Taxes in the United States are famously complicated, but here’s one fact that couldn’t be simpler: In Washington state, those who have the least are required to pay the greatest share of what they have in taxes, while the wealthiest pay relatively little.

With Washington voters now considering legislation that would begin to chip away at that formula for the first time in nearly a century, Solid Ground convened a panel of thinkers from the worlds of advocacy, politics, and technology to probe the reality of the so-called Millionaires Tax¹ and its implications for the future of wealth and poverty in our state. What we learned at this year’s Social Justice Salon: What’s Up with the Millionaires Tax? surprised us – and it may surprise you too.

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#1: Washington state’s tax code is even more backwards than most of us realize. 

This makes us an outlier among other states.

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Washington is pretty unusual in this way. The vast majority of states already have income taxes – only eight do not. Our neighbors in Idaho, for example, pay income tax on every dollar they earn, whereas the Millionaires Tax only applies to income over $1 million.

“There’s this misconception that the Millionaires Tax is an outlier. ‘It’s different, it’s weird, it’s punitive. I can go anywhere else and not be taxed like this,'” said Rep. April Berg, a state lawmaker who was responsible for shepherding the bill through the Washington House of Representatives. “And frankly, you can go anywhere else and be taxed more, trying to avoid this tax.”

In fact, it’s estimated that if Washington had Idaho’s tax code, it would bring in an additional $11 billion in tax revenue every year – double what it collects now.²

What does it look like when a state’s tax code is upside down? In Washington, the wealthiest 1% pay just 4.1% of their annual household income in state and local taxes, while those in the poorest 20% of Washington families pay an average of 13.8%.³

In other words, for Washington families who are already struggling to make ends meet, our tax code makes life even harder.

That’s because our state government is funded primarily through sales tax, and families living paycheck-to-paycheck are – by definition – spending most of what they bring home every month on purchases that are subject to sales tax.

Wealthy people, on the other hand, spend a relatively small share of their monthly income on taxable purchases and instead invest it in stocks and other assets that accrue value but aren’t taxed unless they’re sold.

“That’s why we say that our tax code is upside down, because wealthier people who have more ability to pay taxes are paying much less in proportion to their income of the tax that primarily funds our state,” said Fatema Boxwala, an organizer with Tech4Taxes and one of four speakers on our panel.

“With the Millionaires Tax, it’s an income tax that is asking people who have a higher ability to pay to pay more than people who don’t have that ability.”

And the Millionaires Tax doesn’t just raise income tax – it lowers sales tax for Washington families by exempting a whole bunch of essential everyday items, like shampoo, toothpaste, over-the-counter drugs, and diapers. That means that lower-income families – who spend a greater share of their paycheck on those kinds of purchases – will keep more of that hard-earned money.

“Which is great, because the amount of diapers you buy should not dictate how much tax you’re paying,” Fatema said.

But there are other ways our tax code is upside down as well. Our Business & Occupancy (B&O) tax, for example, applies to every dollar of revenue a business earns, regardless of whether they actually turn a profit.

“We’re an outlier,” said Rep. Berg. “We’re the only state that taxes businesses on gross receipts, right? So we don’t care if you made a dollar or a dime. We’re going to charge you a tax based on what you brought in as a business.”

The Millionaires Tax seeks to address some of that unfairness by more than doubling a B&O tax credit, meaning more small businesses will not have to pay the tax at all.

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#2: Taxes are not meant to be punitive. 

They’re an investment that pays for good things that make our communities better.

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So is the Millionaires Tax just about going after rich people to punish them for enjoying such a sweetheart tax deal for so long? In a word: NO.

“One misconception is that taxes are punitive, right? So as we talk about taxes, taxes pay for good stuff,” Rep. Berg said. “One thing I do want folks to understand is that this tax is to help people. It is not to hurt people.”

The Millionaires Tax will fund a whole bunch of programs that support the wellbeing of all families in Washington state, including the wealthy. These include:

• K-12 education, health care, childcare, higher education, and human services
• Free breakfast and lunch for every kid in public school
• An expansion of the Working Families Tax Credit, so more folks living on low incomes qualify for a refund of up to $1,300 each year
• An end to sales taxes on a variety of everyday essentials, including diapers, toothpaste, shampoo, and over-the-counter medicines – basically nearly everything in the grocery store that’s not food (which is already tax-free)
• Lowering taxes on small businesses

The rest of the money raised through the Millionaires Tax will go into the state’s general fund, where it will be used where it’s needed most.

“This is not to punish people who make a lot,” said Bailey Medilo, communications manager for the youth advocacy organization Washington Bus. “In fact, quite the opposite. This is to ensure that the important systems that support everyone across economic and social circumstances across Washington state are funded.”

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#3: Reforming our tax code isn’t just long overdue. 

It’s urgently needed to prevent significant potential cuts in education and human services.

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Advocates for economic justice have been trying for decades to do something about Washington’s tax code, only to see their efforts die in committee or fizzle out at the polls.  At times, it was seen as political suicide for politicians to even discuss an income tax.

So what changed in 2026? For one, the federal government.

Under the current administration, the federal government has slashed funding for programs that Washington residents rely on to survive, including SNAP and Medicaid. That’s left state government scrambling to take care of its residents at a time when it’s already facing massive budget gaps of its own.

“It’s really, really bad for Washington state, and it’s really bad for a lot of states. But in particular, it means so many people are going to lose access to health care. And that is devastating,” Fatema said.

“People will die if we can’t figure out a way to fund health care for the people who live here in Washington.”

Rep. Berg said it became clear early last year that federal funding cuts were going to have devastating implications for Washington state if something didn’t happen. “You’re slowly starting to realize: We need to not only have a more fair tax code but a more certain tax code,” she said.

“We need to have a tax code where we can take care of Washingtonians in a bigger way and a more sustainable way.”

Bailey said federal funding cuts, particularly to financial aid for post-secondary education, has already had an impact on the future of Washington’s youth. “We’re transitioning into a period where federal funding is becoming more unstable and less reliable.

“Our young people are not receiving their full Pell Grant, or any Pell Grant at all. And FAFSAs are becoming more and more obsolete by the day. The state really does have to step in and support our youngest community members in … a self-investment for the future of Washington state.”

But the push for the Millionaires Tax didn’t come out of nowhere. It was built on decades of work building more momentum toward a more just tax code.

“And I think that the federal funding cuts were kind of like a spark that sets off a larger fire of things that had already been laid out and ready to go,” Fatema said.

“Washington state needs to figure out a way to be able to support itself, and we need to figure it out really, really fast. So the Millionaires Tax is a really good step in that direction.”

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#4: The wealth isn’t going anywhere.

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A common refrain you hear in discussions about taxes is that any attempt to tax the wealthy will just drive them to another state with lower taxes. But Bryan Kirschner, a tech executive who will happily be paying the tax, said that’s simply not the case.

“All those rich people who live in Medina and in the view areas of Bellevue could shave tens of thousands of dollars off their property tax bills anytime they wanted by moving a few blocks to a few miles to an equivalent house in a less fancy place,” he said. “And nobody does that, because you know what? When you’re rich, you don’t have to do that.”

The same goes for the big corporations that are the source of so much wealth in our state.

“They’ve spent billions of dollars building a workforce here – hat goes into making all of these software programs – things that everybody uses every day,” Fatema said.

“They have spent so much money training people here, moving people here, building offices, building data centers. They already have that infrastructure here. The amount of money it would cost a company like Microsoft to lift their workforce and rebuild it somewhere else would be insane.”

What’s more, the wealth in Washington state is only on track to grow more. “We are the second-best AI talent pool in the world. The Bay Area is number one; we are number two,” Bryan said.

“The amount of income and wealth that’s going to be created in this state – with money flowing in from all over the world over the next decade – makes the boom we’ve been through in the last 10 years … look small.

“So the income and wealth at the top in Washington state is going to grow like gangbusters.”

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#5: A Millionaires Tax is just that.

It’s a tax for people who make $1 million or more each year.

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It’s not at all clear what comes next, but there’s one thing we know for sure – the Millionaires Tax will be paid by a tiny number of ultra wealthy residents, so those who don’t want to pay it have tried to stoke opposition to it by convincing others in the state that the tax will one day be expanded to include them too.

Here’s the reality: Any attempt to expand the income tax would require new legislation and would face fierce opposition. It’s unlikely that any politicians who wants to keep their job would support it.

“People want to keep getting elected.” Fatema said. “They don’t want to do things that make their constituents mad at them.”

Even if it did pass, an expanded income tax would almost certainly be repealed in a ballot initiative – just like the one on the ballot this fall.

“If that happened, I would be one of the first people collecting signatures for that ballot measure,” said Fatema. “As people who live in Washington state, we have the power to push back on laws that we do not think are fair.”

What issue would you like our next Social Justice Salon to explore? Email giving@solid-ground.org and share your ideas.

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Sources

1) SB 6346 Millionaires Tax FAQ, Washington state Democrats

2) Washington Tax Revenue Would Be Double If It Was Idaho, KUOW

3) Washington: Who Pays? 7th Edition, Institute on Taxation and Economic Policy

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