Microsoft President and Vice Chair Brad Smith warned in February that a poorly designed Washington state tax increase could make it harder to attract technology employers, talent and investment. The measure he was discussing—ESSB 6346, the “Millionaires’ Tax”—was signed by Gov. Bob Ferguson on March 30, 2026. It will impose a 9.9% tax on Washington taxable income above $1 million beginning in calendar year 2028, with first payments expected in 2029.
What Brad Smith actually said
Smith, Microsoft’s vice chair and president, discussed the proposal during a broader conversation about Washington state’s affordability and competitiveness, including housing supply, electricity, education, infrastructure and the demands of artificial-intelligence growth. His comments were reported on February 6, 2026 by the Washington State Standard.
His point was about the total cost and design of Washington’s tax system, not simply whether one rate increased. Smith said lawmakers should consider whether a new tax would be paired with reductions in other taxes and whether the overall structure would preserve the state’s ability to compete for employers and highly paid workers.
That is different from saying Microsoft has formally opposed the law or plans to leave Washington. The available reporting does not show Smith announcing a relocation, a hiring freeze or a specific number of jobs at risk. His warning was that companies could reconsider where they place future jobs or investment if Washington’s combined costs became prohibitive.
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Microsoft’s official biography identifies Smith’s role as vice chair and president at Microsoft. The company has also said it expects technology companies to contribute taxes, jobs, energy costs, water stewardship and local investment in communities where they build infrastructure, as described in its community-first AI infrastructure statement. That makes “Microsoft wants no taxes” an inaccurate summary of Smith’s position.
What Washington’s new tax law does
ESSB 6346, Senate Bill 6346, was promoted as a tax on millionaires. Gov. Ferguson signed it on March 30, 2026. The enacted framework is described in the governor’s announcement, the state Department of Revenue’s 2026 Legislative Report and the Legislature’s bill report.
| Element | Enacted rule |
|---|---|
| Rate | 9.9% |
| Taxed amount | Washington taxable income above $1 million, subject to statutory definitions, deductions, exclusions, credits and filing rules |
| Effective year | Calendar year 2028 |
| First expected payments | 2029 |
| Policy package | Includes provisions involving the Working Families Tax Credit, small-business relief, sales-tax changes and funding for public services |
The threshold does not mean that someone with $1,000,001 of taxable income pays 9.9% on every dollar earned. The rate applies to the taxable amount above the applicable threshold. Washington taxable income begins with federal adjusted gross income and is then modified by specified additions, exclusions, deductions and credits, according to the Department of Revenue.
The law also changes Washington’s prior statutory prohibition on state and local personal-income taxation. The former restriction appears in RCW 1.90.100; the new tax framework is reflected in RCW 82A.04.030. Individual-versus-joint-filing treatment, residency, income sourcing, equity compensation and other technical issues depend on the final rules and Department of Revenue guidance.
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Employees, executives and founders
The law is an individual-income tax, not a surcharge on Microsoft’s corporate profits. It could nevertheless affect Microsoft executives, founders, senior engineers and other highly compensated workers whose Washington taxable income exceeds the threshold.
Stock awards, bonuses, business income, capital gains, trust income and residency can create complicated timing and sourcing questions. A company’s corporate tax bill and an employee’s personal tax bill are separate issues, so describing the law as a tax “on Microsoft” is misleading.
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Recruiting and retention
Higher personal taxes can reduce the after-tax value of salary, bonuses and equity. That may matter when an employer recruits a worker who can choose among technology hubs or when an existing employee can work remotely from another state. It does not establish that large numbers of workers will move; the effect depends on housing costs, schools, wages, family ties, remote-work policies and the availability of comparable jobs elsewhere.
Future jobs and investment
For a company as deeply rooted in Washington as Microsoft, the immediate question is less likely to be whether its headquarters disappears than where marginal future activity is located. Possible decisions include the geography of new positions, research teams, data centers, facilities and supplier contracts. The sources available do not establish a Microsoft relocation plan or quantify jobs that will be lost.
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Supporters describe the law as a targeted levy on the state’s highest-income residents after decades in which Washington lacked a broad personal-income tax. Ferguson’s announcement says the package is intended to make life more affordable and return a substantial share of revenue to families and small businesses.
- Revenue is directed toward education, health care, higher education and other essential public services.
- The package includes Working Families Tax Credit and small-business provisions that supporters say offset costs for lower- and middle-income households and smaller employers.
- Public investment in housing, transportation, schools, health care and workforce development could improve the conditions that technology employers need.
- A tax on income above $1 million is narrower than a broad wage tax, although the practical reach depends on the final taxable-income rules.
On this theory, the relevant comparison is not simply a 9.9% marginal rate versus zero. It is the combined effect of taxes, housing availability, infrastructure, education, health services, talent and quality of life.
The case opponents make
- Entrepreneurs, investors, executives and highly paid specialists may be able to change residency or arrange where income is earned, reducing the state’s appeal.
- Employers may compare Washington with other technology centers or distributed-work models when locating future teams and facilities.
- Receipts from high-income taxpayers can fluctuate with bonuses, capital markets and business cycles, making them less predictable than broad-based taxes.
- Opponents argue that the law conflicts with constitutional or statutory limits on income taxation. Those are legal claims, not an established court ruling.
- If taxpayers move or alter the timing and form of income, collections could differ materially from lawmakers’ expectations.
Washington’s historical advantage of having no broad personal-income tax is part of this argument, but a meaningful comparison must also account for differences in wages, housing, amenities, other taxes and employer concentration.
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Implementation rules
The Department of Revenue still has to provide practical guidance on filing, residency, sourcing, deductions, credits and specialized income such as equity compensation. A taxpayer should not assume that gross salary, federal taxable income or household income is automatically the Washington tax base.
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Litigation and repeal
The law is enacted, but its future is not guaranteed. As of August 18, 2026, Washington’s official voter-information page lists a repeal effort that would eliminate the 9.9% tax and restore the prohibition on state and local personal-income taxation: Washington voter information. The final ballot designation, certification, wording and election date should be confirmed before relying on the measure. Court challenges could also change the timetable or rules.
Measured economic effects
The tax does not begin applying to relevant income until 2028, so current claims about jobs or investment are largely forecasts. Smith’s warning is a hypothesis about incentives, not proof that technology growth has already slowed.
How to judge whether the warning proves accurate
Useful evidence will emerge in several areas rather than from a single company announcement:
- Job geography: Track whether Microsoft and peer companies place new engineering, research and management roles in Washington or elsewhere.
- Worker mobility: Examine residency and workforce data for high-income technology employees, while separating tax-driven moves from normal remote-work and career changes.
- Investment: Watch headquarters expansions, venture formation, data-center projects, research facilities and supplier activity.
- Tax receipts: Compare collections with official forecasts and note the effects of market cycles, bonuses and changes in taxpayer behavior.
- Public outcomes: Assess whether spending improves housing supply, education, infrastructure, health care and workforce capacity—the benefits supporters say will protect competitiveness.
- Legal status: Follow Department of Revenue rules, court decisions and any repeal vote before drawing a final conclusion.
Bottom line
Brad Smith warned that Washington state could weaken its technology competitiveness if lawmakers increased the overall tax burden without improving the broader cost environment. The 9.9% levy he was discussing is now law, applying to Washington taxable income above $1 million beginning in 2028, but it is an individual tax rather than a direct charge on Microsoft’s corporate profits. Whether it slows growth or helps finance the public investments that sustain growth will depend on taxpayer and employer behavior, implementation rules, legal challenges and the results visible after 2028.
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