Washington state enacted a new tax on high-income earners, with Gov. Bob Ferguson signing legislation that imposes a 9.9% tax on income above $1 million beginning in 2028. The move represents a significant change for the state, which has historically operated without a broad-based income tax.

State officials say the revenue generated from the new tax will fund a range of programs, including child care services, free school meals, tax credits for working families, and targeted relief for small businesses. The policy is also expected to expand the state’s Working Families Tax Credit to hundreds of thousands of additional households.

Ferguson defended the measure as a way to address disparities in Washington’s tax system, arguing that lower-income residents currently pay a higher share of their income in state and local taxes than top earners. He also criticized prior federal tax policies, linking them to increased pressure on state budgets.

The legislation comes as several Democrat-led states explore or implement similar taxes on high-income households. Massachusetts voters approved a surtax on million-dollar incomes in 2022, generating billions in additional revenue, while lawmakers in states such as New York and Colorado are considering comparable measures.

Critics, including Republican lawmakers, argue that higher taxes on top earners could drive residents and businesses to lower-tax states, potentially reducing investment and economic growth. Some have also warned that such policies could expand over time to affect a broader segment of taxpayers.

Recent developments have added to those concerns. Starbucks founder Howard Schultz announced plans to relocate from Seattle to Florida, citing a transition into retirement shortly after lawmakers approved the measure.

Meanwhile, several Republican-led states are pursuing the opposite approach by cutting or eliminating income taxes. States such as Mississippi and Oklahoma have taken steps toward phasing out income taxes, while others are working to further reduce rates.

Washington officials maintain that the new tax will allow the state to expand public services and provide targeted financial relief, even as debate continues over its long-term economic impact.