Noel Frame knows exactly how difficult it is to raise taxes on the ultra-wealthy, because she has been trying to do just that – first as an activist, then as a state legislator – for the past 15 years. And until recently almost all of her efforts ended in failure.
She lives in Washington, a solid blue state that should, in theory, be hospitable to the idea of more progressive taxation and has plenty of multimillionaires to target, since it is the home of Microsoft, Amazon and an array of other tech-driven corporations. While the wealth of these tech giants has grown exponentially in recent decades, the state – which levies no income taxes – has struggled to bring in enough revenue to pay for basic services like public schooling and long-term healthcare.
For each of the past five years, Frame has proposed a wealth tax that would treat the investment income of the state’s most affluent residents as another form of property, subject to the same 1% tax rate that middle-class homeowners pay on their houses. The closest she came was at the end of 2024, when the state’s outgoing governor, Jay Inslee, championed the idea, saying the state needed not to “go backwards” any more.
However, the president of Microsoft, Brad Smith, made it his mission to stop the initiative dead in its tracks. “What are you doing to us?” he reported asking the governor in a phone call. In a matter of weeks, Smith raised millions of dollars from the business community to lobby against the tax, arguing that it would kill competitiveness and cause companies and wealthy individuals to leave the state.
The proposal became so toxic that Inslee’s successor as governor, fellow Democrat Bob Ferguson, wanted nothing to do with it. Instead, he instituted painful cuts, including furloughs of state workers, which so infuriated the head of the state’s largest public-sector union that he called Ferguson a “ratfink” and vowed to work against him serving more than one term.
“The tech companies – man oh man, do they have far too much influence on our political culture,” Frame reflected. “They think they are the only industry in town, and sadly some people seem to believe that.”
A year, though, has proved to be a long time in Washington and national politics. With the state facing a multibillion-dollar spending gap and even affluent public school districts going into receivership for lack of adequate funding, the state legislature has just passed a different form of tax aimed at the state’s ultra-wealthy – a 9.9% income tax that kicks in at a million-dollar threshold – and Ferguson signed it on Monday.
The business community has been broadly supportive, and Brad Smith’s lobbying machine has largely melted away. Private-sector executives have told legislators they fear that the alternative to the millionaire tax would be an increase in a regressive state business tax that targets revenue instead of profits, and would be particularly damaging to low-margin enterprises like hospitals and grocery stores. In recent budget negotiations, they distanced themselves from the big tech anti-tax campaigners and worked instead to negotiate favorable terms for themselves in other areas.
At the bill signing, Ferguson said: “We’re taking a historic step forward to balance an unfair system … It’s the right thing to do for Washington’s working families and it’s the right time to do it.” His office did not respond to questions about his previous opposition to Frame’s wealth tax.
Frame and independent policy experts see the dramatic shift in momentum as the harbinger of a nationwide movement, as more than a dozen other states including California, Colorado, Michigan and New York contemplate wealth taxes of their own.
The big difference-maker in many of these states, they say, has been Donald Trump’s One Big Beautiful Bill Act, passed last summer, which cemented tax cuts for the wealthy and slashed federal spending on healthcare and food assistance at a time when affordability and rising prices were already top of mind for many American families. Tariffs on foreign goods and the recent spike in gas prices, triggered by the Iran war, have only heightened the sense that ordinary households have reached a breaking point.
Trump’s bill also requires states to spend hundreds of millions of extra dollars to administer a complex new eligibility system for federal programs, leaving lawmakers with even more difficult choices about cutting programs or finding alternative forms of revenue to balance the books.
“[Trump’s bill] has infused a level of energy into this movement that I have not seen in all the years I have been doing this work,” Frame said. “People across this country are really fed up because they can’t afford to live.”
Amy Hanauer, executive director of the DC-based Institute on Taxation and Economic Policy, which tracks state trends, said she was not surprised to see Washington act first because it has one of the most regressive tax systems in the country. “This was very overdue, and people in Washington are really excited to see it,” she said. “The bottom line is that billionaires are walking away with a larger share of our economy every single year, and working people can’t afford the basics any more. This movement was growing, this moment was coming.”
Passing the millionaire tax in Washington, which will not come into effect before the 2028 tax year, is unlikely to go uncontested. Frame and the measure’s other champions expect a legal challenge based on a 93-year-old state supreme court ruling that deems any form of income tax to be unconstitutional. They are cautiously optimistic that the current supreme court will overturn that ruling. They also expect opponents of the bill to put an initiative on the ballot inviting voters to strike the measure down.
That is what happened in 2010, when the state last tried to introduce an income tax and voters rejected it. It is also what happened in 2024, when a hedge-fund billionaire named Brian Heywood, working hand in glove with the state Republican party, sought to overturn a state capital gains tax introduced three years earlier – only that time the voters upheld the tax, by a resounding margin.
The about-face in public attitudes over a 14-year period was, Frame said, a result of growing awareness that Washington’s tax system – reliant almost entirely on sales, business and property taxes – demanded far more of the state’s poorest residents than it did of its richest.
According to the Economic Opportunity Institute, a Seattle-based non-profit, the bottom 20% of state households pay 13.8% of their income in state and local taxes, the middle 20% pay 10.9%, and the wealthiest 1% pay just 4.1%.
That awareness has, in turn, made it easier to push back against well-worn arguments that any new tax would, sooner or later, affect middle- and lower-income households and that any attempt to demand more from wealthy companies and individuals would cause them to flee the state for somewhere cheaper, resulting in lost jobs and a weaker economy.
Research based on census data and Internal Revenue Service records does not tend to bear these arguments out. Rather, it shows that the primary reasons for affluent people to move from one state to another are work opportunities, family and lifestyle choices, with taxation a distant consideration in most cases if it comes up at all. The same holds for companies whose success is often rooted in their geographical location and in the staff they have hired and come to depend on. “Millionaire tax flight is occurring,” Michael Mazerov of the Center on Budget and Policy Priorities has written, “but only at the margins of statistical and socio-economic significance.”
One story that spread as the millionaire tax was on the verge of passing in Washington was that Howard Schultz, the chief executive of Starbucks, was moving from Seattle to Florida to avoid paying it. Schultz himself, though, said he and his wife were moving east to be closer to their children as they enter the “retirement phase” of their lives.
Hanauer said of the fear that wealthy people will run away from higher taxation: “The arguments are not so powerful, but powerful people like them.”
That is certainly true in California, where a half-dozen high-profile, uber-wealthy tech titans are railing loudly against a “billionaire tax” that service and health worker unions want to put on the ballot this November and have raised tens of millions of dollars to defeat it. Some of them have also reduced their footprint in California, either by re-registering companies they control in other parts of the country, or purchasing property elsewhere, or both.
They include Sergey Brin and Larry Page, the co-founders of Google, as well as some powerful figures with overt ties to the Trump White House including the venture capitalist Peter Thiel and tech investor David Sacks. The proposal, which is yet to qualify for the ballot, would impose a one-time excise on the state’s roughly 200 billionaires and use the money to fund healthcare and educational programs.
It remains to be seen how serious Brin and his colleagues are about abandoning California or if the state’s other billionaires follow their lead, but the prospect of a mass exodus is already spooking members of the political class. Despite the consistent popularity of proposals to tax the rich and make big corporations pay their fair share – one of the few issues in American politics on which majorities of both Republican and Democratic voters agree – the ballot initiative is opposed by California’s governor, Gavin Newsom, and other state leaders.
Academic studies and California’s legislative analyst are divided on whether the tax can bring in more revenue or would result in a net loss.
In Washington state, at least, the evidence suggests there is not much to fear. The capital gains tax passed in 2021 ended up raising three times the expected revenue in its first year, and a number of city-wide tax initiatives in Seattle have produced similarly unexpected beneficial results, prompting some politicians and media commentators to suggest there is more money sloshing around the state than anyone suspected.
“You know what?” Seattle’s progressive new mayor, Katie Wilson, told a roomful of supporters earlier this year. “This city is filthy rich.”
So rich, the Seattle Times columnist Danny Westneat has written, that it would probably be cheaper for Amazon to fly its executives out of the city by helicopter for meetings than to pay a corporate social housing tax that the city introduced last year. And yet, Westneat said: “They did not take me up on this strategic advice.”
