Even as billionaires flee California to escape a potential wealth tax, proposals to raise taxes on millionaires are advancing in Washington state and Illinois.
Legislation to impose a new 9.9 percent tax on income above $1 million a year advanced this week in Olympia, Wash., passing the Senate Ways & Means Committee. The Evergreen State currently has a tax on capital gains and a 0.58 percent payroll tax dedicated to funding long-term care insurance, but no other tax on ordinary income.
The governor of Washington, Bob Ferguson, a Democrat, has largely backed the tax increase, saying he would use the revenues to increase spending on K-12 education. The Washington Education Association, the teachers’ union, lists “[t]ax the ultra-rich” as its top legislative priority. The state is already in the top 10 in the nation in per-student spending, but in the bottom 10 in the nation in demographically adjusted results on standardized tests.
The Tax Foundation has warned that “the proposed tax would yield a top rate of more than 18 percent in Seattle when combined with two Seattle wage taxes and a statewide uncapped payroll tax, making it the highest rate on wage income in the country.”
“Fundamentally, whatever its finer points, this is a high-rate income tax in a state that already imposes aggressive taxes on businesses,” the Tax Foundation said. “With this legislation, Washington would double down on being a high-tax state, particularly for businesses and for some of its most mobile taxpayers.”
Meanwhile, in Illinois, the Illinois Federation of Teachers is planning to descend on the state capitol in Springfield on Feb. 17 for its annual lobby day. The union says it will give the state’s governor, Democrat J.B. Pritzker, a letter touting “Massachusetts’ early results from its millionaire’s tax.” In a Jan. 14 statement, Stacy Davis Gates, who is president of both the Chicago Teachers Union and the Illinois Federation of Teachers, also cited the Bay State example, writing, “Massachusetts’s 4% surtax on millionaires generated nearly $6B billion for public services since its passage — Illinois can do the same.”
Massachusetts has been struggling with an exodus since its millionaires tax went into effect in 2023. Even Cape Cod Potato Chips left the state, and the Wall Street Journal devoted an entire recent article to the collapse of Boston’s luxury condo market.
A former governor of Illinois, Pat Quinn, a Democrat who served from 2009 to 2015, has been pushing a plan to add a 3 percent surtax for millionaires on top of the state’s existing 4.95 percent flat rate. The Illinois Policy Institute warns that the state already “has one of the highest total effective tax rates in the nation and the highest in the Midwest,” and that the existing high taxes are one reason the state is losing population.
Hellbound and Down 