Washington Businesses Weigh Leaving State Over Tax Policies

Policy expert warns recent and proposed tax increases are pushing companies to consider exit strategies

Published on Feb. 9, 2026

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Mark Harmsworth, director of the Small Business Center at the Washington Policy Center, argues that recent and proposed tax increases by the state legislature are already causing real consequences for Washington businesses. Harmsworth says he has received multiple calls from small business owners who know they cannot stay in Washington and remain profitable, with many considering exit strategies in the next 12-18 months due to the uncertainty created by proposals like a state income tax.

Why it matters

The potential exodus of businesses from Washington state could have significant economic impacts, reducing tax revenue from sources like the business and occupation tax, license fees, and sales taxes. This could negatively affect funding for schools, social programs, public safety, and infrastructure in the state.

The details

Harmsworth says the "onslaught of tax increases" in the last 12 months, including the proposal for a state income tax, have many business owners on the verge of leaving Washington. He notes that even the threat of a wealth tax last year had many large businesses looking to exit the state. Harmsworth argues the income tax would be "the last nail in the coffin" for businesses running on razor-thin margins due to existing taxes. He says the uncertainty around future tax changes is causing business owners to be unwilling to take investment risks or grow their companies, particularly in industries like retail and hospitality with slim profit margins.

  • Over the last 6 months, Harmsworth has received multiple calls from small business owners considering exit strategies in the next 12-18 months.
  • The capital gains tax legislation passed in Washington the previous year, and the projected vs. collected taxes fell short by over $1 billion the following year.

The players

Mark Harmsworth

The director of the Small Business Center at the Washington Policy Center, a former state representative who argues recent and proposed tax policies are driving businesses to leave Washington.

Washington Policy Center

A public policy research organization in Washington state.

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What they’re saying

“The uncertainty created by proposals, such as the income tax, have many of the owners considering exit strategies in the next 12-18 months. Whether the income tax passes or not, there is no trust that politicians in Olympia won't try again or within a few years and apply the tax to everyone.”

— Mark Harmsworth, Director, Small Business Center, Washington Policy Center (clarkcountytoday.com)

“For businesses that run razor thin margins because of the taxes Olympia is already extracting, the income tax would be the last nail in the coffin.”

— Mark Harmsworth, Director, Small Business Center, Washington Policy Center (clarkcountytoday.com)

What’s next

Legislators will need to consider the potential economic impacts of further tax increases and work across the aisle to create a more stable business environment in Washington to encourage companies to stay and new businesses to move in.

The takeaway

Washington's pursuit of new tax revenue sources like an income tax or wealth tax risks driving away the very businesses and job creators the state relies on for its existing tax collections, potentially leading to a net loss in revenue and economic activity.