In March, Washington state passed the first income tax in the state’s history, a 9.9% levy on personal income exceeding $1mn annually. Washington is one of five states led by a Democratic governor that have increased income taxes on the wealthy in the past five years. Several more are considering following suit.
The trend underscores a deepening strain of populist anger at the rich. A December Economist/YouGov poll found 61% of Americans believe billionaires are taxed too little. It also reflects a need to raise revenue in states facing budget shortfalls — in some cases worsened by federal funding cuts under the One Big Beautiful Bill Act, which Congress passed in July.
The passage of these changes in more states would widen the already significant divide in the tax codes between states led by Democratic versus Republican governors.
In Washington state and elsewhere, the specter of new taxes has drawn threats from wealthy residents to relocate to lower-tax jurisdictions. But the evidence that rate increases actually lead to large-scale departures by high earners is spotty.
How does Washington state’s new income tax work?
Washington Governor Bob Ferguson signed the 9.9% levy into law on March 30. It will apply to the roughly 30,000 taxpayers in the state who make more than $1mn a year. Previously, Washington had no income taxes. The measure will take effect in 2028.
A coalition of groups led by the Citizen Action Defense Fund argue in a lawsuit they’ve filed challenging the new law that it violates the state constitution. Previous state court decisions have treated income as a form of property, and the state constitution requires that property be taxed uniformly at a rate no higher than 1% of its value.
Previously, the Washington Supreme Court in 2023 upheld a 7% tax on long-term capital gains — profits from selling assets.
What other states already have or are debating high-income taxes?
Only a handful of states structure their tax codes to specifically target very high earners. Just eight — California, Connecticut, Maine, Maryland, Massachusetts, New Jersey, New York, and Washington state — plus Washington, DC have top brackets beginning at $500,000 or higher for single filers. Only four — California, Hawaii, New Jersey, and New York — as well as Washington, DC impose rates on the top bracket of 10% or more. (Eight states have no income tax at all, and for another 15, the rate is flat for all income levels.)
Washington state is one of five to have imposed new or heightened income taxes on the wealthy in the last five years.
Other states are considering similar measures. The governor of Rhode Island, a Democrat, has proposed raising income taxes on high earners. Democrats in the state legislatures of New York and Connecticut are advocating for higher income taxes on wealthy filers. And California and Oregon are debating imposing wealth taxes — levies on an individual’s net worth. No US state currently has a wealth tax.
What’s driving the push to raise taxes on the wealthy?
Lawmakers and activists in blue states pushing tax hikes on high earners are tapping into a deepening rejection of elites in both major political parties. States are also responding to looming budget shortfalls, which are expected to worsen for some as a result of cuts congressional Republicans made in their sweeping budget law last year to Medicaid, federal food assistance, and other safety-net programs. The law extended the expiring 2017 tax breaks, which lowered rates for most brackets but handed the biggest cuts to wealthier taxpayers.
Washington state is facing a $10bn to $12bn budget deficit over the next four years. According to a Washington Health Benefit Exchange report, the 2025 federal law reduced federal spending on Washington’s Medicaid program by at least $3bn per year. Annual Medicaid spending in Washington is $29.2bn, per KFF.
Maryland, which raised taxes on the wealthy last year, did so to help close a $3.3bn budget gap. The state will lose as much as $2.7bn in federal Medicaid funding annually as a result of the 2025 law, according to the Maryland Department of Health. Maryland’s annual Medicaid budget is $14.6bn, with $8.5bn coming from the federal government.
New York City is facing a roughly $7bn two-year budget gap. Rhode Island is looking at a $101mn deficit in the coming fiscal year, which could grow by as much as another $70mn as a result of the federal spending cuts.
In addition, backers of the wealth tax in California have pitched the measure as a way to offset the Trump administration’s cuts to funding for health care programs.
How much revenue are these measures expected to raise?
The new tax on the wealthy in Washington state is projected to raise roughly $3.7bn a year when it’s fully in force, according to a Seattle Times analysis. The tax first applies to income earned in 2028, with payments due the following year. Washington’s total tax revenue was approximately $39bn in 2025, per the Federal Reserve Bank of St Louis.
A paper published by the University of Missouri School of Law estimated California’s proposed one-time tax would generate $20bn annually from the 200 wealthiest taxpayers in the state from 2027 through 2031 – $100bn total. The ballot measure would impose the tax on residents of the state retroactive to the start of this year, making it difficult to avoid by moving across state lines, the researchers said.
But the conservative Hoover Institution at Stanford University estimates the proposed levy would bring in only $40bn total, citing the departures of a number of billionaires from the state before the January deadline. Their departures would also hurt California’s future income tax revenues, costing the state $25bn in net revenue long term, according to the think tank.
California’s tax revenue was $275bn in 2025.
In Rhode Island, the governor estimates his plan to raise taxes on those making at least $1mn would generate $135mn a year. Rhode Island’s tax revenue was $5.5bn in 2025.
Do such taxes cause wealthy residents to leave the state?
Opponents of the state tax hikes on the wealthy warn they’ll drive high earners away, hurting the revenue base in the long term. Efforts to increase taxes on wealthy residents are often followed by a string of high-profile threatened or actual departures. But the evidence that raising taxes on the wealthy prompts widespread flight from a state and a loss in revenue is mixed.
In California, Alphabet Inc co-founder Sergey Brin, who has spent $57mn opposing the wealth tax ballot measure, purchased a $42mn house on the Nevada side of Lake Tahoe. In total, six billionaires publicly departed the state between the ballot measure’s announcement and January 1 of this year, the date residency would be established if the provision is adopted, according to the Hoover Institution. The researchers estimate those six took about 30% of the expected tax base for the wealth levy with them.
In Washington state, Starbucks Corp founder Howard Schultz announced he would leave the state for Miami, citing family reasons and retirement. His social media post announcing the move did not reference the tax debate but alluded to worries the state would become less business friendly. Amazon.com Inc founder and former Chief Executive Officer Jeff Bezos also decamped to Florida from Washington back in 2023, the year after the new Washington tax on capital gains took effect, though he did not cite the levy as a reason for his departure.
While high-profile departures grab headlines, research doesn’t support a pattern of a major outflow of wealthy residents from high-tax states.
Tax hikes in Massachusetts and Maryland went through without public high-profile departures like those experienced in California and Washington.
The Massachusetts surtax has brought in about $5.7bn in revenue since it took effect – $3bn more than expected. 2026 IRS data showed out-of-state moves increased in 2023, the year the surtax took effect, and former Massachusetts residents took a net $4.2bn in adjusted gross income with them. But Massachusetts had faced a net outflow of income for years. The total income leaving the state was higher in 2021, and the number of people making more than $200,000 who left was higher in 2022, both before the tax took effect.
A 2023 study by the left-leaning Center on Budget and Policy Priorities found interstate moves are on the decline in general, and when people do move across state lines they tend to cite family and job-related reasons as the primary motivator. Some people may leave states because of taxes or consider rates as they pick their destination, but such cases are “rare,” according to the analysis.
A 2025 study by the Fiscal Policy Institute likewise found that the top 1% of New Yorkers moved out of the state less frequently than all other income groups. The trend was unaffected by the 2021 tax increases on those earning more than $1.08mn.
Are Democrats also focused on tax rates at the federal level?
Historically, the topic of taxes was more commonly a talking point of Republican campaigns, and the promise was to cut rather than increase them. But Democrats have seized on the issue as raising taxes on the wealthy grows in popularity.
On the national level, several lawmakers thought to be potential candidates for the Democratic Party’s presidential nomination in 2028 have unveiled federal tax proposals that would target the wealthy.
Representative Ro Khanna, a California Democrat, and Senator Bernie Sanders, an independent from Vermont, introduced a bill in March to impose a 5% annual wealth tax on billionaires.
Democratic Senators Cory Booker of New Jersey and Chris Van Hollen of Maryland also released separate proposals in March that would cut taxes for low- and middle-income households and raise levies on the wealthy and corporations.
These proposals for tax hikes on the rich are unlikely to feature heavily in Democrats’ messaging heading into the midterm elections in November because, even if their party were to win control of Congress and pass them, President Donald Trump would almost certainly kill them with his veto power. But they’re an indication that the issue is likely to play a big role when it comes time for Democrats to pick a candidate in 2028.
That doesn’t mean that this year’s midterm elections will be devoid of tax messaging. Republicans are touting tax breaks for tips and overtime income as well as a special deduction for senior citizens included in last year’s One Big Beautiful Bill as they try to maintain control of Congress. And Democrats are preparing to run against the new law and its deep cuts to social safety net programs, painting it as a tax give-away to the rich.
