Survey: 44% of Washington employers are thinking about moving out of state

Survey shows 44 percent eye exit

Nearly half of Washington’s business leaders say they are thinking about moving out of state.

The Association of Washington Business (AWB) found that 44 percent of employers are considering relocating their personal residence, according to its Winter 2026 quarterly survey.

AWB, the state’s chamber of commerce and manufacturers association, collected 429 responses by email from business owners and operators between Jan. 12 and Feb. 2.

The survey’s executive summary pointed to a continuing collapse in employer confidence, driven largely by a growing tax burden.

More businesses plan to relocate

The number of businesses planning to leave Washington has nearly doubled in a year. Seventeen percent now say they plan to relocate out of state, up from 9 percent at the same time last year.

Businesses are also more than twice as likely to expand outside Washington (30 percent) than within it (14 percent).

AWB President Kris Johnson said employers, especially small and medium-sized businesses, are under severe strain.

Johnson added that businesses are not feeling good about the direction of the state economy or their own prospects.

Tax burden tops list of concerns

Taxes dominate the worry list. Sixty-four percent of respondents rated the overall tax burden as their most important business challenge, and 75 percent said they are already feeling the impact of higher taxes approved during the 2025 legislative session.

Health care costs came in second at 62 percent, followed by government regulations at 54 percent, inflation at 40 percent, and tariffs at 30 percent.

More than half of respondents, 54 percent, reported negative effects from tariffs on their operations.

Only 9 percent call economy strong

Employer confidence in the state economy has dropped sharply.

Only 9 percent of respondents rated the Washington economy as strong, while 33 percent called it weak or very weak. About a third expect the state to enter a recession within the next year.

The picture inside individual businesses looks just as grim.

One-third said they are in a downturn or struggling, and nearly half, 47 percent, reported flat performance with no growth.

Record tax package signed in 2025

Much of the frustration traces back to May 2025, when Gov. Bob Ferguson signed the largest tax increase in state history.

The two-year state budget relied on five tax bills expected to bring in $9.4 billion over four years, passed to address a multi-billion-dollar budget shortfall.

The package raised business and occupation taxes broadly, added a temporary surcharge on high-grossing firms, and increased capital gains and estate taxes.

Lawmakers also expanded the sales tax to cover services like digital advertising and temporary staffing.

Budget shortfall followed tax increase

The record tax package did not solve the budget problem for long. By mid-2025, tax collections were coming in below projections.

In December, Ferguson proposed a supplemental budget to address a $2.3 billion shortfall in the current two-year budget.

His plan included about $800 million in spending cuts and a withdrawal of roughly $1 billion from the state’s rainy day fund.

About 20 percent of Washington’s budget comes from federal funding, which Ferguson said faces its own uncertainty.

Lawmakers propose 9.9 percent income tax

Democratic leaders are now pushing a new revenue source.

In February 2026, Senate Majority Leader Jamie Pedersen and House Majority Leader Joe Fitzgibbon introduced companion bills, SB 6346 and HB 2724, that would create a 9.9 percent tax on individual income above $1 million.

Supporters say fewer than 0.5 percent of Washington households would owe anything under the tax.

Even if it passes, the revenue would not reach state coffers until 2029 at the earliest.

Governor endorsed concept in December

Ferguson announced his support for a millionaires’ tax on Dec. 23, 2025.

He said the revenue should expand the Working Families Tax Credit, cut taxes for small businesses, fund K-12 education, and remove sales tax on essentials like diapers and hygiene products.

Ferguson also said he would not support an income tax on anyone earning less than $1 million a year. He added that he supports writing the $1 million threshold into state law and adjusting it for inflation.

Income tax ban passed just two years ago

The proposal faces a complicated political backdrop.

In March 2024, the legislature passed Initiative 2111 with bipartisan support, banning state and local income taxes. The measure cleared the House 76-21 and the Senate 38-11.

Washington voters have also rejected income tax proposals multiple times over the decades.

But because the legislature enacted I-2111 itself rather than sending it to voters, lawmakers can now amend or repeal it with a simple majority vote.

Supporters say tax system is unfair

Backers of the millionaires’ tax argue the current system hits lower earners the hardest. Washington is considered to have one of the most regressive tax systems in the country.

According to the governor’s office, families in the bottom 20 percent of income pay 13.8 percent of their total income in taxes, while families in the top 1 percent pay just 4.1 percent. Supporters say the new tax would help close that gap while funding public services.

Opponents warn tax could expand over time

Republicans and business groups say the income tax will not stay limited to millionaires. Rep. Travis Couture called the proposal “a nonstarter” and said it avoids addressing state spending.

Senate Republican Leader John Braun said passing an income tax would undermine a law created through the initiative process. AWB’s survey results suggest the debate is not just theoretical.

More businesses may leave if the tax burden continues to grow.

Job growth ranks 35th in the nation

Washington’s economy is already showing signs of strain beyond the survey results.

According to the 2026 AWB Competitiveness Redbook, the state added just 19,800 non-agricultural jobs in 2025, a growth rate of 0.5 percent.

That ranked 35th in the nation, down from second-highest a decade ago. The state’s December 2025 unemployment rate stood at 5.3 percent, above the national rate of 4.1 percent.

The Redbook also found that Washington’s electricity cost advantage over other states is shrinking.

This article was created with AI assistance and human editing.

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