Proponents of the recently passed Senate Bill 6346 (SB 6346), Washington’s new 9.9 percent income tax on household income above $1 million, effective January 1, 2028, point to one feature that claim will actually boost philanthropy. The bill includes a $100,000 deduction for charitable contributions to Washington nonprofits. Supporters cite decades of economic research showing that lowering the after-tax “price” of giving increases donations.
A comprehensive meta-analysis of multiple studies found that for every $1 in tax benefit from deductions, charitable giving rises by about $1.30. High-income donors are especially responsive. States like California, New York and Oregon have long used similar deductions, and combined federal-state savings have encouraged large gifts. In theory, affected households could save up to $9,900 in state taxes per $100,000 donated, more than offsetting the modest income reduction from the tax itself. The result should be a modest net increase in charitable giving from the roughly 20,000 targeted households.
This optimistic view sounds appealing on paper. But it ignores the far larger behavioral response already underway, capital flight.
Wealthy individuals and business owners are highly mobile. When states raise taxes on success, many simply leave, taking their companies, investments and philanthropy with them. The evidence is not theoretical. Former Starbucks CEO Howard Schultz recently announced his move to Florida following the bill’s passage. Amazon founder Jeff Bezos left Washington years ago avoiding the new capital gains tax. Washington Policy Center research and IRS migration data already show net outflows of high-earning households after our capital gains tax and other hikes. California and New York have lost billions in resident income as top earners relocated to Florida, Texas and Nevada. Even academic studies that downplay the percentages admit that the departures involve the most productive citizens.
When millionaires establish residency elsewhere, they stop giving significantly to local Washington causes. Will Fred Hutchinson see another $710 donation from the Bezos family again – arguably no. Major local charities, hospitals, universities, food banks and arts organizations rely heavily on large gifts from these families, precisely the donors hit by the new tax. A $100,000 deduction cap offers zero comfort to someone facing a permanent 9.9 percent hit when Florida offers zero state income tax and far lower overall burdens. And because the deduction applies only to gifts to Washington nonprofits, relocated donors have every incentive to redirect their philanthropy out of state.
Washington thrived for decades as a no-income-tax state, attracting talent and generosity. States without personal income taxes historically saw charitable giving as a share of income grow nearly three times faster than high-tax states. Imposing this new levy risks shrinking the overall philanthropic pie far faster than any capped deduction can expand it. You cannot tax what has already left the state.
Policymakers betting that a charitable deduction will offset the damage are engaging in wishful thinking. True support for our communities comes from economic growth and keeping successful Washingtonians here, not driving them away with policies that accelerate both wealth and philanthropy exodus.
