Billionaires Are Moving… Should You Be Worried?

You may have heard the rumor lately that the wealthy are leaving Washington State. Billionaires, tech founders, investors, and even some of the people who helped build Seattle's tech economy. The big question everyone is asking is this, if the rich leave, what is going to happen to Washington's businesses, jobs, and real estate prices? So today we're going to unpack what is actually happening, where wealthy residents are moving, and which states are becoming the new tax havens for billionaires. And I really want to look at this because this could certainly affect the luxury housing market and we want to explore whether it will trickle down to the rest of the market as well. Because if you own property here, this matters a lot right now. The moment that started the conversation was really around the time when Amazon founder Jeff Bezos announced he was leaving Seattle and moving to Florida after nearly 30 years of living in the Bellevue area or Seattle area. Okay, so Bezos said he planned to relocate to Miami to be closer to family and Blue Origin operations. But the timing also lined up with Washington's new, at the time, 7% capital gains tax, which applies to profits from selling assets like Amazon stock, right, that are valued above $250,000 per year. So according to tax analysts, Bezos' move potentially saved him around a billion dollars in taxes on his stock sales. And that single move, which was in the newspaper and everything, triggered a larger debate. So if the richest person in Washington leaves over taxes, will others follow? And Washington's new taxes on wealth are changing to make it more and more of a concern for less and less wealthy people. You don't have to be Jeff Bezos for it to have a negative impact on you. So to understand that concern, you have to understand the tax structure that we have. So Washington state historically has had no state income tax, which has helped attract companies like Amazon and Microsoft. But over the last few years, the state has introduced or proposed several policies that affect high income residents, such as capital gains tax. We've got a 7% tax on investment gains over $250,000. And this is a detriment if you are like retired or a business person that makes a lot of income from stock sales. Real estate and retirement accounts, however, are exempt. And that tax earns Washington about $786 million per year, which comes from just a few thousand people in the state. And in fact, roughly 3,300 taxpayers paid that tax. And the top 10 accounted for over half of the tax collected, which means something important. The state is relying very heavily on a small number of ultra wealthy taxpayers. And if they decide that they don't like it, they can leave. If, you know, a few thousand of the right people leave, there goes all that money. And where are we going to get the money now? It's going to come down to everybody else, right? The other people. So let's look at the evidence that some wealth is leaving the area. Migration data suggests at least some high earners are leaving. A smart asset analysis of IRS data found Washington state lost a net 222 households earning $200,000 or more between 2021 and 2022, placing it among the higher states for wealthy out migration. And of course, that was during COVID and people were working remotely, but they did decide to leave. Researchers also found affluent young professionals leaving Washington faster in recent years, ranking the state second in outflows among many Gen Z high earners. So to be clear, this is not a mass exodus, but there are signals of a slow migration trend among some high income residents. And where are they going? Well, when wealthy people move for tax reasons, they tend to go to places that have better tax options, more favorable tax communities. So the most common destinations right now include Florida, which has no state income tax, no tax on capital gains at the state level and a major influx of wealthy residents. Texas, which also has no state income tax and a business friendly environment, Tennessee, no income tax on wages, Nevada, no income tax, which is a popular place with entrepreneurs and investors. And most of these places have pretty good warmer weather also, which is a plus for almost everybody. And these states are becoming America's modern tax havens for wealth. But here's the twist. Even though billionaires are leaving and it's making headlines, Seattle's economy is still incredibly strong. We still have Amazon, Microsoft, Costco, Starbucks is leaving. We still have tech jobs. We still have venture capital, and we still have a startup ecosystem that are deeply rooted in this region. And that matters more to housing prices than the location of a few billionaires. So what we need to watch out for, we have heard Starbucks is leaving. We have seen Boeing start to shift some of their operations to different states or invest in other states rather than here when they're expanding their operations. And we've seen some of the big tech companies like Google, Meta, Amazon start to do fairly significant layoffs. So if that trend continues, then that's going to be a bad sign for the local real estate market. What I would expect to see right away is that luxury demand could shift. And we've already seen a 64% increase in luxury homes hitting the market this month. Interestingly, Western Washington only saw 14 homes sell above $10 million in 2024, which is a reduction from previous years. But it's tech job growth that still drives housing in this area. And if we're seeing layoffs and contraction, then that could be a problem because the real driver of a lot of our Seattle housing prices is these high income tech workers rather than the few thousand billionaires. If we still have thousands of engineers moving here, that's going to be a very good sign if they're all moving out. That's going to be a problem. But there are other reasons that people choose to live here. It's a desirable area because of nature. The urban and natural lifestyle are very close together. We have major universities. We have strong wages. These forces are still very much intact. Now, if you're wondering if you should move before it's too late, this is a question that I'm having a lot in my mind, and I don't see anybody else talking. I try to bring it up. Oh, have you heard about this? Are you worried about this? The people that I talk to are not. My honest take as a Seattle realtor is that Washington is not about to collapse because wealthy people are leaving. That idea is probably overstated, but it is fair to say that tax policy can influence where high net worth individuals choose to live. And the state, if it continues to experiment with wealth taxes, high income taxes, we are going to expect to see less wealthy, high income people want to be here. If they have a choice to work remotely, start their business somewhere, it's probably going to be in Texas, Florida or Tennessee or Nevada, rather than in Washington at this point. And I think one important component of this issue that's not being brought up in the discussion is that this new millionaire's tax, which is an income tax on 10% of any income above a million dollars per year, that's not allowed by our state constitution. So I feel like that the idea that Congress and the governor are joining forces to pass that tax in outright violation of our constitution is just a breach of trust with the people. And it seems like it makes people not want to invest here, not want to stay here because we can't trust the people to follow the law that are in charge of making the law and ruling over us, feels incongruous. So the key question, again, is not whether the billionaires are leaving, it's whether the jobs are leaving. Right now, Seattle still has a very strong job market, one of the strongest in America. And our housing market has been very strong for the last few years, even in the face of the higher interest rates and sagging real estate after COVID. Washington state has held up strong in that wake. We'll see what it continues to do. What I'm seeing is that we are growing, but at less than the rate of inflation, which is actually making things a little bit more affordable right now. So are the rich leaving Washington? Yes, a few are, and more probably will. But Seattle's economy is still powered by something much bigger than billionaires, which is innovation, technology, and talent. And as long as those things stay here, the real estate market will likely stay strong. So if you want more insights from the field on what's happening in the Seattle housing market, or you're thinking about buying, selling, or investing here, I would love to help. You can subscribe to my channel or look in the comments below to make an appointment to talk things through on Zoom.