Washington’s New Millionaires Tax Statistics

Washington’s new 9.9% millionaires tax doesn’t take effect until January 1, 2028, with the first returns and payments due in April 2029.

That sounds comfortably far off. But it really isn’t.

Several of the smartest planning moves — changing the form a business takes, timing a large gain or business sale, electing the new pass-through entity tax, or making a genuine, well-documented change of domicile — only work if you start a year or two ahead. Thus, it pays to understand now who actually gets caught by this tax, how many of them there really are, and where the revenue actually comes from.

The statistics turn out to be more interesting, and more useful, than the headlines suggest.

One other brief explanatory note: The estimates that follow came from Pareto distributions the Anthropic Claude LLM developed using IRS income distribution data from 2022 as well as the Washington Department of Revenue estimates for the new tax. Consider these good-faith estimates. But still just estimates.

Most People Who Pay Tax Not Who You Picture

The public conversation about the millionaires tax tends to summon images of billionaires. The data say something different. The single largest group of people who will pay the tax are taxpayers earning between $1 million and $2 million of adjusted gross income — relatively ordinary high earners, successful business owners, two-income professional households, and people having a single good year.

Working from 2022 IRS data (roughly 21,500 Washington households reported AGI over $1 million, averaging about $3 million each) and modeling the spread of incomes above the threshold, the distribution looks like this:

About two out of every three affected taxpayers sit in that bottom $1M–$2M band.

The median taxpayer reports roughly $1.6 million of AGI — which, after the $1 million standard deduction, leaves about $600,000 taxed at 9.9%, or roughly $60,000 of tax. (Thus, half the taxpays paying this tax will pay between slightly more than $0 and $60,000-ish.)

But the mean average equals about $150,000 in tax. (You calculate that value by dividing the roughly $3 billion expected revenue by the 20,000 taxpayers.)

The thing to really note with these two statistics, median versus mean? How far the $60,000 median sits below the $150,000 mean. That giant gap is the tell-tale signature of a small number of very large incomes pulling the average up.

The planning implication: a huge share of the people who will owe this tax are not the people who have a family office and a team of advisors already on retainer. They’re the ones who’ll be surprised — and who most need a heads-up.

The “20,000 Taxpayers” Number Badly Understates Reach

As already mentioned, state policymakers have said the tax will be paid by roughly 20,000 taxpayers and raise about $3 billion a year. Both numbers are reasonable. But “20,000” undercounts the human reach of the tax for three reasons, and the gap matters for anyone who has to administer, prepare, or build software for these returns.

First, returns aren’t people. The overwhelming majority of million-dollar returns are joint returns. A $1 million household is frequently two earners, two spouses, two signatures. Counting individuals rather than returns, the annual population is closer to 35,000–40,000 people than 20,000. (This makes sense. It’s easier for two people working to cross the $1,000,000 threshold than one person working.)

Second — and this is the big one — the membership of the “millionaires club” turns over constantly. It is not the same 20,000 returns year after year. Research on top-income mobility (Splinter and Larrimore; Auten, Gee, and Turner) finds that at least a quarter, and by some measures roughly a third, of the top group drops out every single year, replaced by a different set of people moving up. Two-thirds are gone within a decade. The million-dollar threshold churns even faster than the broad “top 1%,” because so many people cross it exactly once — the year they sell a business, exercise a big block of options, or book an outsized capital gain. Put those exit-and-entry rates together and, over a five-to-ten-year window, the number of distinct returns that cycle through the tax could run from 50,000 toward 100,000 — and the number of distinct individuals higher still.

Third, nonresidents have to file too. The tax reaches nonresidents on their Washington-source income. That approach sweeps in visiting professional athletes (Mariners, Seahawks, and Kraken opponents — there’s no NBA team yet, so no NBA duty days), with no five-day grace period for athletes or entertainers as well as touring performers with Washington shows. And it sweeps in out-of-state owners of pass-through entities, rental property, and other ventures with Washington-source income. Rough estimates: on the order of 1,000 nonresident athletes a year, a couple hundred performers, and anywhere from a few thousand to well over ten thousand nonresident investors and business owners.

Add it up and the actionable insight writes itself. For the Legislature and the Department of Revenue, for tax practitioners, and for the software vendors who build the tax engines (Lacerte, ProConnect, CCH ProSystem fx and Axcess, UltraTax, Drake, and the rest), the real volume of activity — first-time filers, one-and-done filers, part-year and nonresident returns, pass-through elections — will be a large multiple of “20,000 returns.” Everyone in that chain should plan for far more activity, and far more taxpayer confusion, than the single-year headcount implies.

Revenue Rides on Small Number of Very Large, Mobile, Volatile Fortunes

Here’s the final paradox. Most people who pay the tax are in that $1M–$2M band, often for only a year or two. But most of the money is exquisitely sensitive to a handful of ultra-wealthy residents — both to whether they stay in Washington and to how much income they happen to realize in a given year.

Consider the arithmetic of a single big year. A taxpayer with $50 million of AGI owes about $5 million — as much as roughly 100 typical taxpayers from that dominant $1M–$2M band, combined. One person can move the needle like an entire small city’s worth of high earners.

Now scale that up. Jeff Bezos left Seattle for Miami in November 2023, before this tax existed. Had he still been a Washington resident, his Amazon stock sales in 2024 alone — about $13.6 billion — would have produced something on the order of $1.3 billion of Washington tax in a single year (founder shares carry a near-zero basis, so nearly all of it is gain). That’s close to 40% of the tax’s entire projected annual haul. From one taxpayer. In one year. His departure didn’t cost Washington that amount every year — his realizations are or would have been episodic — but it illustrates how concentrated, and how lumpy, the top of this tax base is.

Bezos isn’t the only example of feet voting. Ken Fisher moved Fisher Investments’ headquarters from Camas, Washington to Plano, Texas in 2023, explicitly in response to Washington’s capital gains tax, and now lives in Dallas. Every multibillionaire who changes domicile is, in revenue terms, the equivalent of losing more than a thousand — and in a big-income year, a few thousand — “average” millionaires-tax payers at once. And recent news reports have explicitly reported, strongly hinted or triggered worries that other Washington billionaires (Howard Schultz, Gabe Newell, Rich Barton) are gone or maybe going.

The flip side is that the maybe two dozen or so billionaires who remain Washington residents — Steve Ballmer, Bill Gates, MacKenzie Scott, Melinda French Gates, Charles Simonyi, John Stanton, and others still on Forbes’ Washington list — represent an enormous share of the upside. The tax’s $3 billion projection quietly assumes they stay put and keep realizing income here. Because their incomes presumably swing wildly from year to year (a big stock sale one year, almost nothing the next), the state should also expect the revenue itself to be volatile — strong in years the wealthy realize gains, soft in years they don’t.

What This Means for Planning

The takeaways depend on where you sit:

• If your income occasionally spikes over $1 million — a business sale, a large gain or bonus, a liquidity event — the difference between planning two years early and reacting after the fact can be six or even seven figures. Entity structure, the pass-through entity election, installment timing, charitable strategies, and (for some) a real change of domicile all need lead time.
• If you advise high earners, expect a wave of first-time and one-time filers who don’t think of themselves as “millionaires,” plus a thicket of nonresident and pass-through returns. The client who has never owed Washington income tax in their life may owe it once — and only once — and will need help getting it right.
• If you build or buy tax software and processes, scale your assumptions to the churn and the nonresident reach, not to the 20,000 sticker number.

The tax doesn’t arrive until 2028. The planning window is open now.

Additional Resources

Washington State Millionaires Tax Residency Rules

Changing Your Washington State Residency or Domicile

Washington State’s New Millionaires Tax Quietly Limits Charitable Contributions