How some states are reviving the campaign to tax the rich

PROVIDENCE, Rhode Island (AP) — Chuck Collins thought he’d won life’s lottery by inheriting huge sums of money through his great-grandfather Oscar Mayer’s processed meat company, but instead of fighting to protect every dime, Collins helped push for higher taxes on wealthy people like him.

He successfully helped implement a higher tax in Massachusetts on income above $1 million, and the idea has already taken hold in a few other blue states, including California, Maryland, Minnesota and New Jersey. Lawmakers in Washington state, which does not have an income tax, could send the governor this week a measure that would impose the measure on million-dollar earners.

“I think people are starting to wake up to the harms of this inequality,” said Collins, a founding member of the group National Millionaires, which advocates for higher taxes on the nation’s wealthy. “Including people who have wealth, who say, if we keep going down this path, it’s not going to end well for anyone.”

Washington could be next to the millionaire income tax

Since a state Supreme Court decision nearly a century ago struck down the income tax, Washington has emerged as one of the few Democratic-controlled states without a wage or payroll tax — although it does levy a tax on certain investment returns.

Facing budget shortfalls, lawmakers are discussing a proposal that would create an annual tax of about 10% on personal earnings above $1 million. If adopted, the tax would raise billions of dollars in new revenue that would be designed to pay for free K-12 school meals, child care services, the family tax credit, and eliminating sales taxes on personal care items like shampoo.

The House of Representatives adopted it this week after an all-night session to discuss amendments to the proposal. Now it’s up to the Senate, which approved the previous version. Democratic Governor Bob Ferguson has indicated his support if the Legislature, controlled by his party, can send it to him before it adjourns on Thursday.

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

Others, including GOP lawmakers, warn that taxes on the wealthy are not a comprehensive solution to address troubling state revenues and could drive away companies.

Colin Hathaway, a millionaire businessman in Washington, said he is concerned that the proposed tax would treat money made by his roofing company as income, even though he puts most of it back into the business. He was already hurt by the state’s previous move to raise taxes on capital gains, and said the additional tax could force him to move away from the state where his high school-age children grew up.

“There is a strong incentive not to do business here,” he said.

If the measure is adopted, it will likely be challenged in court and put on the ballot.

Momentum in blue states

As affordability becomes a hot topic in statehouses this session, a handful of progressive states are at least considering imposing some sort of wealth tax.

Perhaps the most ambitious effort to tax the rich is taking place in California – a state that already taxes its millionaire class. Supporters are working on a ballot measure that would impose a one-time 5% tax on the assets of those with a net worth of $1 billion. The proposal, backed by a major health care union, would use the additional revenue to fill federal funding cuts to low-income health services that President Donald Trump signed last year.

For critics, California’s wealth tax effort is the latest example that pressure on the rich in the United States is no longer about finding solutions to raise revenues, but is instead now backed by those who believe excessive wealth should be reduced or even eliminated, said Jared Walczak, a senior fellow at the Tax Foundation.

“You see that in the language surrounding something like California’s wealth tax, where the ballot language itself talks about it being a tax on the continued excessive accumulation of wealth,” Walczak said.

Elsewhere, Rhode Island lawmakers are discussing a budget proposal — backed by Democratic Gov. Dan McKee — that would impose higher taxes on residents who earn $1 million or more.

In Michigan, organizers are working to collect enough signatures to get a ballot initiative before voters in November asking them to approve replacing the state’s current flat tax. Under the proposal, Michigan would impose an additional 5% tax on those who earn more than $500,000 individually or $1 million for joint filers. This initiative, supported by the State Board of Education, will direct the new revenue to help fund K-12 schools.

New York City Mayor Zahran Mamdani renewed his call for New York state to raise taxes on the rich — even though he faces opposition from Democratic Gov. Kathy Hochul. Chicago Mayor Brandon Johnson has made a similar call, but the Illinois State Assembly has not yet moved on imposing a tax on millionaires.

Red states are moving in the opposite direction

The recent campaign by left-leaning leaders in blue states contrasts with what is happening in many Republican-led states, which have been more critical of passing higher taxes on their richest residents and have moved to eliminate or significantly reduce personal income taxes.

Eight states do not impose an income tax at all, and Walczak said the gap between states seeking tax relief and those seeking higher taxes on the wealthy is “larger than it has been in decades.”

However, questions remain about whether these cuts will increase other taxes or defund services.

“I think most Americans are very fed up because I think they understand that there are really two tax systems,” said David Kass, executive director of the left-leaning group Americans for Tax Justice. “There is one system for the average person. Are you a nurse? Are you a firefighter? You pay taxes every two weeks. And then for the wealthy, there are all these tax breaks and all these special loopholes.”

Massachusetts is often brought up in the debate about the effectiveness of millionaire taxes. Voters passed the Fair Share Amendment in 2022, which added an additional 4% tax on income over $1 million; The inflation threshold has risen annually. So far, the amendment has raised $6 billion for education and transportation, according to the state’s Executive Office of Administration and Finance.

“It’s good for everyone, in a time of stark inequality, for wealthy people to contribute a little more,” said Collins, Oscar Mayer’s grandson. “Especially at a time when others are struggling to keep up.”

Attanasio reported from Seattle and Mulvihill reported from Haddonfield, New Jersey.