Seattle's AI elite is sounding the alarm over a proposed state income tax, warning Gov. Bob Ferguson that the so-called "millionaires tax" could stall the region's AI surge and send high earners and startups packing for lower-tax hubs. In a letter delivered Monday, a coalition of researchers, founders and investors cast the fight as a competitiveness problem at the exact moment companies are scrambling to hire AI engineers and scale new products. Their warning lands as Olympia weighs the bill's next steps in a short legislative session.
The letter, signed by University of Washington professor Pedro Domingos and AI veterans including Oren Etzioni, urges state leaders to "pause" work on the income tax and related capital-gains changes. The group argues that higher levies would drive top talent and future startups elsewhere, and calls on the governor to slow the legislative push so the potential fallout can be fully studied, according to GeekWire.
The Bill And The Timeline
Senate Bill 6346, the engrossed substitute version of the "millionaires tax," would impose a 9.9% tax on household income above $1,000,000, with carve-outs for charitable deductions and small-business credits. The bill text specifies that the tax would take effect beginning Jan. 1, 2028, and lays out rules for estimated payments and administration, as detailed by the Washington Legislature.
What The Signers Warned
"AI is at a critical moment, and a hasty decision now would do serious damage," the letter states, arguing that new levies could materially undermine Washington's ability to keep growing the tech sector and could slow investment. The signers press the governor to pause further work on the proposal while lawmakers weigh tradeoffs between revenue and long-term competitiveness, according to GeekWire.
Data And Outside Analysis
The letter points to Silicon Valley Bank's State of the Markets report, which shows a marked downturn in VC-backed company formation in Seattle. The report's regional analysis finds roughly a 30% decline in new VC-backed companies since 2022, according to Silicon Valley Bank. Industry analysts have also flagged competitive concerns, noting that the combined effect of new levies could make Washington less attractive to high earners and investors; see the Tax Foundation for underlying data and broader tax-competitiveness analysis.
Supporters Stress Investments For Schools And Relief
Backers of the measure counter that the tax is aimed at shoring up K-12 education, health care and the Working Families Tax Credit, while providing targeted relief for small businesses. Senate Democrats and the bill's sponsors estimate the proposal could raise about $3.7 billion a year and highlight built-in credits and exemptions designed to protect small firms and lower-income households. Sponsors outline those priorities in more detail at Senate Democrats.
What Happens Next
The Senate approved its engrossed substitute version of the bill earlier in February, and the measure now sits in the House as lawmakers move toward the March 12 end of the 2026 session. House committees have already held hearings, and the bill's fate is expected to be decided in the coming days, according to TVW.
For Seattle's tech community, the fight is about more than a single tax proposal. It is about whether Washington can keep hiring, funding and scaling AI companies in a cutthroat national market. With final votes looming, the letter adds a high-profile local voice to an already fractious debate over how the state pays for schools and services without undercutting the innovation engine that helped build its tax base in the first place.
