Seattle Democrat rejects wealth 'exodus’ concerns as businesses flee for lower-tax states

The Seattle state lawmaker behind Washington’s newly minted "millionaire's tax" is dismissing concerns that a high-income tax hike will trigger an exodus of wealthy residents and businesses from the Pacific Northwest.  

"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.

Pedersen, the Senate Majority Leader representing Washington's 43rd Legislative District, maintains there is no evidence that the tax—recently signed into law by Gov. Bob Ferguson—will drive the state's top earners to lower-tax jurisdictions like Florida or Texas.

"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."

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The legislation marks a seismic shift for a state that has historically prided itself on having no personal income tax. Pushed through by the Democratic majority during the 2026 session, the bill imposes a 9.9% tax on annual income exceeding $1 million for individuals or households.

While the tax was signed in March 2026, it is not scheduled to take effect until January 1, 2028, with the first payments due in 2029. The delay is intended to allow the state's Department of Revenue to build a collection infrastructure—and to allow time for the inevitable wave of constitutional challenges to clear the courts.

Despite Pedersen's optimism, the regional business landscape is already showing signs of strain. Coffee giant Starbucks recently announced it will shift 2,000 corporate jobs—primarily in IT and supply chain management—to a new regional headquarters in Nashville, Tennessee. While Starbucks maintains it is not abandoning its Seattle roots, the move to a state with no personal income tax has amplified fears of "tax flight."

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Furthermore, multiple local business owners told FOX 13 Seattle they were forced to shutter operations due to the state's expanded retail sales tax on services. In response to this pressure, the legislature recently moved to scale back those expansions and is expected to roll back certain retail taxes within three years.

Central to the debate is a century-old legal precedent. Since the 1930s, the Washington State Supreme Court has classified income as "property," which, under the state constitution, must be taxed at a uniform rate (no more than 1%). To bypass this, Democrats have characterized the millionaire’s tax as an "excise tax"—the same legal maneuver used to uphold the state’s capital gains tax in 2023.

Pedersen has been vocal about his desire to overturn the old case law entirely. 

"I’d like to force the Washington State Supreme Court to reconsider its case law that considers income to be property. Do you have any other suggestions about how to bolster the argument that this would be an excise tax and not a property tax?" Pedersen reportedly wrote:  

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The tax debate comes as Seattle’s local leadership faces national scrutiny. Mayor Katie Wilson, a self-described socialist who took office following the 2025 election, has been criticized for her dismissive attitude toward taxpayer frustration.

The Washington Post editorial board recently joined the fray, lambasting Wilson for being "arrogant" and "dismissive" regarding the potential departure of high-net-worth residents. The board argued that Wilson’s rhetoric ignores the reality of a shrinking tax base and growing "taxpayer fatigue" over soaring local rates.

In 2025, the legislature also increased the state's estate tax to 35% for the wealthiest residents—the highest rate in the United States—though lawmakers were forced to slightly moderate those figures earlier this year following intense backlash from the business community.

Sen. Pedersen’s office did not respond to Fox News Digital's latest request for comment.