Supporters of Washington state’s impending 9.9% millionaire tax celebrated the state Supreme Court’s unanimous ruling blocking a voter referendum on the measure. However, if proponents better understood the potential economic damage this tax is likely to inflict, they might adopt a more cautious stance.

The public could typically fight such laws by passing a referendum with 154,455 votes. Instead, the court ruled that the tax is “necessary for the support of the state government” and those who want to repeal  the law will need a citizen’s initiative with at least 308,911 petitioners by June 2026.

While  the Evergreen State was once an incubator for startups and a haven for businesses, its new burdensome income tax would encourage productive entrepreneurs to leave, leading to lower government revenues and slowed growth.

Despite the state’s nickname, the grass does appear to be greener on the other side. Over 20,000 residents have fled to tax-friendly states like Arizona, according to recent research from the Heritage Foundation.

Proponents of the income tax claim it would close Washington’s estimated budget shortfall of $10 billion to $12 billion over the next four years. This budget gap is largely due to Democrats increasing spending by $8.3 billion from the 2023-2025 biennium. In fact, the recent $80.2 billion budget bill was passed without any  Republican votes.

The problem is clearly not one of revenue but one of fiscal competence. Washington’s rate of spending on the budget outpaces its economic growth. The office of the state treasurer highlighted this concern in a recent report. Total reserves are dangerously low at only 8%, or only 22 days of operating budget, the lowest in the nation. The state’s debt burden per capita also eclipses $3, 500 or more than twice the national median.

Simply put, lawmakers are spending more than is being generated. Rather than manage spending to balance these budgetary challenges, Washington Democrats turned to taxation. In 2025, Gov. Bob Ferguson signed the largest tax increase in state history, raising gas, business and sales taxes. The Washington Policy Center estimates state GDP shrunk by 1.2% and $8.5 billion in worker wages were lost.

The millionaire tax is projected to collect approximately $3.5 billion to $4.5 billion per year, approximately $190,000 from 21,000 Washingtonians. While revenues generated from the income tax would ostensibly fund government programs, high earners are the demographic with the greatest means to change residency or move to preferable regimes predominantly in red states. Taxing the most wealthy and mobile cohort jeopardizes underfunding the very public services promised by blue policymakers.

Washington was one of only nine states without an income tax prior to the passage of its 2026 millionaire tax, formerly making it an attractive destination for high earners. This favorable landscape helped businesses and residents thrive, as major companies like Starbucks and Amazon made their homes there. However, raising taxes has and will continue to hollow out Washington’s tax base.

Jeff Bezos, the founder of Amazon, moved his residency from Washington to Florida following the imposition of a 7% capital gains tax, taking his reported $954 million in potential tax revenue. Starbucks founder Howard Shultz announced his departure from Seattle for Florida in response to the 9.9% income tax. Marc Barros, CEO of Seattle startup Moment, is also moving his company to Wyoming to escape the tax.

It is not just billionaire businessmen like Bezos and Shultz who are fleeing for a more favorable tax environment. Smaller entrepreneurs, such as the founder of a security-automation company, are also moving their businesses to friendly red states without crushing taxes and regulations.

An Association of Washington Business survey found that 44% of business leaders said they are considering leaving the state, with 64% rating the overall tax burden as their most important business challenge; 53% of businesses would respond to a tax increase by raising prices. Tax burdens on high earners and businesses therefore affect everyday citizens, government revenues, and broader economic growth.

In response to 2025 tax proposals, Microsoft President Brad Smith stated he had “never been more worried about the future of the tech sector in Washington state,” which is a devastating reality for the sector accounting for nearly 21.8% of the state's economy and 24% of total wages. As capital flight erodes Washington’s own tax base, labor, businesses and government coffers may be further strained.

Rather than pass burdensome tax policies that place downward pressure on the state’s economy and incentivize outward migration, lawmakers should balance the state’s budget through controlled spending and encourage growth opportunities. If done prudently, the Evergreen State could once again become a thriving economic powerhouse and a magnet for businesses, innovators and families.

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Nicole Huyer is a senior research associate in the Heritage Foundation’s Roe Institute for Economic Policy Studies. Miles Pollard is an economic policy analyst with Heritage’s Center for Data Analysis. Camilla Cort is a former member of Heritage’s Young Leaders Program.

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