Opinion: Washington’s business exodus accelerates due to high taxes, regulations driving companies away

Washington's business relocation rate has nearly tripled since winter 2025, per an AWB survey. — Washington’s business relocation rate has nearly tripled since winter 2025, per an AWB survey.

🎧 WA Business Exodus: Taxes, Regulations, and the Cost

Mark Harmsworth says the data is clear. Washington is losing the competition.

Mark Harmsworth
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 (AWB) reveals alarming trends, nearly 1 in 4 employers (24%) are now actively considering relocating their businesses out of state, up sharply from 17% in the previous quarter and nearly triple the level from winter 2025.

Another 55% 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 6th 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 (B&O) tax rates for service businesses and introduced new surcharges. Large companies face a 0.5% surcharge on taxable income over $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 GDP growth by up to 0.5% in 2026 (nearly $4.5 billion) and cut wages by billions more.

Office vacancy rates reflect the pain. While Seattle’s downtown vacancy remains among the nation’s highest (hovering between 28% and 35%+ in Q1 2026 reports), the broader Puget Sound region and state face similar pressures from remote work shifts and corporate relocations. Companies like Starbucks are shifting hundreds of jobs to lower-tax states such as Tennessee. Other firms have issued WARN 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.

Bottom line is 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 $1,000,000 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 3 months after signing the income tax into law, lauding it as the way forward for the state, Governor Ferguson is now claiming 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 is clear. Washington is losing the competition. It’s time to compete again.

Mark Harmsworth is the director of the Small Business Center at the Washington Policy Center.