Blue States Push New Millionaire Taxes as Wealth Gap Widens Nationwide

Democratic-led states across the country are advancing legislation to impose higher taxes on millionaires and billionaires amid growing wealth inequality. Washington state lawmakers are considering a nearly 10% tax on earnings over $1 million, while California advocates push for a 5% tax on billionaire assets.

PROVIDENCE, R.I. — Chuck Collins believes he struck it rich through his great-grandfather’s Oscar Mayer meat processing empire, but instead of safeguarding his fortune, he’s championing efforts to increase taxes on America’s wealthiest citizens.

Collins played a key role in establishing Massachusetts’ higher tax rate on earnings exceeding $1 million, and this concept is now gaining momentum across several Democratic-controlled states such as California, Maryland, Minnesota and New Jersey. In Washington state, which lacks an income tax system, legislators may approve legislation this week creating one specifically targeting million-dollar earners.

“I think people are waking up to the harms of these inequalities,” said Collins, a founding member of the group Patriotic Millionaires, which calls for higher taxes on the country’s super affluent. “Including people who have wealth, who say, if we keep going down this road, it ain’t going to end well for anybody.”

Washington has remained unique among Democratic states for nearly a century without taxing wages or salaries, following a state Supreme Court ruling that eliminated income taxes, though it does collect revenue from certain investment gains.

With budget constraints looming, state legislators are considering legislation establishing an almost 10% annual levy on individual income above $1 million. The proposed tax could generate billions in new funding earmarked for universal K-12 meal programs, childcare assistance, family tax relief and removing sales taxes from personal hygiene products like shampoo.

Following an overnight session where lawmakers debated various amendments, the state House approved the measure this week. The legislation now returns to the Senate, which previously passed its own version. Democratic Gov. Bob Ferguson has signaled his approval if the Democratic-controlled Legislature can deliver the bill before Thursday’s adjournment deadline.

“Washington is a state that has had an extremely regressive tax structure for 93 years,” House Majority Leader Joe Fitzgibbon, a Democrat, said in an interview. “It falls very heavily on working and middle class people in our state.” He said that if the change is adopted, it will help. “We don’t need to be a tax haven,” he said.

However, Republican legislators and other critics warn that targeting wealthy individuals won’t comprehensively address revenue challenges and may discourage business investment.

Colin Hathaway, a millionaire businessman in Washington, said he’s concerned the proposed tax would treat the money earned by his roofing company as income, even though he’s putting most of it back into the business. He was already hit by the state’s previous move to hike capital gains taxes, and said an additional tax could force him to move way from the state where his high school-aged children grew up.

“There’s a strong incentive to not be doing business here,” he said.

Legal challenges and ballot initiatives will likely emerge if lawmakers approve the measure.

As affordability dominates legislative discussions nationwide, several progressive states are exploring various forms of wealth taxation.

California presents the most aggressive approach to taxing the wealthy, despite already imposing taxes on millionaires. Supporters are developing a ballot initiative establishing a one-time 5% levy on assets belonging to individuals worth $1 billion or more. The plan, supported by a major healthcare union, would compensate for federal healthcare funding reductions for low-income populations enacted under President Donald Trump’s administration.

Critics view California’s wealth tax initiative as evidence that America’s movement to tax the rich has evolved beyond revenue generation to efforts aimed at reducing or eliminating extreme wealth, according to Jared Walczak, a senior fellow at the Tax Foundation.

“You see that in the language around something like the California wealth tax, where the ballot language itself talks about it being a tax on sustaining excessive accumulations of wealth,” Walczak said.

Rhode Island lawmakers are reviewing a budget plan endorsed by Democratic Gov. Dan McKee that would implement increased taxes on residents earning $1 million annually or more.

Michigan organizers are gathering signatures for a November ballot measure asking voters to replace the state’s current flat tax structure. Their proposal would add a 5% tax on individuals earning over $500,000 or couples filing jointly with $1 million in income. The state board of education supports this initiative, which would channel new revenue toward K-12 education funding.

New York City Mayor Zohran Mamdani has renewed his campaign for New York state to increase taxes on wealthy residents, despite facing resistance from Democratic Gov. Kathy Hochul. Chicago Mayor Brandon Johnson has made similar appeals, though the Illinois legislature hasn’t advanced millionaire tax legislation.

This recent progressive state movement contrasts sharply with Republican-led states, which have opposed higher taxes on their wealthiest residents and have worked to eliminate or substantially reduce personal income taxes.

Eight states currently operate without income taxes, and Walczak noted the divide between states pursuing tax relief and those seeking higher wealthy taxes “is larger than it has been for decades.”

Uncertainty remains about whether such reductions lead to increased alternative taxes or reduced public service funding.

“I think most Americans are pretty fed up because I think they understand that there’s really two tax systems. There’s one for your average person. You’re a nurse? You’re firefighter? Every two weeks you pay taxes. And then for the super wealthy, there’s all these tax breaks and all these special loopholes,” said David Kass, executive director of the left-leaning advocacy group Americans for Tax Fairness.

Massachusetts frequently appears in discussions about millionaire tax effectiveness. Voters approved the Fair Share Amendment in 2022, adding a 4% surcharge on income exceeding $1 million, with the threshold adjusted annually for inflation. The amendment has generated $6 billion for education and transportation programs, according to the state’s Executive Office for Administration and Finance.

“It’s good for everybody, in a time of grotesque inequality, for wealthy people to chip in a little bit more,” said Collins, Oscar Mayer’s great-grandson. “Especially at a time when others are just struggling to keep up.”