That conundrum that keeps happening with the rich is happening again.
They are said to be leaving this state. Yet collections for a tax on wealth have smashed records — again.
For all the attention on this subject, Washington state has only one new wealth-related levy up and running (a new income tax is still two years away). But the capital gains tax debuted in 2023. It taxes not extreme wealth but profits made from selling assets, mostly stocks (real estate sales are excluded).
To pay this 7% tax you first have to book personal profits north of $278,000 — a windfall so rarefied it has blessed fewer than 10,000 Washingtonians each year.
So what just happened? The state’s chief economist reports that the latest returns have blown the roof off.
This morning we got the updated numbers for fiscal year 2026 for capital gains … it came in at $1.5 billion," economist Dave Reich told state lawmakers earlier this month. "So a very significant increase, quite a bit above our forecast from what we had before."
This is understating things by a fair bit. Last year this tax raised $584 million. So the revenue, which is a preliminary figure pending delayed returns, appears to have nearly tripled in one year. It quadrupled from the year before that.
This is not what the critics of tax-the-rich schemes said should happen. They predicted tax proceeds would deteriorate as rich people moved away or structured their finances to avoid paying it.
"Money is mobile," warned state Rep. John Ley, R-Vancouver, when the Legislature last year added an additional 2.9% surcharge on gains over $1 million.
He cited the case of billionaire investor Ken Fisher, a former Washington resident.
“When this body was even considering instituting a capital gains income tax, he immediately moved his corporate headquarters to Texas," Ley noted. "And he took with him a lot of high-paying jobs. Those employees are no longer paying taxes in our state."
This is true. Ley also cited the case of Amazon founder Jeff Bezos, who left for Florida with his $200 billion-plus fortune in 2023. It’s estimated that the move saved Bezos $600 million to $1 billion solely on this one tax.
"When money is mobile and moved, the essential tax rate becomes zero," Ley warned.
One tech entrepreneur who moved away wrote to tell me about it. Brian Janssen, founder of Onyx Software, said he doesn’t favor Washington’s new tax-the-rich schemes. What irked him though was the unnecessary level of animus.
"In today’s Seattle and in Washington State at large, I’m a villain in the eyes of progressive 'leaders,'" he said. "I can count on one hand those who are planning on remaining. You can see this at a very public individual level … what is not seen is the billions of wealth in my peer group (probably one of hundreds of such groups in the region) that are leaving or have left."
And yet — somebody is still here paying this tax. A super rich lot of somebodies.
In February, the state estimated that capital gains would raise about $750 million, on account of the stock market doing well. Yet the state’s remaining rich somehow doubled that expectation.
It’s kind of extraordinary that windfall profits at the top are smashing records even as the wealthy are said to be fed up or fleeing. It makes it difficult to know what’s really going on.
It’s also a tale of two economies.
"By many measures, the state economy is in a funk," emailed Jacob Vigdor, a University of Washington economist and public policy professor. He cited flatlining job numbers, a higher unemployment rate and a housing market in "a state of suspended animation."
There’s no funk at the top.
"When the stock market is doing well, there are capital gains to be had, Vigdor said.
One possible explanation for the record returns is that wealthy people may have paused selling stocks the year before, in hopes the tax might get repealed by voters. But it was upheld at the ballot in the fall of 2024. Voters seemed to favor the idea of taxing the wealthy to help pay for schools.
Vigdor also said some wealthy people may have started cashing out more stocks in 2025 due to concern about the Donald Trump administration. Plus the top rate went up, though only by 2.9%.
The most logical explanation is simpler: The rich around here are just really rich and getting richer. Some are leaving but the rest are getting far richer, faster, than the tax estimators can keep up with.
Will tax-the-rich eventually harm business? Will state government use this money well? These are legit questions that Democrats haven’t been so good at answering. I also agree with Janssen above that demonizing people with money is shallow and counterproductive.
But since the state Legislature passed the capital gains tax in 2021, as its first big try at tapping into tech wealth, Microsoft’s annual profits are up 130% in those five years. Amazon’s profits are up a dizzying 264%. This is astounding context for how there could be so much more big money sloshing around than anyone thought.
As long as taxes on the superwealthy keep topping estimates, often by two or threefold, it’s going to be tough to convince those down-in-the-funk voters that the tippy top are hurting, or fleeing, or that any of this is bad.
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