Democrats filled the deficit this biennium with a $9.4 billion tax hike signed by Gov. Bob Ferguson in his inaugural legislative session, and now another state deficit is looming

Tim Clouser
The Center Square Washington

A recent survey found that 65% of employers now report taxes as their biggest concern following the largest increase in state history, with the majority passing costs onto customers.

The Association of Washington Business released its fall 2025 survey on Wednesday, after hundreds of employers submitted responses through Oct. 29. Taxes remained the top concern, rising from 58% of respondents last summer, but 76% reported the most recent increase had a direct impact on business. 

Last January, the Legislature convened amid a state deficit of upwards of $12 billion to $16 billion over the next four years. Democrats filled the hole this biennium with a $9.4 billion tax hike signed by Gov. Bob Ferguson in his inaugural legislative session, and now another state deficit is looming in Olympia.

“As we think about the upcoming legislative session, we hope that lawmakers will break the cycle of never-ending tax increases,” AWB President Kris Johnson said, “and focus instead on a growth agenda and providing some relief to families and businesses struggling to keep up with spiraling costs.”

State Lawmakers will convene for the 2026 legislative session on Jan. 12, as the Washington State Economic and Revenue Forecast Council suggests that their coffers in Olympia could run dry by 2027.

According to the AWB fall survey, more employers feel like the state economy is deteriorating as well. 

Around 28% of respondents described the economy as “weak,” compared to 17% last fall, while 27% reported a downturn in business, up from 17% last fall. Business owners are also less optimistic about expanding in-state, with only 14% planning to do so over the next two years, down from 23% last fall.

“The results represent a significant deterioration in Washington’s business climate compared to the previous quarter,” according to the fall 2025 survey. “Although significant challenges remained, tariff concerns were easing, recession fears had declined, and the trajectory seemed to be leveling off.”

AWB argued in its executive summary that Washington’s historic tax increase “changed everything.”

About 41% of the employers expect the state economy to enter a recession in the next year. Last fall, only 18% employers worried about an impending recession, which then rose to 32% over the summer. Only 14% of respondents said they don’t expect a recession in the most recent survey, with 44% “unsure.”

While 52% of respondents still say they’re managing the ongoing impacts of President Donald Trump’s tariffs, the amount concerned that the policies will negatively impact their business has fallen steadily. 

Last Spring, in the months after Trump took office, 72% of businesses were worried about the impact. 

Among the 52% of respondents who reported impacts from the tariffs, only 64% raised input costs, compared to 85% last summer. Supply chain disruptions among the 52% of employers also fell from 40% to 29%, though the amount of businesses reporting tariffs as a challenge rose from 30% to 37%.

Still, inflation, government regulations and health care costs outranked tariffs among all the concerns.

“Washington continues to grow more unaffordable for employers and families,” Johnson said. “Local businesses are being squeezed by higher taxes and duplicative regulations coming from Olympia, and unpredictable trade policy at the federal level, both of which are driving up costs for consumers.”

This report was first published by The Center Square Washington.