022 “mansion tax” — a transfer tax on property sales above $5 million — was projected to generate up to $1.1 billion annually for affordable housing. Actual receipts have been about half as large. High-value property sales dropped roughly 50 percent after the tax took effect.
Which states could be next?
A new wave of tax proposals targeting high earners is rippling through state legislatures, with Virginia, Rhode Island, Michigan and others joining California in calls for higher taxes on top earners and billionaires.
California is pushing furthest. A ballot initiative heading to voters in November would levy a one-time 5 percent tax on the net worth of state residents worth $1 billion or more, with revenue directed toward Medi-Cal and public education. Six of California’s 214 billionaires left the state before a January 2026 residency cutoff date written into the proposal, taking an estimated $27 billion in potential revenue with them.
Rhode Island’s Democratic governor is backing a 3 percent surtax on income over $1 million. In Michigan, a proposed ballot measure would impose a 9.25 percent top rate on incomes over $500,000 for single filers and $1 million for joint filers, with supporters projecting $1.7 billion in new education revenue.
Similar wealth tax proposals have already taken hold in Maryland, Minnesota and New Jersey. How Washington’s constitutional challenge plays out could determine whether the rest follow.
The legal battle ahead
The Citizen Action Defense Fund announced plans to sue within hours of Gov. Bob Ferguson’s signing, arguing the law conflicts with a 1933 state Supreme Court ruling that invalidated a voter-approved income tax. Former state Attorney General Rob McKenna will lead the challenge.
The constitutional argument hinges on a narrow but deeply rooted legal question. The 1933 court concluded that income is property, and property must be taxed uniformly across all residents — meaning a graduated income tax, by definition, violates the state constitution’s uniformity requirement.
McKenna said the courts have been equally clear for nearly a century, and that the new law creates a direct conflict with binding precedent.
The Citizen Action Defense Fund is not the only group mounting a challenge. The Washington State Republican Party has said it plans to pursue three separate legal challenges, including one targeting a “necessity clause” written into the bill that shields the legislation from a referendum.
Regardless of lower court rulings, parties on both sides expect to appeal directly to the state Supreme Court to resolve the constitutional question quickly. That outcome, legal observers note, would set a precedent with implications well beyond Washington’s borders.
The exodus question
Opponents of millionaire taxes have long relied on a simple argument: Tax the rich, and they’ll leave.
Cristobal Young, a Cornell University sociologist who has spent years tracking millionaire migration using IRS records, found the threat is mostly overstated. After examining 13 years of tax returns reporting at least $1 million in income, Young found millionaires actually have a lower migration rate — 2.4 percent — than the general population at 2.9 percent. Just 0.3 percent of all millionaires move to lower-tax states in any given year.
The reason, Young argues, is that wealth is place-specific. Wealthy individuals are deeply rooted and not easily movable. Their earning power is tied to where they built their careers, their networks and their businesses.
Massachusetts bears that out. Since the Fair Share Amendment passed in 2022, the number of millionaires in the state grew 38.6 percent, from around 440,000 to more than 612,000.
There are exceptions. During the COVID-19 pandemic, millionaires did leave high-tax states in notable numbers — but by early 2023, migration patterns had largely reverted to pre-pandemic baselines.
Whether Washington’s critics are right may ultimately be decided in a courtroom.
Washington’s tax doesn’t collect a single dollar until 2029, meaning the legal battle will almost certainly be resolved before the state sees any revenue. That timeline is what makes this fight consequential for every state watching from the sidelines.
If McKenna and the Citizen Action Defense Fund prevail, opponents in California, Rhode Island, Michigan and elsewhere gain a ready-made constitutional blueprint for blocking similar measures. If the Washington Supreme Court upholds the law, it could break open a legal obstacle that has kept income taxes off the table in several states for nearly a century.
