Something significant is happening in state tax policy — and it’s moving fast.
As of June 2026, a growing number of states are actively pursuing new taxes targeting high earners and high-net-worth individuals. States with enacted millionaire or high-earner surtaxes include Massachusetts (4% surtax on income above $1 million, effective 2023), Washington (9.9% tax on income above $1 million, signed March 2026, effective 2028), and Maine (3% surcharge on income above $200,000). States with active proposals or ballot measures include California (Billionaire Tax Act, qualified for November 2026 ballot), New York City (2-percentage-point surcharge on income above $1 million, pending state authorization), Michigan (proposed 5% tax on income above $500,000), Rhode Island (proposed 3% surtax on income above $1 million), Illinois (3% surtax under study following a 61%-support advisory referendum in 2024), Maryland, and Minnesota. (Sources: Tax Foundation legislative tracker; National Conference of State Legislatures; Washington Secretary of State SB 6346 enrolled bill; Ballotpedia, 2026 California Billionaire Tax Act, updated May 2026. Status as of June 2026; proposals are subject to amendment, defeat, or delay.)
Some have already passed into law. Others are weeks away from a ballot or a governor’s signature. And a few are quietly building the legal architecture to tax you even after you leave.
If you have significant wealth, this is not an abstract policy debate. It’s a ticking clock.
The landscape in plain terms
No state technically has a formal “exit tax” — the kind where you write a check the day you move. What’s emerged instead is something more sophisticated: a patchwork of income surtaxes, net worth levies, and extended residency rules designed to capture wealth before it crosses state lines, and sometimes long after.
Here’s where things stand, state by state.
Washington — signed into law, March 2026
Washington made history this year. For most of its existence, the state had no income tax at all. That changed on March 30, 2026, when Governor Bob Ferguson signed Senate Bill 6346 — a 9.9% tax on Washington-source household income exceeding $1 million per year, effective January 1, 2028, with first returns and payments due in 2029. (Source: Washington State Legislature, SB 6346 enrolled bill text, leg.wa.gov; BDO client alert, Washington Enacts Millionaires’ Tax, April 2026, bdo.com. As of June 2026, the law is subject to anticipated legal challenge on state constitutional grounds; its effective operation may be altered by litigation or legislative amendment.)
The reach is broader than most people realize. The tax applies not just to Washington residents, but to part-year residents and nonresidents who earn Washington-source income — meaning founders, investors, and executives with business interests or pass-through income in the state could be on the hook even if they’ve already relocated.
Legal challenges are certain and ongoing. Washington’s own constitution has historically been interpreted as prohibiting income taxes, and the legislature is counting on the same creative judicial framing that upheld its capital gains tax in 2023. Whether the millionaires’ tax survives is an open question. But the two-year runway before it takes effect means planning decisions need to start now, not in 2027.
Starbucks founder Howard Schultz’s response after the bill passed: he announced he was moving to Florida.
California — on the November 2026 ballot
California isn’t waiting for legislation. A ballot initiative — the 2026 Billionaire Tax Act — is on track for the November ballot after supporters collected 1.6 million signatures, nearly double the threshold required to qualify. If passed, it would impose a one-time 5% tax on the net worth of any California resident worth over $1 billion as of January 1, 2026.
The “one-time” framing deserves scrutiny. Tax policy analysts at the Tax Foundation note that the initiative’s design choices would expose many taxpayers to effective rates well above the advertised 5%, particularly founders and investors whose wealth is concentrated in illiquid private businesses.
The residency date — January 1, 2026, retroactively — is also expected to face Due Process challenges in court. But at least six California billionaires, including Google co-founders Larry Page and Sergey Brin, have already claimed to have left the state before that deadline. Whether California courts agree they’re off the hook will likely be litigated for years.
New York City — proposed, pending state authorization
New York City Mayor Zohran Mamdani has proposed raising the city’s top income tax rate from 3.9% to 5.9%. Combined with existing state-level rates, that would push the top marginal income tax rate for New York City’s wealthiest residents to nearly 17% — the highest in the nation.
The proposal requires authorization from Albany, and Governor Kathy Hochul has resisted. But Mamdani is under real budget pressure — the city faces a $5.4 billion gap — and the political momentum behind the tax is significant. A Siena poll found 54% of New York State voters support it, rising to 62% among NYC residents.
Massachusetts — already law, already producing results
Massachusetts passed its millionaire surtax in 2022 and it’s been in effect since January 2023. The 4% surcharge on income above $1 million has generated nearly $3 billion in fiscal year 2025 alone — roughly double what the state originally projected.
The revenue numbers are impressive. The migration question is more complicated. IRS data shows a meaningful outflow of high-income earners from the state since the tax took effect, even as total surtax collections keep climbing. More on that in our companion piece on the Massachusetts case study.
Other states in motion
Michigan has a ballot proposal that would levy a 5% tax on individuals earning $500,000 or more. Illinois is studying a 3% surtax proposal that polled at 61% support in a 2024 advisory referendum. Connecticut, Maryland, Minnesota, and Rhode Island are all in various stages of considering or implementing higher taxes on top earners.
The counter-movement: states going the other direction
While blue states push taxes higher, red states are racing in the opposite direction. The five states that enacted the largest income tax cuts for millionaires in 2025 were Kansas, Mississippi, Missouri, Ohio, and Oklahoma — with combined cuts projected to exceed $2.2 billion per year once fully implemented.
Missouri became what the Tax Foundation and other analysts have described as the first state that levies an income tax to fully exempt capital gains income from state taxation — effective January 1, 2025, under House Bill 594, signed by Governor Mike Kehoe on July 10, 2025. The exemption applies to net capital gains as defined under Missouri’s conformity to federal tax law; specific exclusions and conformity items may apply. (Sources: Missouri Department of Revenue, House Bill 594 Summary, dor.mo.gov; Tax Foundation, Missouri Enacts Capital Gains Exemption, July 2025, taxfoundation.org; RSM US, Missouri First State to Exempt Capital Gains, rsmus.com.) Note: States with no income tax — including Florida and Texas — also impose no capital gains tax by default; Missouri’s distinction is as the first income-tax state to carve out a full capital gains exemption. Mississippi and Oklahoma have legislated the elimination of their state income taxes entirely over the coming years.
The divergence is real, deliberate, and accelerating. Two Americas are emerging in state tax policy — and your state of residency is becoming one of the most consequential financial decisions you can make.
Why this matters beyond the headlines
The states actively pursuing millionaire taxes are home to a disproportionate share of the nation’s high earners, founders, and family wealth. And the policy trend has a compounding effect: each new tax announcement prompts another wave of relocation planning, which reduces the taxable base in high-tax states, which creates pressure for more revenue, which generates pressure for more taxes.
California’s top 1% already supplies nearly half of all state income tax collections. New York City’s top 1% pays more than 40% of the city’s income taxes. These are not stable revenue architectures — they are highly concentrated bets on a group of people who have increasingly viable alternatives.
If you live in one of these states, or derive significant income from business interests there, the question is no longer whether to think about this. The question is whether you’re thinking about it fast enough.
What to do now
Tax law moves faster than most financial plans. The two-year window before Washington’s millionaire tax takes effect, California’s November ballot date, and the ongoing legislative volatility in New York all argue for getting ahead of this — not waiting until something passes and then scrambling.
For high-net-worth individuals and families considering their options, the most important first step is a clear-eyed analysis of your current state tax exposure, your domicile situation, and whether your legal and financial structure is optimally positioned for what’s coming.
Florida remains one of the most favorable destinations in the country for this kind of planning — no state income tax, no estate tax, an established legal framework for establishing domicile, and a growing concentration of wealth management infrastructure in markets like Naples and Southwest Florida.
If you haven’t already, download our free Florida Domicile Checklist — it covers the specific steps high-net-worth individuals should consider when establishing Florida residency, including common documentation requirements and administrative actions that may help reduce the risk of residency challenges from prior states. Outcomes depend on individual facts, documentation quality, and state enforcement practices; completing the checklist does not guarantee tax savings or legal defensibility in a residency dispute. The checklist is educational in nature and is not a substitute for individualized advice from a qualified tax attorney or CPA familiar with your prior state of domicile.