It is well established that taxes impact behavior. This is true at both the state and local level. For example, in 2021, the Washington legislature imposed a statewide capital gains income tax, and in 2026 it passed a 9.9% “millionaires” income tax (currently subject to constitutional legal challenge). This has led to concern about wealth flight as individuals and businesses look to leave the state. But what happens when two neighboring cities, both facing the same statewide tax climate, embark on radically different tax schemes? Bellevue and Seattle provide the perfect case study to consider.
Even when individuals and businesses face burdensome state taxes, they still have the option to reduce their local tax burden. Based on the data, Seattle is an example of making the wrong tax choices and driving businesses and residents out the door. Businesses are moving just next door to Bellevue to escape bad Seattle policy.
There are stark policy differences between neighboring Bellevue and Seattle in numerous areas, but it’s especially clear concerning taxes. Seattle imposes several local business taxes that Bellevue avoids. For example, in 2020, Seattle passed a new tax on businesses known as “JumpStart.” This tax proved to be the last straw for multiple businesses that left Seattle, ultimately decreasing tax revenue and creating an incentive for others to leave. The impact of these tax differences is tangible, with Seattle losing 1.3% of its jobs from 2023-2025, and Bellevue’s labor pool is up 12.6% during the same period.
According to Cushman and Wakefield’s reporting, Seattle’s office vacancy rate has increased 4.2% over five fiscal quarters, while Bellevue's has increased just 1.7%. Since 2021, Bellevue has added almost 3.9 million square feet of office space compared with 2.6 million in downtown Seattle. Amazon, Tikok, OpenAI, Snowflake, Robinhood, Uber, and Meta have all shifted or expanded into Bellevue rather than increasing their presence in Seattle.
If businesses and high-wealth individuals are leaving Seattle, why aren’t they leaving all the other cities in King County at the same rate? Some are moving jobs out of the state, most notably with Starbucks relocating some of its operations away from the city where it was founded, into Nashville. Starbucks’ former CEO Howard Schultz also announced his personal departure from Seattle to Miami. According to the Downtown Seattle Association, the city lost more than 13,000 jobs in 2025.
The high office vacancies also greatly damage commercial real estate values in the area. It’s estimated that between the three different large skyscrapers Amazon owns in Seattle, it has lost more than $1 billion in taxable value over the past three years. Another example is Blackstone, which recently sold an iconic office building in Seattle for $280 million, about 54% below what they purchased it for in 2019. This rapid decrease in value resulted in property tax revenue falling more than $2.8 million short of earlier projections. Seattle’s Downtown Association predicts that this will mean a greater tax burden on renters, homeowners, and small business owners as the tax burden is shifted.
For more than a decade, Bellevue has taken a different policy direction than Seattle. In 2016, Bellevue helped launch a new organization, Startup 425, connecting aspiring entrepreneurs and small business owners with education resources. In 2019, a formal regional partnership was formed with other cities that expanded their capabilities to include business mentoring, connecting founders to capital, and coordinating city economic development offices. In 2023, Bellevue implemented small business consulting services and a permit concierge to walk alongside businesses through the entire process.
In contrast, Seattle in 2020 passed the JumpStart payroll tax mentioned earlier that put a major strain on companies. The tax rate quickly increased by 6.5% just three years later. In 2025, Seattle also increased its Business and Operations (B&O) tax by 54.1% for businesses that qualified. Bellevue, meanwhile, doesn’t have a payroll tax at all, and its B&O rate hasn’t increased since 1989.
Bellevue’s 2026 Vibe Check Report showed that there are 23% more citizens in Seattle who agree with the statement that the “city isn’t doing enough for business” than in Bellevue. Joe Fain, CEO of Bellevue’s Chamber of Commerce, states, “In Bellevue, we live our values by the results we achieve, not by a slogan on a t-shirt.”
Although everyone is subject to Washington’s statewide tax and regulatory framework, businesses and individuals still have options to reduce their tax burden at the local level depending on where they locate. Seattle’s poor business climate is a policy choice and a benefit to the economic outlook for more tax-restrained Bellevue.
The vivid contrast between Seattle and Bellevue is a lesson every municipality in the country can learn from. Imposing high local taxes and onerous regulations incentivizes individuals and businesses to look to neighboring jurisdictions for relief.
Sam Cardwell is a Policy Analyst for the Mountain States Policy Center, an independent research organization based in Idaho, Montana, Washington and Wyoming. Online at mountainstatespolicy.org.
