We’re From the Future: What Washington Business Owners Can Learn From Massachusetts’ Millionaires Tax

If you own a business in Washington state, the new millionaires tax may feel like a future problem. 

But, here, in Massachusetts, we are FROM the future.

Just don't blame us for this.

Our firm has been helping owners navigate this reality since Massachusetts’ millionaires tax took effect in 2023. 

And if there is one lesson we have learned already, it is this: a tax like this is almost never just about what you earn in a typical year.

It is about what happens in an exceptional one.

That is why you should not think about this issue only through the lens of annual income. Think about it through the lens of planning. Because, the year that creates exposure is not the year you suddenly start “making a million dollars.” It is the year something happens.

A business sale. A partial exit. A recapitalization. A large bonus. A concentrated gain. A redemption. A one-time spike in pass-through income. An earnout. The exercise of equity.

In other words, this is not just a tax on high earners. In practice, it can become a tax on big moments.

That distinction matters.

Too often, owners hear “millionaires tax” and assume the rule applies to somebody else, someone with a permanently different lifestyle, income level, or balance sheet. But that is not how these taxes tend to show up in real life.You may spend years below the line and then cross it once, because of a single transaction or a single unusually successful year.

And by the time that year arrives, many of the best planning opportunities are already gone.

That is the part policymakers do not always talk about, but advisors and owners need to. Once income is recognized, once deal terms are fixed, once a transaction is signed, flexibility narrows fast. The real work happens earlier: when you're still deciding how to structure a transaction, when the company is still evaluating timing, and when the tax consequences are still something you can shape rather than simply absorb.

That is where experience matters.

Massachusetts and Washington are not identical, of course. The details differ. The mechanics differ. The surrounding tax landscape differs. But the pattern is strikingly similar: once a state creates a higher tax aimed at top-income households, business owners need a different level of forward-looking coordination.

Not because every owner will owe the tax.

Because every owner now has to ask better questions.

What would happen if this were our big year?

What if we sold?

What if we had a liquidity event?

What if income that usually lands across multiple years lands in one?

What if you're not “rich” in the colloquial sense, but taxable income tells a different story for one year only?

These are not edge cases. For closely held businesses, they are normal planning scenarios.

That is why the conversation should start now, before you know whether you will ever cross the threshold. Waiting until a transaction is imminent is often too late. The point is not to overreact to headlines. The point is to recognize that taxes built around high-income years create planning pressure well before the income arrives.

And perhaps the most important lesson from Massachusetts is that you should resist thinking about this issue too narrowly. It is not just about salary. It is not even just about profitability. It is about how income is characterized, when it is recognized, whether gains are concentrated, how transactions are structured, and whether the your broader financial life has been coordinated with your business strategy.

That is why this is not a year-end issue. It is not just a compliance issue. And it is certainly not just a tax-preparer issue.

It is an advisory issue.

Those who will be best positioned in this environment are not necessarily those with the lowest income or the simplest fact patterns. They are the ones who begin planning early, model different scenarios, and understand that one extraordinary year can change the equation far more than ten ordinary ones.

We sometimes say, half-jokingly, that we are “from the future” on this topic.

It's because we are.

We have already seen what happens after a millionaires tax stops being a debate and starts becoming a planning reality. We have seen how quickly business owners move from “this probably doesn’t affect me” to “I wish we had started thinking about this sooner.”

Washington business owners do not need to panic.

But they do need to prepare.

We have seen the future, and we can help.