Wealth taxes: High hopes, low returns

House Bill 2046 and Senate Bill 5797 are not just about raising revenue—they represent a major shift in Washington’s tax philosophy. By taxing paper wealth, creating a complex new bureaucracy, and signaling hostility toward investment and innovation, these bills would damage our economy and undermine long-term tax stability.

• HB 2046 would impose a new annual tax on certain intangible financial assets owned by Washington residents, such as publicly traded stocks, bonds, mutual funds, and exchange-traded funds. The tax would apply to residents with more than $50 million in combined intangible financial assets and would be assessed at a rate of $10 per $1,000 in value. Importantly, this tax would apply to unrealized gains—meaning taxpayers could owe millions in taxes on investments they have not sold or received income from.
  
  
• In addition to the new tax, HB 2046 would create an entirely new tax structure under a separate section of state law, Title 84A RCW, which would operate independently of Washington’s traditional property tax system. It would require detailed annual filings and grant the Department of Revenue broad new authority to administer and enforce the tax.
  
  
• SB 5797 is a separate proposal that mirrors HB 2046's structure and intent. It includes nearly identical provisions, imposing the same tax rate, thresholds, exemptions, and valuation standards.

Why these proposals are bad for Washington

Opens the door to broader wealth and middle-class taxes: Today, the threshold is $50 million. Tomorrow, it could be lower. Once a wealth tax infrastructure is in place, future legislatures could expand it to include smaller asset classes or middle-income savers—such as retirement portfolios or family-owned businesses. These proposals set a dangerous precedent.

Stifles innovation and drives entrepreneurs away: These proposals target the very people who create jobs, invest in new ideas, and drive economic growth. By taxing unrealized gains and creating a separate wealth tax system, Washington would discourage successful individuals from investing—or even remaining—in the state.

When wealthy individuals leave, Washington loses more than this tax: When high-net-worth individuals move out of Washington to avoid aggressive taxation, the state loses multiple sources of revenue—including sales tax, business taxes, capital gains revenue, and more. Jeff Bezos moved his tax residency out of Washington after the state enacted a capital gains tax. If even a handful of wealthy taxpayers leave because of these new proposals, it could result in net revenue loss, not gain.

The administrative burden is immense and costly: The Department of Revenue has described implementation of this tax as “daunting.” Fiscal notes estimate the department would require more than $13 million per year over the next six years just to administer the new system—money that could otherwise go to core public services.

No other U.S. state has implemented this kind of tax—for good reason: Policymakers across the country understand that taxing unrealized wealth is an administrative nightmare and an economic gamble. Washington would be the only state to adopt this type of tax, making it a national outlier and putting our competitive edge at risk.

Wealth taxes have failed internationally: Countries that tried wealth taxes ultimately walked away from them. Austria, Denmark, France, Germany, Finland, Iceland, Luxembourg, and Sweden all repealed their wealth taxes after seeing poor economic outcomes, revenue shortfalls, and capital flight. Washington shouldn’t make the same mistake.