Washington has long been one of the most business-friendly states in the country. It offered no personal income tax, no capital gains tax, and a deep talent pool built around major tech employers. For decades, those advantages made the Pacific Northwest an easy choice for executives and company founders looking to build something significant.
That calculus is changing fast.
In less than four years, Washington went from zero capital gains tax to a top rate of 9.9%. This week, the state enacted its first-ever personal income tax, with a 9.9% levy on income over $1 million having cleared the House and Senate vote before heading to the governor’s desk for signature.
For business leaders with operations or personal residences in Washington, these developments carry real dollar consequences. And for companies still deciding where to plant their flag, Washington just moved into a very different competitive position.
The Capital Gains Tax: From Zero to 9.9% in Under Four Years
Washington’s capital gains story starts in 2022, when the state enacted a 7% excise tax on long-term capital gains over a standard deduction threshold, set at $278,000 for 2025. The tax covers gains from stocks, bonds, mutual funds, business interests, and other assets held over a year. Real estate, retirement accounts, and certain family-owned businesses are exempt.
The tax survived legal challenge. The Washington Supreme Court upheld it in 2023, the U.S. Supreme Court declined to hear an appeal in 2024, and voters rejected a repeal effort by a 63% to 37% margin in November 2024. It is settled law.
Then in May 2025, Governor Ferguson signed SB 5813, which added a 2.9% surcharge on gains exceeding $1 million, retroactive to January 1, 2025. That brings the top rate to 9.9%, matching Oregon and sitting just below California’s 13.3%.
Washington collected $840 million in capital gains tax revenue in its first year, far exceeding the state’s original $248 million projection. Roughly 84% of collections came from King County, and the top ten taxpayers accounted for 56% of all revenue collected.
For executives sitting on significant stock positions or planning a liquidity event, the math has shifted materially. What was once a zero-tax environment for investment gains is now one of the higher-tax states in the country for large transactions.
The Millionaires Tax: Washington’s First-Ever Personal Income Tax
Senate Bill 6346 imposes a 9.9% tax on Washington adjusted gross income over $1 million per household. It’s the first personal income tax in Washington’s 137-year history. Voters have rejected income tax proposals 11 times over the past century.
The Senate passed the bill on February 16 by a 27 to 22 vote. The House passed a revised version on March 10 by a 51 to 46 vote, following more than 24 hours of continuous floor debate. This week, the Senate passed the bill with a 27 to 21 vote. It’s now headed to Governor Ferguson, who has stated he will sign it.
Once signed, the tax would take effect January 1, 2028, with first payments due in 2029. Revenue projections estimate $3.4 to $3.7 billion annually from approximately 21,000 filers, which is less than .5% of Washington households.
A founder earning $5 million annually in Washington under the new income tax would owe roughly $396,000 more per year compared to living in a state with no income tax. Add capital gains exposure, and the total gap grows significantly.
The bill includes a necessity clause that blocks a voter referendum. Legal challenges are expected. Opponents argue income cannot be classified as anything other than property under Washington’s constitution, which requires uniform taxation. Supporters believe the current court will extend the logic it used to uphold the capital gains excise tax. How that legal fight resolves will shape Washington’s tax landscape for years to come.
What Strategic Executives Are Doing
The conversation about leaving Washington is no longer hypothetical.
Jeff Bezos moved from Seattle to Miami in late 2023. By relocating before selling Amazon stock, he avoided Washington’s capital gains tax on gains estimated at more than $600 million in 2024 alone. His move was a preview of what is possible when the personal tax burden gets large enough.
An Association of Washington Business survey found that 44% of business leaders are considering moving their personal residence out of state, and 17% of businesses plan to relocate entirely, with 61% citing tax burden as the primary reason. Washington has experienced the highest net loss of corporate headquarters of any state since 2022.
The destinations drawing the most attention share a familiar profile: no personal income tax, no capital gains tax, and a pro-growth environment.
What This Means If You Are Weighing a Location Decision
For companies deciding where to establish or expand operations, and for executives thinking about where to base themselves personally, the window to act before these changes fully take effect is narrowing.
Site selection has always been about more than taxes. A true strategic decision comes from an understanding of a location’s workforce quality, infrastructure, proximity to customers, energy costs, and regulatory environment. The real value is in seeing the full tax picture across multiple states, jurisdiction by jurisdiction, including property tax exposure, sales and use tax obligations, and incentive opportunities that can offset upfront costs.
KE Andrews has helped energy, industrial, and commercial companies navigate complex state and local tax environments for over 45 years. Our dedicated Site Selection team works alongside your leadership to independently analyze the full tax and incentive landscape across target markets so you can make location decisions with confidence and clarity. Whether you’re evaluating a new headquarters, a manufacturing expansion, a data center, or a processing facility, we bring the data, the relationships, and the experience to help you land in the right place at the right cost. Reach out to our team today to start planning.