Washington became an income-tax state this year. The people who built businesses there because it was not one now have a decision to make.

Washington became an income-tax state this year. The people who built businesses there because it was not one now have a decision to make.

The country is sorting itself into two kinds of states. In one, a dollar of income costs you nine or ten cents before the federal government takes its share. In the other, it costs you nothing. Washington just moved from the second group to the first - a 9.9% individual income tax beginning in 2028 - and a measure to repeal it has qualified for the ballot. The New York Times is covering the fight as a story about millionaires. It is a story about people deciding whether to stay.

The tax does not start by counting a family's houses, retirement accounts and investments. It starts with income, which is why the owner who earned a few hundred thousand dollars a year for twenty years and sells the business in 2028 becomes a millionaire on one tax return. A full-year resident gets a $1 million standard deduction, shared between spouses. A married couple with $2 million of Washington income owes $99,000 before credits.

So they leave, and leaving works - if it starts early. A family that moves to a no-tax state well before the sale, and actually moves, keeps most of the state's share of the price, and on a large sale that is millions of dollars. The business is the harder part. Most middle-market deals are asset sales for tax purposes, not stock sales, and the gain on an asset sale is taxed where the company does business, whoever owns it and wherever he lives. Washington's law reaches Washington-source income of nonresidents, including income from businesses operating there. The move handles the owner; the sourcing of the sale takes planning, and more time.

A sale is also more than the federal gain times 9.9%. Washington removes federal long-term capital gains and applies its own rules in deciding what comes back into the base. Exempt sales and the family-business deduction matter, and there is a credit for the Washington capital-gains tax imposed in the same year. Adding the two headline rates overstates the result, sometimes by a lot.

The repeal vote decides whether the tax survives. An owner planning a 2028 sale cannot plan around a vote. Which of your income would the tax reach, from where, and in which year? That is the work, and it starts before the ballot is counted.