By Todd Welch / Herald Columnist
Washington enters 2026 facing a stark and uncomfortable reality: A business climate that has deteriorated at an alarming pace.
Twelve years ago, Washington ranked sixth best for business. According to a 2025 survey by Chief Executive, it now ranks 45th. That is not market coincidence; it is the cumulative impact of policy.
Yet as the upcoming legislative session begins, lawmakers are advancing new payroll-style “progressive revenue” taxes once again aimed at employers and high earners. These proposals are framed as targeted, painless, and corrective. In practice, they strike at the core cost structure of job creation. A payroll tax is a tax on hiring. It is a direct penalty on expansion, raises, and investment.
Policy makers do not have to speculate about the outcome. Seattle’s failed “Head Tax” provided a live case study. When the city pursued punitive employment taxation, Amazon froze construction and moved thousands of jobs to Bellevue. Other companies followed. The tax did not generate stability; it shattered it.
Now the state appears prepared to repeat that error on a much larger scale. The risk to Washington’s competitiveness is severe. Employers evaluating sites for data centers, engineering hubs, logistics expansion, or advanced manufacturing are acutely sensitive to long-term cost stability. When a state signals that success will be met with escalating taxes, capital simply flows elsewhere.
The consequences ripple fast. Reduced capital investment leads to slower job growth. Slower job growth shrinks the tax base. Revenue projections come up short. Lawmakers then return with the same solution: more taxes.
Washington state is drifting toward a self-reinforcing cycle of economic erosion. What makes this moment especially dangerous is the political environment fueling it. The Legislature has become a one-party system in practice, where sweeping fiscal policy moves with minimal bipartisan restraint.
Washington would benefit from genuine collaboration between Democrats and Republicans, bringing more scrutiny, more debate, and better outcomes. A mono-party approach increases risk, not certainty.
The Legislature also continues to misdiagnose the core problem. Washington does not suffer from a revenue shortage. State revenues have climbed dramatically over the last decade. What Washington lacks is spending discipline. Budgets have expanded rapidly, programs have multiplied, and long-term obligations have surged. Instead of restructuring spending, lawmakers default to new taxation.
Meanwhile, affordability deteriorates. Housing, child care, transportation, energy and groceries all rise faster than wages when taxes climb. The burden invariably falls on middle-income households, even when taxes are branded as “targeted.” Washington does not need a new generation of ideological revenue experiments. It needs fiscal restraint, bipartisan governance and a renewed focus on restoring competitiveness.
A state that has fallen from sixth to 45th for business, that is losing tens of thousands of jobs, and that is growing steadily less affordable, cannot tax its way back to prosperity. It must rebuild its business climate first. If lawmakers continue treating job creators as a revenue source rather than as partners in growth, Washington’s economic slide will not stabilize, it will accelerate.
Todd Welch is a columnist for The Herald, addressing local and state issues. He lives in Everett.
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