Washington’s Tax Blitz Could Kill the Sonics—And the Startup Economy
Washington State legislators are building a tax regime so hostile that NBA investors are spooked and founders are planning their exits.
TL;DR
Washington’s proposed millionaire tax is already spooking NBA investors. It’s just one part of a tax stack that would hit founders and small businesses harder than anywhere in America.
The Seattle SuperSonics might never come home.
Not because of arena problems. Not because of ownership disputes. Because Washington Democrats are building a tax regime so hostile to wealth that NBA investors are spooked and pro athletes don’t want to play there.
EXCLUSIVE: GOV BOB FERGUSON KNOWS DEMOCRATS' BAD POLICIES MAY COST SEATTLE SONICS RETURN I have obtained documents used by WA Gov Bob Ferguson's team to prep him for his meeting with NBA Commissioner Adam Silver earlier this month According to the docs, Joe Impecoven (Ferguson Policy Advisor) has been in communication with Tod Lieweke, CEO of both the Seattle Kraken and Oak View Group (lead investment group working to bring the Sonics back to Seattle) & Samantha Holloway, Owner and Chair of the Seattle Kraken "Tod and Samantha wanted to share a few high-level points for your awareness ahead of your meeting with NBA Commissioner Adam Silver" "Commissioner Silver is fully committed to returning the Sonics to Seattle but emphasizes the importance of doing it right this time to ensure the team’s long-term stability in the city" "The Commissioner will continue to refrain from making any public commitments until a formal deal is finalized." "Success hinges on securing the right investors and ensuring the city’s infrastructure and environment support sustainable success beyond the initial deal." "Samantha highlighted several key factors they and the Commissioner are closely monitoring:" "- The high cost of maintaining a basketball team - The impact of employer layoffs i.e. “fewer employees equals fewer ticket sales” - Challenges posed by the millionaire’s tax on recruiting top players - Whether Seattle remains an attractive and investor-friendly environment (noting recent investor relocations to Florida, without specifying names)" "Samantha stressed the importance of the Commissioner recognizing that Climate Pledge Arena is fully prepared for basketball, not just hockey." Both Samantha and Tod noted that "state assistance could be critical particularly in securing a practice facility, which is a key consideration for the Commissioner." "Finally, Samantha and Tod want the Commissioner to understand that the City of Seattle is ready for the Sonics’ return and that you maintain an excellent relationship with them and city leadership" MORE TO COME
Internal documents from Governor Bob Ferguson’s meeting prep with NBA Commissioner Adam Silver tell the story. Samantha Holloway, owner of the Seattle Kraken, flagged the challenges directly: the millionaire’s tax makes it harder to recruit top players, and investors are already relocating to Florida. Silver is “fully committed” to bringing the Sonics back—but “success hinges on securing the right investors and ensuring the city’s infrastructure and environment support sustainable success.”
Translation: Washington is becoming uninvestable. The Sonics are just the canary.
The “Millionaire” Tax That Isn’t
The proposed 9.9% income tax on income above $1 million sounds targeted. It isn’t. The threshold is per household—meaning a married couple earning $500,000 each gets hit. That’s not billionaires. That’s two software engineers at Amazon.
And here’s what nobody’s talking about: pass-through businesses—S corps, LLCs, partnerships—report income on the owner’s personal return. According to Future42, this “millionaires tax” will largely bypass big multinational corporations while falling squarely on locally owned small and mid-sized businesses. Independent contractors. Family-owned construction companies. Local restaurants. Medical practices. Farmers. The people who actually build communities and employ your neighbors.
The politicians aren’t even hiding it. Rep. Larry Springer (D-Kirkland) admitted lawmakers “should not be trusted” to keep this tax limited to high earners. Rep. Shaun Scott has already introduced a bill applying stiff taxes on incomes above $125,000. The expansion isn’t hypothetical—it’s already written.
The Over-Correction of 18%: The Highest Rate in America
This income tax isn’t happening in a vacuum. Stack it on top of WA Cares tax, Seattle’s JumpStart payroll tax, and the Seattle Social Housing tax—and the Tax Foundation calculated a combined top marginal rate of over 18% on wage income and RSU vesting in Seattle.
Higher than New York City. Higher than San Francisco. That’s pretty crazy.
Think about what this means in practice. A startup employee who earned $150K a year for five years suddenly has $2 million in income when their company goes public—and gets slammed with an 18% rate even though their average income was never close to “millionaire” territory. These aren’t hedge fund managers. They’re engineers who took below-market salaries and bet on equity. They took the risk. And now the state wants to punish them for it working out.
Killing QSBS: Punishing Founders for Succeeding
Washington bills SB 6229 and HB 2292 would strip the federal Section 1202 QSBS exclusion at the state level.
If you’re not in the startup world, here’s why this matters: federal QSBS lets founders who held qualified small business stock for five years exclude up to $10-15 million in capital gains—100% tax-free. Congress designed that incentive specifically to encourage people to start companies and take the enormous personal risk that entails. It’s one of the most important tools we have to encourage entrepreneurship in this country.
Washington wants to claw it back. According to GeekWire, a founder who did everything right—incorporated as a C corp, held stock for five years, stayed within every requirement—would still owe Washington 9.9% on gains that are 100% excluded federally. On a $5 million exit, that’s up to $495,000 to the state on gains Congress specifically said should be tax-free.
Why would anyone start a company in Washington when the state is actively working to take nearly 10% of the upside Congress told you was yours?
The Emergency Clause: No Vote for You
Here’s the part that should make everyone angry, regardless of where you fall on taxes.
Washington voters have rejected income taxes more than 10 times at the ballot box. Ten times. So how are Democrats pushing this through? The bill includes an “emergency clause” claiming it’s “necessary for support of state government"—which blocks citizen referendum. But the tax doesn’t even take effect until 2028. What emergency takes two years to arrive?
Fourteen senators who voted to BAN income tax in 2024 are now sponsoring the bill to enact one in 2026. Once the framework exists, a simple majority vote can expand rates or lower thresholds—no public vote required. This is how you get an income tax that voters have rejected ten times: you just stop asking them.
California’s Warning
I’ve watched this movie before. I live in it.
Jeff Bezos moved to Miami two years ago. The WSJ says he "got out just in time.”
Washington was once a low-tax refuge—the thing California used to be before politicians destroyed it. Democrats gained full control of the statehouse in 2017 and the business environment has “rapidly deteriorated.” The state has seen a 60% surge in spending since the pandemic, multiple tax increases, and still has a $2.3 billion budget shortfall. According to the Washington Post, Washington Democrats are “proposing an unconstitutional income tax on high earners to plug a multibillion-dollar budget deficit only a year after the largest tax increase in state history.”
Sound familiar? Spend recklessly, create a deficit, then blame “the rich” and demand more taxes. Rinse, repeat. California has been doing this for decades and the result is a state that’s losing population for the first time in its history.
Europe tried wealth taxes in the 1990s. Employment dropped 33%. Tax payments dropped 51%. Most European countries have since repealed them. The data is in. This doesn’t work.
IRS migration data already shows Washington losing 222 high-earning millennial households in 2021-2022—before any of these new taxes were even in effect. The people who understand the math are already moving.
Why is this happening? Washington’s real tax revenue dilemma
Before you cheer the anti-tax backlash, consider the uncomfortable reality: Washington has one of the most regressive tax structures in the country. The bottom 20% of earners pay nearly 17% of their income in state and local taxes while the top 1% pay under 3%. That’s not a progressive tax-and-spend state — it’s a state that soaks the working class through sales tax and gives millionaires a free ride. The anger behind the millionaire tax isn’t invented. It comes from a real structural imbalance that decades of “no income tax” orthodoxy created.
The better question isn’t whether Washington needs new revenue — it probably does. It’s whether Olympia has earned the right to ask for it. A 116% spending increase in a decade, a long-term care program that collects billions and delivers a joke of a benefit, and a
necessity clause designed to block voters from having a say. None of that screams fiscal competence.
The real fix: Fix the waste, sunset the COVID-era zombie programs, protect QSBS so founders actually want to build here, and then make your case to voters like adults. Drop the emergency clause. If the tax is as popular as Democrats claim, put it on the ballot and win.
The Athletes Know What’s Coming
NBA players making $20-50 million per year would face 9.9% state income tax on top of federal. Top free agents already factor state taxes into contract decisions—it’s why Texas and Florida teams have built-in recruiting advantages.
NEW: Holy crap! The Sonics return to Seattle could be in jeopardy because of insane “progressive taxes” being pushed by WA Democrats. Ari Hoffman just obtained internal communications showing elite investors and pro athletes are spooked by crazy tax talk in this state. The data dump is extensive, but here are some more concerns expressed to Governor Bob Ferguson: -Challenges posed by the millionaire’s tax on recruiting top players. - Whether Seattle remains an attractive and investor-friendly environment (noting recent investor relocations to Florida, without specifying names.) |@GovBobFerguson
EXCLUSIVE: GOV BOB FERGUSON KNOWS DEMOCRATS' BAD POLICIES MAY COST SEATTLE SONICS RETURN I have obtained documents used by WA Gov Bob Ferguson's team to prep him for his meeting with NBA Commissioner Adam Silver earlier this month According to the docs, Joe Impecoven (Ferguson …
The Sonics return isn’t just about arena infrastructure. It’s about whether stars want to play there. Commissioner Silver won’t make “any public commitments until a formal deal is finalized"—and the tax situation is part of that deal.
Seattle’s hockey team is there. But can they keep stars? Can they recruit? The same question applies to every tech company, every startup, every small business trying to hire.
Washington spent decades building a competitive advantage. No income tax meant founders, athletes, and investors chose Seattle over San Francisco and New York. Now Democrats are dismantling that advantage in real time—and they’re doing it without letting voters have a say.
The Sonics situation is just the most visible symptom. The real damage is to every startup founder weighing where to build, every engineer deciding where to vest their RSUs, every small business owner wondering if they can afford to stay.
This is how you get an income tax that voters have rejected ten times: legislatures just stop asking them.
Related Links
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Washington state's tax and government spending crisis is a warning (Washington Post)
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WA Democrats have a messaging problem on new state income tax (Seattle Times)
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Ari Hoffman's exclusive on Ferguson briefing documents (@thehoffather)
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