CEO Message: State taxes take center stage

First Things First: It's a Disaster!

No, I’m not plugging May’s Bellevue Chamber lunch, featuring the top seismological, emergency management, and public lands leaders in our state (register today while space is available) ... I’m talking about this year’s tax proposals in Olympia. 

The Bellevue Chamber works well with both sides of the aisle, and Democrats and Republicans alike have helped push through meaningful pieces of legislation that have helped Bellevue and the Eastside flourish. This year, however, majority Democrats are pushing an extinction-level event for Washington’s economic engine.

This is not hyperbole; the end is near. As we approach the final few weeks of session Washington’s major employers will learn their fate and be faced with a difficult decision about their future.

Will They Stay or Will They Go?

Hiring is already slowing, and even before the Trump administration’s tariffs slammed companies in our trade-dependent state with new costs, the tech sector had already pulled back. Amazon, Microsoft, Meta, Google, Starbucks, and other prominent Puget Sound area companies have announced or completed significant layoffs in recent months, but the worst is ahead of us.

It's one thing to transfer jobs from one area to another, like Amazon did when it moved an additional 10,000 jobs from Seattle to Bellevue after the passage of Seattle’s Jump Start income tax. The real long-term damage, however, happens slowly and almost imperceptibly.

While Amazon’s global workforce has grown 20% since the pandemic, it has shrunk by the same amount in Seattle and even dropped statewide. Tech employment represents more than 20% of our state’s economy, but every major tech company has been expanding faster outside our state than within it in recent years. Our high-cost, high-tax, high-regulation, anti-business environment has already shooed away the golden goose, and this legislative session is all but certain to kill it.

What's On the Menu?

As most of you are aware, both Senate and House majority caucuses have rolled out tax proposals that they hope to pass before April 27. The options range from the deeply troubling, to downright irresponsible.

Statewide Jobs Tax:

In the Senate, leaders have proposed to take a form of Seattle’s Jump Start Tax statewide. Under the plan, employers with more than $7 million in annual revenue will now pay an additional 5% tax on all wages above the Social Security wage base of $176,100. Most affected workers can say goodbye to their cost-of-living adjustments, and many will be saying goodbye to their jobs.

Statewide Wealth Tax:

The House and Senate also both proposed a wealth tax on individuals with $50 million in worldwide assets. The Senate sets the rate at 1%, but taxes all assets for these high-net-worth individuals, while the House sets a lower rate of .8% and exempts the first $50 million. Both plans would tax fractional ownership in privately held businesses where wealth could be highly illiquid. Investors in an early-stage startup that isn’t yet profitable would have to liquidate their holdings in order to pay the tax.

To be clear, if this wealth tax is adopted, Washington’s start-up economy will end overnight. Every private-equity investor of means will leave the state before the tax goes into effect in January 2026. 

Even progressive billionaire Nick Hanauer has called this proposal “boneheaded,” adding, “This proposal is impractical, has serious legal issues and likely wouldn’t survive a ballot challenge. It is not a serious proposal, and won’t solve our budget problems because it is unlikely to bring in revenue.”

Wealth taxes of these nature have failed resoundingly where they have been instituted. France, Sweden, and Germany all abandoned their wealth taxes when the effected taxpayers fled those countries, taking countless jobs and philanthropy with them.

Case in point: Norway, a country 30% smaller than Washington state, has already lost 80 billionaires and multimillionaires to the tax, and revenues from their wealth tax have plummeted as a result. Voters of all stripes, rightfully angered by a concentration of wealth, are yearning for the opportunity to “soak the rich.” Doing so in this way will likely put many Washingtonians out of a job.

Blowing the Cap off Property Tax Growth: Budget leads have also proposed eliminating the cap on property tax increases allowing them to grow at three-times the rate annually than current law. This will hike rents, and have the potential to push people out of their homes. Plans also include a near-60% increase in the surcharge on banks; and a debilitating hike in business and occupation taxes on the largest 400 companies in the state. The House’s B&O surcharge could as much as triple tax rates for some Washington companies.

The Other Stuff:

These tax plans are the sharp point on an otherwise reckless legislative session. With unemployment insurance taxes set to rise as the legislature extends benefits to striking workers, paid family leave taxes increase as legislators further expand eligibility to the already strained trust fund, and rent control aims to shut down Washington’s already beleaguered housing market, the unrelenting attacks on Washington’s economic engine are unyielding.

A Choice for Employers:

The Clash said it best: “Will I Stay or Will I Go?" But, employers have one more option: Fight back.

Major employers have taken a back seat in pushing against the anti-business sentiment of state government in recent years. They have failed to mount meaningful resistance to the bad ideas coming out of Olympia, and in many cases, have acquiesced to legislative demands in hopes of avoiding further attacks. That trepidation ends now.

While the outcome in this legislative looks bleak, there is still over a month to go before the session concludes, and many opportunities for job-creators in Washington to be heard.

Even after the session concludes there is the opportunity to take these policies to court and to the ballot. Democratic majorities in both chambers have been bolstered by voter-anger over Trump’s first term and his subsequent return to the White House.

While their disgust is understandable, it has been misinterpreted by Democratic leaders as a blank check to adopt far reaching policies that will do unparalleled damage to Washington’s economy and quality of life.

Since 2000, Washington has seen the greatest amount of tax increases of any state in the nation, yet it still ranks 46th in public safety, and 47th in both affordability and fiscal stability. It already has the highest rate of new-business failures in the nation, and has collapsed from the nation’s sixth best business tax climate in 2014 to the fifth worst.

We have a choice. We can accept these deplorable statistics and look for greener pastures out of state, or we can fight for a Washington worth protecting. I hope you’ll join us in the fight.

Joe Fain, President & CEO

Bellevue Chamber