Seattle Tech Execs Protest Proposed State Tax Hikes
Technology executives in Seattle are publicly rallying against proposed tax increases in Washington state. Opponents argue that the hikes threaten the local tech industry's competitiveness and could drive talent and companies out of the state, drawing parallels to the economic decline of other formerly industrial hubs.
At the heart of the debate is a proposed 9.9% "Millionaire's Tax" on annual income over $1 million, which recently passed the state Senate. If enacted, this would give Seattle the highest combined state and local top marginal tax rate on wage and restricted stock unit (RSU) income in the entire country, at over 18%. This comes after Washington’s capital gains tax, first introduced in 2021, was updated to a graduated rate. The state now levies a 7% tax on long-term gains above $278,000, which increases to 9.9% for gains exceeding $1 million. A separate proposal, labeled an "extinction-level event" by local venture capitalists, seeks to eliminate a key incentive for startups. Lawmakers are considering applying the state's capital gains tax to the sale of Qualified Small Business Stock (QSBS), which is currently exempt from federal taxes to encourage high-risk, early-stage investment. The opposition is vocal, with startup founders like Emily Choi-Greene of Clearly AI arguing the measure attacks those taking risks to build new companies. The concern is that founders and the investors who back them are highly mobile and may choose to build their companies elsewhere if the financial incentives are removed. These proposals add to what is already ranked as one of the least competitive tax climates in the nation. The Tax Foundation ranked Washington's tax system 45th out of 50 states, citing the Business & Occupation (B&O) tax—a tax on gross receipts rather than profit—which can disproportionately affect low-margin businesses. The state also levies the nation's highest estate tax, with a top rate recently increased to 35%, and has added new B&O surcharges on large businesses and the advanced computing sector. These cumulative changes form the backdrop for the tech industry's growing anxiety. Proponents, however, argue the new taxes are necessary to fund public education and healthcare. They also aim to rebalance what the Institute on Taxation and Economic Policy has called the most regressive state and local tax system in the country, where low-income residents currently pay a much larger share of their income in taxes than the wealthiest residents.
