Key Points

• A Seattle-based startup founder warns Washington’s “millionaires tax” could spur an exodus of top earners.
• The new tax, passed in March 2026, imposes a 9.9% levy on income above $1 million per household.
• Business owners and high-income professionals express frustration over the perceived punishment of success.
• Some entrepreneurs are considering relocating their businesses out of Washington.
• The tax is projected to generate $3.5 billion annually, funding public services and tax credits.
• Critics argue the tax could drive talent and investment away from the state.

Seattle (Evening Washington News)May 12, 2026 — A growing sense of frustration is sweeping through Washington state’s business community as the new “millionaires tax” takes effect. Business owners who have spent years building companies and hiring workers now feel betrayed by a policy they believe punishes their success. Some of these entrepreneurs are contemplating taking their businesses elsewhere, warning of a potential exodus of top earners from the state.

What Is the Millionaires Tax?

Passed by the Washington State Legislature in March 2026 under Senate Bill 6346, the millionaires tax imposes a flat 9.9% levy on household income exceeding $1 million per year.

As reported by Nathan Goldman of Forbes, the law targets Washington residents, part-year residents, and nonresidents deriving Washington-source income, including wages, business income, and capital gains from Washington assets.

The tax begins January 1, 2028, with first returns due in 2029, and the $1 million threshold is indexed for inflation starting in 2030.

Supporters, including Washington Senate Democrats, tout the tax as a progressive measure to fund public defense, the Working Families Tax Credit, small business tax relief, and sales tax exemptions. According to the Institute on Taxation and Economic Policy (ITEP), the tax could raise $3.5 billion annually, bolstering services for low- and middle-income families while expanding the state’s Earned Income Tax Credit to 460,000 additional households.

Why Are Business Owners Upset?

Seattle tech entrepreneur Jesse Proudman, founder and CTO of Venice.AI, voiced his concerns on Talk Radio 570 KVI‘s The Ari Hoffman Show, describing the tax as a “breaking point” for the tech community. “Everybody’s on their way out,” Proudman said, claiming a wave of founders, investors, and high-earning professionals are already fleeing or planning to leave.

As reported by Fox News, Proudman warns that the exodus could accelerate as the policy rolls out, citing Washington’s previous capital gains tax as a precedent that pushed some investors away.

Proudman, a long-time Seattle entrepreneur, argues that these mobile individuals may simply relocate rather than absorb the new liability.

“What I came to realize is that so many people that I know and respect in the community — they’ve already left,”

he stated, echoing fears that Washington’s competitive edge in tech could erode. Critics, including conservative think tanks like the Commonsense Institute, project a $19 billion decline in personal income from 2028 to 2032 due to potential outflows.

Who Is Most Affected?

The tax primarily targets high-income households, but its reach extends to Washington-source income for part-year and nonresidents.

As detailed in the Washington Senate Democrats’ FAQ, this includes wages earned in the state, business income from Washington entities, and gains from Washington real estate or tangible property. The standard deduction of $1 million per household applies to married couples or domestic partnerships, with adjustments for federal adjusted gross income and capital gains.

Supporters emphasize that the tax spares the vast majority of Washingtonians, with only 0.3% of filers affected. ITEP highlights that the revenue will fund public education, childcare, and enhanced tax credits, offsetting federal cuts to programs like SNAP and Medicaid.

However, Proudman and other business leaders counter that the tax could dissuade out-of-state talent, such as high-income athletes, from choosing Washington-based teams, potentially impacting sectors like sports and entertainment.

Background of the Development

The millionaires tax emerges from Washington’s shift toward a more progressive tax structure, following the 2021 enactment of a capital gains excise tax on stocks and bonds.

As reported by GeekWire, that earlier policy sparked debate among Seattle tech founders and investors, with mixed reactions on its impact. SB 6346 builds on this by expanding the income base, marking Washington’s first significant state income tax in modern history.

Economists like Goldman note the tax’s potential to alter incentives for mobile high earners, who may relocate to states with no or lower income taxes.

The policy’s passage reflects broader national trends, with Democrats pushing for higher taxes on the wealthy to address inequality, while opponents warn of economic fallout. The tax’s structure, excluding federal deductions beyond charitable contributions, aims to balance equity with revenue generation.

Predictions for the Future

The millionaires tax could reshape Washington’s business landscape, particularly for tech and high-income sectors.

As Proudman predicts to Fox News, the exodus could accelerate, with companies and talent relocating to states like Texas or Florida offering no income tax. This may reduce investment in Washington startups, potentially slowing job growth and innovation.

For the broader audience, including small businesses and low-income workers, the tax’s impact depends on how effectively revenue funds public services. ITEP projects expanded tax credits could boost economic security for vulnerable families, but any outflows of high earners might dampen state revenues. The outcome will hinge on whether Washington’s progressive measures outweigh the risk of losing its competitive edge.