Washington scores poorly on business, tax climate in think tank’s report card
AI-generated summary reviewed by our newsroom.
- Washington fell from No. 6 to No. 45 in business-tax ranking since 2014.
- Business leaders cite rising taxes and instability as triggers for relocation.
- Lawmakers passed new tax hikes in 2025 to close a multi-billion-dollar gap.
The state’s taxes and business climate has turned stormier in recent years, according to a new digital dashboard tool by a Washington-based think tank.
The Washington Policy Center (WPC), a nonprofit think tank that often criticizes the state’s tax policies, published the digital dashboard as part of its ongoing Report Card for Washington’s Future project, with key subjects of focus including education, agriculture and transportation.
By WPC’s assessment, the Evergreen State’s business grades could use improvement.
Washington fell 39 spots in its state tax-competitiveness rating, from No. 6 in 2014 to No. 45 this year, per data broadcast by WPC. The report card also notes that Washington ranks as having the country’s eighth-highest business-failure rate over 10 years.
Majority-party Democrats passed a slew of new and increased taxes in the 2025 legislative session to balance the state’s operating budget, which saw a multi-billion-dollar gap between expected revenue and spending.
Mark Harmsworth, director of WPC’s Small Business Center, cited recent business and occupation (B&O) and sales tax moves as being particularly damaging to small businesses. He said the state’s new law capping annual rent hikes will spike the cost of living as well.
“We started to see the trend a little while ago, so we knew that we were heading in the wrong direction,” he said. “What did shock me was the speed at which we went from where we were a relatively good state to open a business 10 years ago to now we’re in a pretty bad state.”
Harmsworth said business owners are starting to leave the state, citing a lack of tax stability. And corporate titans like Amazon and Microsoft are beginning to spread their employee bases elsewhere too, he said.
More than 60 business leaders across the state — including from Microsoft, Amazon, Nordstrom, Costco, T-Mobile and Zillow — wrote a letter to Washington leaders this spring urging them to refrain from hiking business taxes to balance the state’s operating budget.
Harmsworth, who previously served two terms as a Republican representative in the state House, said the state’s grades could get worse from here.
If a wealth tax were to get signed into law — as Washington Democrats failed to do this session but might try anew next year — the state’s economic health will continue to deteriorate, he said.
“The thing that really scared the big boys is the wealth tax,” he said. “They all went down to Olympia to scream at their elected officials about that. Because they know that if that goes through, they’re going to have to relocate out of the state, which will be devastating to us.”
A small business owner himself, Harmsworth said he’s seen his B&O taxes rise tenfold since he started up about eight years ago. The state has been “nickeling and diming” small businesses for years, he said.
“A lot of the time you just absorb it, and you just try to do your best, because you don’t want to pass that on,” he said. “But I think we’ve reached the tipping point.”
Rachel Smith, CEO and president of the Seattle Metropolitan Chamber of Commerce, said her organization doesn’t always align with Harmsworth’s think tank on issues. But looking at the report card, she said one can’t disagree with the data.
The report card includes information gleaned from The Tax Foundation, which describes itself as a nonpartisan tax-policy nonprofit, and U.S. Bureau of Labor Statistics data analyzed by the Lending Tree online marketplace.
On top of the new and increased taxes and fees passed this session, Smith cited other policies that concerned her. One example: a state law extending unemployment benefits to striking workers.
“You may agree with some or all of those, but I think it’s just simply impossible to think that this volume of tax and policy change on economic activity isn’t going to have an economic impact,” she said.
Both Smith and Harmsworth say that regular Washingtonians would also feel the effects if the state’s business climate continues on a downward trend. Increased cost to businesses will eventually trickle down to the consumer, they contend.
Smith said that Washington’s recent tax jumps, combined with big national-level economic moves like tariffs, will make the state even less affordable.
“You will see changing business models,” Smith said. “And I think that that is just all very real, and is going to result in businesses and employers continuing to be on a bumpy ride for the foreseeable future.”
This story was originally published June 20, 2025 at 5:00 AM with the headline "Washington scores poorly on business, tax climate in think tank’s report card."
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