Washington state is wrestling with a dramatic policy shift after Gov. Bob Ferguson signed a new millionaire’s tax, and State Sen. Jamie Pedersen of Seattle is out front defending it even as businesses and local leaders raise alarms. The law carves out a 9.9% levy on income above $1 million and is set to start collecting in 2029 after a delayed implementation meant to build collection systems and weather legal challenges. Seattle Mayor Katie Wilson and corporate moves like Starbucks relocating jobs to Nashville have turned this into a live debate over whether Washington can afford to chase revenue from its richest residents.
Sen. Jamie Pedersen has repeatedly pushed back on predictions of a mass exodus, insisting the new levy won’t trigger a stampede out of the state. “The reality is the millionaire tax is not likely to result in businesses leaving,” State Sen. Jamie Pedersen (D-Seattle) told a local FOX affiliate following the bill’s signing. That line is meant to calm voters, but skepticism from the private sector keeps growing as concrete decisions start rolling in.
The law itself is blunt and unprecedented for the state: a 9.9% tax on annual income above $1 million for individuals or households, approved during the 2026 legislative session. It won’t collect a dime until January 1, 2028, and the first payments won’t be due until 2029, giving the Department of Revenue time to build systems and opponents time to file constitutional challenges. That delay looks sensible on paper, but it also gives businesses and high earners months to plan relocations and restructurings.
Lawmakers who backed the bill framed it as an exercise in fairness and revenue modernization, but the legal route they chose is unusual: Democrats call the charge an excise tax to avoid a century-old state constitutional rule that treats income as property. Since the 1930s, Washington’s Supreme Court has said income is property and must be taxed uniformly, and the new approach borrows the same reasoning that upheld the capital gains tax in 2023. With the constitutionality squarely in doubt, a long court fight is almost certain.
“The drivers that we heard about from [businesses] are concerned about the sales tax on services [and] concern about the estate tax. Both of those things the legislature took action on in the last session,” Pedersen said. “I do not have any indication that the millionaire’s tax is going to cause some significant exodus.” Those exact words aim to reassure, yet they sit next to real-world moves that suggest companies are hedging their bets, not taking political rhetoric at face value.
STARBUCKS CUTS JOBS IN SEATTLE AS FORMER CEO HOWARD SCHULTZ BLASTS ‘SOCIALIST’ MAYOR — that headline summed up how the private sector perceived the signal coming out of Seattle, where corporate leaders face rising costs and uncertainty. Starbucks announced it will shift roughly 2,000 corporate positions, mainly in IT and supply chain, to a regional hub in Nashville, Tennessee, and while the company says it still honors Seattle roots, the tax-free lure of other states is now a tangible factor. Moves like that feed the narrative Republicans are pushing: higher rates chase jobs and headquarters out of state, shrinking the tax base instead of growing it.
Small-business owners reported real pain from related changes, telling local outlets they were forced to close after retail sales taxes were expanded to cover more services. Lawmakers reacted by dialing back some of those expansions and promising rollbacks within a few years, a clampdown meant to soothe the business community and blunt accusations of overreach. Even with adjustments, the damage to confidence may already be done, and the recovery of local commerce could lag behind the policy corrections.
Part of the fight is political theater, and Seattle’s mayor has become a focal point. Mayor Katie Wilson, who describes herself as a socialist, has been criticized at the national and local level for a tone that some see as dismissive toward taxpayer concerns, and the Washington Post called her “arrogant” and “dismissive” in an editorial arguing she underestimates the consequences of a shrinking tax base. That language matters because it frames the debate: supporters tout moral imperatives, while critics warn of an economic reality that voters will feel in wallets and job notices.
Policy changes have not stopped at the income tax. In 2025 the legislature raised the estate tax to 35% for the wealthiest Washingtonians, a top rate unmatched in the country, though lawmakers later eased the numbers under business pressure. The combination of higher rates and legal uncertainty is a magnet for litigation and relocation planning, and it is precisely the sort of predictable reaction Republicans point to when arguing for tax restraint and clearer, more predictable rules for employers and high earners.
Sen. Pedersen’s office did not respond to Fox News Digital’s latest request for comment. The legal battles and fiscal math are just beginning, and while proponents promise new revenue for public priorities, opponents see a self-inflicted wound that could hollow out Washington’s highest-paying jobs and test the state’s long-term competitiveness.
