Washington state’s business environment is facing significant challenges as high taxes and stringent regulations push many companies to consider relocating. A recent survey by the Association of Washington Business (AWB) indicates that nearly 24% of employers are actively thinking about moving their operations out of state. This marks a sharp increase from 17% in the previous quarter and is nearly triple the rate from winter 2025.
The survey also reveals that 55% of business leaders are contemplating moving their personal residences elsewhere, citing the state’s escalating tax burden as a primary concern. Washington’s business tax climate has deteriorated significantly, dropping from the 6th best in the nation in 2014 to one of the worst for small business survival today.
Major tax hikes enacted in 2025 have exacerbated the situation. The state increased Business & Occupation (B&O) tax rates for service businesses and introduced new surcharges. Large companies now face a 0.5% surcharge on taxable income over $250 million, with advanced computing firms experiencing even steeper increases. These changes, part of the largest tax increase in state history, are projected to reduce state GDP growth by up to 0.5% in 2026, amounting to nearly $4.5 billion, and cut wages by billions more.
Office vacancy rates in Seattle remain among the nation’s highest, with downtown vacancies hovering between 28% and 35% in early 2026. The broader Puget Sound region and the state are experiencing similar pressures due to shifts towards remote work and corporate relocations. Companies like Starbucks are moving hundreds of jobs to lower-tax states such as Tennessee, while others have issued WARN notices and relocated operations to Idaho, Utah, and beyond.
Entrepreneurs report that Washington’s combination of high taxes, regulatory red tape, and unfriendly policies makes growth nearly impossible. As high earners and companies leave the state, the revenue from increased taxes, including the new income tax, is expected to decline, leaving politicians in Olympia scrambling for new sources of tax revenue.
Governor Ferguson, who recently signed the income tax into law, has claimed he will veto any change to the exemption threshold to maintain support for the legislation. However, there is skepticism about the predictability of such promises, which adds to the uncertainty for business owners.
To reverse this trend, Washington needs to lower the tax burden, simplify regulations, and prioritize a pro-growth environment. This would help stem the exodus and restore economic prosperity. The data is clear: Washington is losing the competition, and it’s time to compete again.
Original reporting: Clark County Today (Vancouver WA) — read the source article.
