Washington state received troubling news from a recently published economic report. The 2026 Competitiveness Redbook, a study conducted by the Washington Alliance for a Competitive Economy, found that the state’s business climate is in alarmingly poor shape.
The Redbook examines 61 different economic indicators to take the pulse on the health of Washington’s economy. This includes various data such as electricity prices, unemployment insurance payments, minimum wage, taxes, and educational pursuits of the population. The consensus of the findings is that even as Washington’s small business economy has been trending downward over the years, this past year has taken an unprecedented plunge further in the wrong direction.
This includes imposing one of the largest tax increases in state history last year: a business and occupation tax rate increase, expansion of the sales tax, increases in the death (estate) and capital gains income tax, elimination of certain tax preferences, and additional taxes on luxury items and electric vehicle credit.
One of the key takeaways is that the data shows a continued slowing in job growth in Washington. Last year, Washington added 19,800 non-agricultural jobs, for a 0.5% growth rate. That was 35th in the nation, down from 56,100 jobs created the year before (24th in the nation) and down from 109,000 jobs a decade ago, which was second highest in the nation.
Historically, Washington has enjoyed energy at a low cost due to its hydroelectric power, but even that perk seems to be sinking. The Climate Commitment Act cost increase on energy distributors is being passed on directly to the consumer, and they are feeling the heat.
Association of Washington Businesses (AWB) President Kris Johnson reacted to the report, saying: “The data aligns with what Washington employers are telling us directly. Rising taxes and higher costs are putting businesses under increasing strain, driving decisions to expand or relocate outside Washington. At the same time, a key competitive advantage — low-cost electricity — is starting to slip as new laws and regulations push up energy costs. Together, these trends should be a warning sign for lawmakers as they debate new taxes and policies that could further weaken Washington’s competitiveness.”
It's not just the Redbook that came to this conclusion, but various other reports as well. Washington was ranked 45th in the Tax Foundation’s 2026 State Tax Competitiveness Index and 35th in the Schweitzer Engineering Lab’s 2025 Freedom Index. Every sector is facing pressure from the state’s record tax increase last year, with additional threats from the proposed unconstitutional income tax this year.
It shouldn’t be surprising, then, that AWB found in its quarterly survey that 44% of business leaders are considering moving their personal residence out of Washington state. This figure has doubled since the income tax was proposed in the legislature. In addition, 17% of businesses are considering fleeing Washington altogether, which is up 9% from the same time last year.
In a broader perspective, MSPC’s Fact Book shows that Washington continually lags behind its neighbors in the region on multiple economic indicators. The Evergreen state has the highest general fund spending per capita, debt per capita, and state and local tax collections per capita in the region. Consequently, Washington business owners are flocking to states like Idaho.
Rather than constantly targeting businesses for tax increases, lawmakers should be looking to improve the state’s economic climate. Instead, Washington currently has the 8th highest 10-year business failure rate, and the highest 5-year business failure rate due to the overwhelming tax and regulatory burdens. The state used to be known for its history of successful companies being formed and becoming worldwide brands, with Amazon, Starbucks, and Boeing as examples.
The reality today is that policymakers are making it increasingly harder to thrive and innovate within the ever-increasing tax and regulatory burden. The numerous economic reports are a loud warning that, unless a course correction is made, more entrepreneurs will be looking elsewhere to do business.
Sam Cardwell is a Policy Analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Eastern Washington and Wyoming. Online at mountainstatespolicy.org.
