Tax the Rich: Additional States Considering and Enacting Taxes Targeting High-Net Worth Individuals
As predicted in our previous alert, a number of states recently moved to enact or propose wealth taxes or income taxes aimed at individuals with high annual incomes, over $1 million. As California’s proposed Billionaire Tax continues to gain momentum, Washington, Maine, and Minnesota are also expanding their efforts to tax the rich.
California’s Billionaire Tax
In order to get the proposed California’s Billionaire Tax on the November 2026 ballot, backers needed to obtain 875,000 signatures in support of the ballot measure by June 24, 2026. On April 26, 2026, the Wall Street Journal reported that over 1.5 million signatures had already been obtained. Once the signatures are submitted, local election officials will need to verify the signatures and send them to the California Secretary of State. If at least 875,000 signatures can be verified, the ballot measure will be put forth to California voters as part of the November 2026 election. If the ballot measure passes, California would impose a one-time 5% tax on California’s resident billionaires.
Washington’s Millionaires Tax
On March 30, 2026, Washington’s governor signed into law Substitute Senate Bill 6346 (Millionaires Tax) that imposes a 9.9% income tax on individuals with annual Washington adjusted gross income of $1 million or more. Washington’s Millionaires Tax is significant because Washington historically did not impose an income tax on individuals. The tax will be imposed beginning January 1, 2028.
Who Pays the Millionaires Tax?
The Millionaires Tax applies to both Washington residents and nonresident individuals, which are defined as natural persons. Additionally, the tax includes a pass-through entity tax election, which allows pass-through entities to pay the tax on behalf of their individual members or owners.
How is the Millionaires Tax Calculated?
The Millionaires Tax is imposed on Washington taxable income. The starting point to calculate Washington taxable income begins with determining Washington base income. Washington base income begins with an individual’s federal adjusted gross income and requires multiple addbacks to an individual’s federal adjusted gross income, including adding back federal long term capital gains and carryover losses that pre-date 2028.
For Washington resident individuals, the Millionaires Tax requires that all income be allocated to Washington from “wherever [that income] is derived.” Notably, this includes the income from any non-grantor incomplete gift trust established by a Washington resident individual, which effectively eliminates the income-tax advantage of using a Nevada Incomplete Non-Grantor Trust (NING) or Delaware Incomplete Non-Grantor Trust (DING) for Washington state residents.
For Washington nonresident individuals, the Millionaires Tax is imposed on the income derived from sources within Washington. Income of nonresident individuals subject to the tax includes wages from employment within Washington, rents and other gains attributable to real or personal property located in the state, and income from intangible personal property, such as dividends and interest, to the extent that the intangible personal property was employed in a business or occupation carried on within Washington.
To help guide nonresident individuals, the tax’s statutes provide high-level rules for how nonresidents should allocate income to Washington. However, given that allocating income is so fact dependent, additional interpretative guidance from the Washington Department of Revenue is necessary and is likely forthcoming.
Once a taxpayer has calculated a base income, there is a standard $1 million deduction from the taxpayer’s base income, which effectively creates the $1 million threshold of the tax. Importantly, the standard deduction applies regardless of whether an individual is filing separately or if the individual and his/her spouse are filing jointly.
Is the Millionaires Tax Being Challenged?
Yes. The Millionaires Tax is already being challenged by Washington business owners and residents in Petter v. State of Washington. The plaintiffs allege that Washington’s tax violates the state’s constitution that prohibits nonuniform taxation of property and limits the aggregate tax burden on property to 1%. In a 1933 decision, the Washington State Supreme Court held that income was a form of property subject to the state’s constitutional protections for the taxation of property. See Culliton v. Chase, 174 Wash. 363, 25 P.2d 81 (1933).
What about Washington’s Estate Tax?
On March 24, 2026, Washington’s governor signed into law Senate Bill 6347, which reverses the estate tax increases enacted in 2025 to assist with Washington’s budget shortfall. For decedents dying between July 1, 2025, and June 30, 2026, Washington imposes a top marginal estate tax rate of 35%, decedents dying on or after July 1, 2026, benefit from a top marginal estate tax rate of 20% (as further detailed in the table below). Decedents dying between July 1, 2025, and June 30, 2026, do get one advantage — an increased estate tax exemption of $3,076,000; while decedents dying on or after July 1, 2026, are left with a $3,000,000 estate tax exemption, that will not increase with inflation adjustments.
| Washington Taxable Estate Value | Decedent’s Date of Death | |||
| July 1, 2025 – June 30, 2026 | On or after July 1, 2026 | |||
| Base Tax | Rate | Base Tax | Rate | |
| $0 – $1,000,000 | $0 | 10% | $0 | 10% |
| $1,000,000 – $2,000,000 | $100,000 | 15% | $100,000 | 14% |
| $2,000,000 – $3,000,000 | $250,000 | 17% | $240,000 | 15% |
| $3,000,000 – $4,000,000 | $420,000 | 19% | $390,000 | 16% |
| $4,000,000 – $6,000,000 | $610,000 | 23% | $550,000 | 18% |
| $6,000,000 – $7,000,000 | $1,070,000 | 26% | $910,000 | 19% |
| $7,000,000 – $9,000,000 | $1,330,000 | 30% | $1,100,000 | 19.5% |
| Greater than $9,000,000 | $1,930,000 | 35% | $1,490,000 | 20% |
Maine’s Surcharge on Millionaires
On April 10, 2026, Maine’s governor signed into law supplemental budget bill L.D. 2212, which imposes a 2% income tax surcharge on the portion of Maine taxable income that exceeds $1 million for individuals and $1.5 million for individuals filing married joint returns and head of household filers. While Maine’s millionaires surcharge is not a drastic departure from Maine’s current individual income tax system, the surcharge does apply retroactively effective for tax years beginning on or after January 1, 2026. As a result, filers would first be subject to the surcharge when tax returns are filed in 2027 for the 2026 tax year.
Minnesota’s Wealth Tax
In March 2026, the Minnesota legislature introduced HF 4616 that would impose an annual 1% tax on all “taxable wealth” above $10 million. If enacted, HF 4616 would be effective for taxable years beginning after December 31, 2025.
As currently drafted, HF 4616 defines taxable wealth as the sum of a taxpayer’s real property, tangible personal property, and intangible property located in Minnesota, minus the sum of all debts and financial obligations owed by the taxpayer. The value of property would be calculated in the same manner as the value of gross estates under IRC § 2031.
The Minnesota wealth tax would also apply to nonresidents of Minnesota with an ownership interest in a pass-through entity with real property, tangible personal property, and intangible property located in Minnesota. As drafted, HF 4616 would provide a look-through attribution approach whereby the ownership of the property would be deemed that of the nonresident taxpayer and not the pass-through entity.
New York Contemplating Income and Property Tax Hikes
As part of his 2025 campaign, New York City Mayor Zohran Mamdani proposed instituting a 2% surtax on the annual income of NYC households over $1 million. The New York state legislature is currently debating the 2026-27 budget. While Mayor Mamdani’s proposal has support within the New York state legislature, he may not be successful in obtaining a full 2% hike.
As part of the budget negotiations, New York Gov. Kathy Hochul has joined Mayor Mamdani in proposing a “pied-à-terre tax,” which would impose a property tax surcharge on second homes in New York City that are worth over $5 million. While the details of the proposed pied-à-terre tax are still being finalized, early reports suggest that the surcharge could generate an additional $500 million in annual revenue.
Federal Wealth Tax Still Unlikely
In March, Senator Bernie Sanders (I-VT) and Representative Ro Khanna (D-CA) introduced the “Make Billionaires Pay Their Fair Share Act,” which would impose a 5% annual federal wealth tax on U.S. billionaires. With Republicans and some moderate Democrats voicing strong opposition to a federal wealth tax, the proposed legislation is unlikely to gain any traction while Republicans control the House and Senate. Even if the legislation were to pass, the Constitution’s restriction on direct taxes unless apportioned among the states by population poses a significant legal hurdle to the constitutionality of any federal wealth tax. Nevertheless, during a contentious mid-term election year, Senator Sanders and Representative Khanna’s efforts demonstrate the increasing political weight of wealth taxes and progressive income taxes.
We will continue to monitor the impact of the enacted Washington and Maine taxes and the proposed federal, Minnesota, and California wealth taxes, along with any additional proposed wealth taxes that may affect our clients.
