Starbucks exits as Washington introduces new 9.9% tax on millionaires

Seattle Lawmaker Addresses Concerns Over Millionaires Tax

A Washington state lawmaker backing the new “millionaires tax” is downplaying worries that taxing high earners will drive wealthy individuals and businesses out of the area. State Senator Jamie Pedersen, representing Seattle’s 43rd Legislative District, confidently stated, “The reality is that the billionaire tax is unlikely to cause companies to exit.” He maintains that there’s little evidence suggesting that the recently signed tax will prompt wealthy residents to relocate to states with lower taxes like Florida or Texas.

Pedersen mentioned that conversations with local businesses indicated different worries, such as new consumption taxes on services and inheritance taxes, which Congress had addressed previously. He believes that these factors are more significant concerns than a mass exit of the wealthy.

The new tax law marks a significant change for Washington, which has traditionally prided itself on having no personal income tax. This legislation, pushed by the Democrats during the 2026 session, will impose a 9.9% tax on individuals or households earning over $1 million annually. Though signed into law in March 2026, it won’t take effect until January 1, 2028, with the first tax payments slated for 2029. This delay is meant to allow the state’s Department of Revenue to develop the necessary infrastructure for tax collection, as well as provide time for potential legal challenges.

However, despite Pedersen’s optimistic outlook, there are already signs of distress in the local business climate. For instance, Starbucks has announced plans to shift 2,000 corporate jobs to Nashville, Tennessee. While the company insists it is not abandoning its origins, the move to a city with no personal income tax raises concerns about tax avoidance.

Moreover, local business owners have reported struggles due to the expanded retail sales tax on services, which has caused some to shut down. In response, Congress is working to reverse some of these tax expansions within a three-year timeframe.

The discussion around the tax relates back to legal precedents going back to the 1930s when the Washington State Supreme Court defined income as “property,” requiring it to be taxed at a flat rate. To work around this, the Democratic Party has framed the billionaire tax as an “excise tax,” similar to the strategy used for the state’s capital gains tax in 2023.

Pedersen has expressed his ambition to challenge the existing legal framework, stating a desire for the Washington State Supreme Court to reconsider its classification of income as property, alluding to a need for a more favorable interpretation that would support their tax approach.

As this tax debate unfolds, Seattle’s local leaders are under national scrutiny. Mayor Katie Wilson has faced criticism for taking a dismissive attitude toward taxpayer concerns. The Washington Post editorial board has labeled her approach as “arrogant” and noted her rhetoric tends to ignore the shrinking tax base and growing dissatisfaction among local taxpayers.

Furthermore, the state’s inheritance tax for the wealthiest, raised to 35% in 2025—the highest in the country—sparked significant backlash from the business community, leading lawmakers to revise that figure slightly this year.