There’s been a great deal of discussion about the potential for a “millionaires’ tax” at the federal level – but for the moment that doesn’t seem like a likely way for the feds to bring in much needed revenue.

On the other hand, four states have done just that, according to a blog post by Aidan Davis, the state policy director at the Institute on Taxation and Economic Policy (ITEP).

As she wrote, “Washington was the first to act this year, becoming the first state in 35 years to implement a new personal income tax (in this case, applied exclusively to millionaires). Within a matter of weeks Maine, Hawaii, and Rhode Island raised their top tax rates on affluent families as well.”

Washington’s new millionaires’ tax is a monumental development for revenue and tax equity in the state. It’s projected to raise $3 billion in 2029, after it goes into effect in 2028.

According to the ITEP, Washington has had the second most regressive state and local tax system in the country as it relies on sales, property and gross receipts taxes, rather than more progressive income taxes. Not only is this not fair tax policy, but the state has also had difficulties paying for necessary services.  

The new revenue is intended to pay for investments in public education and childcare and help fund a sizable expansion to Washington’s Working Families Tax Credit, the state’s EITC, boosting the incomes of low- and moderate-income families.

Three other states are taking similar approaches. According to the post: 

• “Maine passed a millionaires’ tax – a 2 percent surcharge on income over $1 million – which is estimated to raise $100 million in new revenue each year beginning in fiscal year 2027.”

• “Rhode Island passed a 3 percent surcharge on taxable income over $1 million. The tax will phase in over three years, set at 1 percent next year, 2 percent in tax year 2028, and 3 percent beginning in 2029. Once fully phased in, the tax is estimated to raise more than $150 million a year.”

• “Hawaii, in response to federal cost shifts and recent, deep state tax cuts, created a new top bracket of 13 percent – effectively a 2 percent surcharge – for filers with incomes above $500,000 (single filers) and $1 million (joint filers). This change will bring in more than $70 million a year.”

These actions are occurring in the wake of last year’s federal tax and spending cuts. “States and localities are being asked to shoulder more responsibility for funding essential services. This year’s wave of progressive revenue measures is, in part, a response to that shift,” Davis told us. “Bold revenue-raising measures are essential both to fill new funding gaps emerging from the federal law and to better support long-needed state investments like childcare and education.” 

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