Authored by Mark Harmsworth via The Washington Policy Center,
Washington state’s business climate continues to deteriorate under the weight of record tax increases and burdensome regulations.
A spring 2026 survey by the Association of Washington Business reveals alarming trends.
Nearly one in four employers (24 percent) are now actively considering relocating their businesses out of state, up sharply from 17 percent in the previous quarter and nearly triple the level from winter 2025.
Another 55 percent of business leaders are considering moving their personal residences elsewhere, citing the state’s escalating tax burden as the top challenge. This flight is no surprise. Washington’s business tax climate has plummeted from sixth-best in the nation in 2014 to near the bottom today, with the state now ranking among the worst for small-business survival.
Major tax hikes enacted in 2025 are now hitting businesses hard. Starting in late 2025 and accelerating into 2026, the state increased business & occupation tax rates for service businesses and introduced new surcharges. Large companies face a 0.5 percent surcharge on taxable income of more than $250 million, while advanced computing firms saw their surcharge jump dramatically. These changes, part of the largest tax increase in state history, are projected to reduce state gross domestic product growth by up to 0.5 percent in 2026 (nearly $4.5 billion) and cut wages by billions of dollars more.
Office vacancy rates reflect the pain. Although Seattle’s downtown vacancy rate remains among the nation’s highest (hovering between 28 percent and more than 35 percent in reports from the first quarter of 2026), the broader Puget Sound region and state face similar pressures from remote work shifts and corporate relocations. Companies such as Starbucks are shifting hundreds of jobs to lower-tax states such as Tennessee. Other firms have issued worker adjustment and retraining notification notices and moved operations to Idaho, Utah, and beyond.
High-profile exits and stalled expansions are mounting. Entrepreneurs report that Washington’s combination of high taxes, regulatory red tape, and hostile policies makes growth nearly impossible.
The bottom line is that as the high earners and companies leave the state, the revenue from increased taxes, including the new income tax, will dry up and politicians in Olympia will be left scrambling for new sources of tax revenue.
The $1 million threshold on the income tax will fall in the blink of an eye.
Politicians have to restore small-business owners’ confidence in the regulatory environment and keep the promises they are making.
Just three months after signing the income tax into law, lauding it as the way forward for the state, Gov. Bob Ferguson is now claiming that he will veto any change to the exemption threshold in order to garner support to keep the legislation in place.
History indicates that Ferguson’s claim might be a little “flexible,” and that’s the problem. There is no predictability for business owners.
Until leaders recognize that businesses vote with their feet, and their payrolls, the state’s economic outlook will remain clouded.
Washington can reverse course. Lowering the tax burden, simplifying regulations, and prioritizing a pro-growth environment would stem the exodus and restore prosperity.
The data are clear. Washington is losing the competition. It’s time to compete again.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times or ZeroHedge.