[ed. ...and large hedge funds and corporations, too. Please?]
Within hours, it also escalated the main practical argument against it — which is that people making north of a million dollars a year won’t actually pay it. Because they won’t be here anymore.
Taxing the rich is an “old worn out rope-a-dope to convince voters to stick it to the wealthy, those dirty bastards,” he wrote. “Who then promptly move out of the state with the now duped voter holding the check.”
Are the rich about to flee? And do they really drive away in U-Hauls like the rest of us schlubs? (I thought they favored private jets.)
Seriously, the specter of it suggests Democrats may be about to solve the wealth inequality issue by chasing away the top. Or at least scaring enough of them away to make the tax a bust.
“If they pass an income tax, I will be better off to change my residency to believe it or not, California,” retired Starbucks executive Howard Behar wrote to me after my column last week on how tax-the-rich fever is rising. He also cited Washington’s rather severe inheritance tax.
Heywood, who has been leading various GOP-backed initiative drives, is an interesting case study because he already fled a state due to taxes.
“I’m an economic refugee,” he told an interviewer in 2022.
In 2010, when California dinged its wealthiest residents with an income tax surcharge that pushed rates as high as 13.3%, Heywood moved his hedge company out, to Washington.
He cited his top reasons for leaving California as “taxes, taxes, taxes, taxes.” Puget Sound’s natural beauty was a fifth reason.
“I came here to make money and to be free,” Heywood said.
So it’s true that rich people sometimes do pull up stakes and split when taxes get too dear. Other readers suggested a different framing.
“Maybe we have so many tech companies paying such high wages precisely because we don’t have an income tax?” one said.
The problem with these arguments is that most of the top high-tech hubs, such as California’s, have even higher taxes, and have for years.
In fact since Heywood fled California, that state has become the millionaire and billionaire capital of the world.
“Billionaires flush with ‘new money’ are flocking to the Bay Area,” read a headline earlier this year from SFGate. A study found the number of millionaires in the San Francisco area rose by 98% from 2014 to 2024 — despite California’s tax surcharges on the superrich.
“When millionaires say they’re leaving, they almost never do,” wrote a tax attorney for Forbes magazine about this data.
Wealth advisers Henley & Partners showed that millionaires and billionaires are in fact concentrated in the U.S. cities and states with by far the highest taxes. New York City has the most rich people, followed by San Francisco, Los Angeles and Chicago. All these places have state income taxes, and some, like New York, have surcharges on the superwealthy that send local income tax rates as high as 14.8%.
San Francisco and the surrounding Bay Area, routinely blamed for a list of progressive horrors that’s said to be repelling the rich and civilized, in reality has now surpassed New York for the most billionaires in the world, the Henley study showed. The Bay Area has 82 billionaires to go with 342,000 millionaires. This compares to Seattle’s 11 billionaires and 53,100 millionaires, Henley found.
The income tax rate proposed for Washington, by state Senate Majority Leader Jamie Pedersen, D-Seattle, would be 9.9% on any dollar earned above $1 million in a year.
That rate seems high to me, though it’s only a bit higher than a special millionaire tax passed by voters in Massachusetts in 2022. They imposed a surcharge on dollars earned above $1 million, so that the top rate now is 9%.
Did the superwealthy flee from Massachusetts after that? Some did, and a big exodus was predicted. But the tax, in its first two years in 2024 and 2025, startled even its backers by raising more than twice as much as projected — $5.7 billion instead of $2.3 billion. Somebody paid all that tax.
“People who thought this tax would backfire will have to concede now that it generates a substantial amount of additional revenue,” Evan Horowitz, director of Tufts University’s Center for State Policy Analysis, told Bloomberg News.
Forbes postulated that the flight of the rich is a sort of chestnut that lives on through repeated tellings by influential people.
“For every high-profile departure anecdote splashed across the headlines, there are thousands of high earners doing nothing of the sort,” the magazine summed up.
It’s true the rich can jet off if they wish. In theory they can “offshore” themselves and their families to Texas or Florida or Nevada, like assets being shifted from one bank account to another.
But they’re also people. They have friends, community connections, kids in schools. They like looking at Mount Rainier, too. Money can’t easily re-create that stuff.
***
The populist turn in politics is real. Down at the base voter level, there is no party of the rich anymore.Another takeaway: It may finally be sinking in for a broad cross-section of voters just how much the top of society has made out like bandits in the Big Tech era.
Consider that in 2017, 12,520 Washingtonians made more than $1 million in income, according to IRS filing data. Just five years later, in 2021, that number had soared to 28,930. That’s a 131% increase in millionaires. These aren’t paper millionaires either, but federal tax filers reporting they earned north of a million bucks for a single year.
Constituting less than 0.5% of the state’s population, this group makes 15% to 25% of all the money earned in the state each year, IRS data shows.
