Seattle business leaders are raising alarms about economic momentum after the state House passed a 9.9% income tax on earnings above $1 million, with the vote coming the same day former Starbucks CEO Howard Schultz announced he and his wife have relocated to Miami.
Even on the dreariest of days, Bob Donegan radiates optimism. “Seattle is still a really attractive place to come to visit or work or live,” said the Ivar’s CEO, as he stood on the deck of the Acres of Clams restaurant on the Seattle waterfront. For decades, he has been the biggest champion of the redevelopment, and says, “The private sector has spent more than one and a half billion dollars in new hotels, apartments, retail spaces, and renovations of the piers. It’s working.”
He cites data from Seattle Historic Waterfront Association and the Downtown Seattle Association that shows foot traffic is up double digits year over year. But he is also concerned that economic momentum could be blunted after the state House approved a new “millionaires tax,” advancing a politically divisive measure that would impose a 9.9% tax on personal income above $1 million and potentially set up a legal and political fight in a state that has long rejected broad income taxes.
The bill, Senate Bill 6346, passed 51-46, with all Republicans voting against it. It now returns to the Senate for concurrence on House amendments before it can be sent to Gov. Bob Ferguson, who has signaled support. Eight House Democrats voted against the measure, though all Seattle-based representatives voted in favor of the tax. Supporters say the proposal would make Washington’s tax system less regressive by shifting more of the burden to top earners, while pairing new revenue with tax relief for lower-income families and some small businesses. Critics call it a “seismic shift” that could weaken the state’s competitive advantage and prompt high earners and employers to relocate.
The legislation would apply the new tax rate to taxable annual income over $1 million, with collections projected to begin in 2029. The House vote came as former Starbucks CEO Howard Schultz, one of Washington’s most prominent business leaders, disclosed in a LinkedIn post that he and his wife, Sheri, have moved to Miami. “Last year we traveled to dozens of places around the world,” Schultz wrote, adding that the couple has entered the “retirement” phase of their lives and relocated to South Florida to be closer to family on the East Coast.
Schultz praised the role Seattle and the Pacific Northwest played in building Starbucks and said he hopes Washington “will remain a place for business and entrepreneurship to thrive.” He said the couple’s private family office will move to Miami, while the Schultz Family Foundation will continue operating in Seattle. Schultz did not mention the tax legislation in his post. However, the timing of his announcement came amid an intense debate over how Washington should fund schools, health care, and other priorities, and what the state’s tax structure signals to employers and wealthy residents.
Republicans suggested a connection between the move and the tax debate. “It’s no doubt the two things are connected. Howard Schultz is a smart man,” said Rep. Drew Stokesbary, R-Auburn. “It’s called capital flight,” said Rep. Chris Corry, R-Yakima. “We don’t need more taxes on businesses in our state, in our city. We need more businesses here paying taxes,” said Jon Scholes, president and CEO of the Downtown Seattle Association, speaking ahead of the organization’s annual “State of Downtown” event.
Scholes pointed to signs of progress in Seattle, including double-digit growth in foot traffic along the waterfront and increased visitor activity. However, he noted the office vacancy rate remains above 33%, and worker foot traffic is still about two-thirds of pre-pandemic levels. “I don’t know that elected officials generally appreciate how fragile our economy in the city is, how fragile downtown is. We’ve lost jobs in this city and downtown over the last three or four years. They’re growing jobs on the other side of the lake,” he said.
Donegan said he wished lawmakers had taken more time and revisited the issue during a longer session in 2027. He said he has spoken with private wealth attorneys who have helped high-net-worth clients establish residency outside Washington. “That’s not a myth,” Donegan said.
