South Sound Businesses Pay the Price for the 2026 Legislature’s Policy Choices

AUTHOR: TOM PIERSON, INTERIM PRESIDENT & CEO

The 2026 Washington State Legislature adjourned March 12th after passing 267 bills. The session delivered significant new costs and regulatory pressures for businesses. 

Budget
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The 2025-27 supplemental operating budget increases the total spending amount for the biennium to $80.2 billion – an increase of $2.4 billion for the biennium. This includes a $880 million transfer from the rainy day fund, marking the state’s continued increase in spending. Over the past decade, state spending has increased by 116%, far exceeding the inflation rate of 34% in the same time period. This trajectory highlights the ongoing concerns about the long-term sustainability of the state’s budget and the likelihood of continued fiscal pressures in future cycles.
 
In direct harm to businesses, Governor Ferguson decided to veto $500,000 in the state’s supplemental operating budget that was dedicated to combating organized retail crime. This is a major setback for the business community, our employees, and our customers. The business community has consistently talked about the impacts of retail crime, underscoring that dedicated state investments like this are not optional - they are essential to maintaining public and operational safety.
 
This funding is not new; in 2024 the legislature provided $1 million to launch the now successful pilot program in King, Snohomish, and Spokane counties, which focused on coordinated responses to organized retail crime. This funding delivered measurable results, including 402 program-driven law enforcement responses, and generated 5,868 organized crime reports, among many other measurable outcomes that helped businesses. 
 
Eliminating this investment is discouraging to the business community when we are asking for meaningful partnership, support, and action. Without additional funding, businesses are left without support they desperately need. While we understand the state is working under budget constraints, if the state is serious about protecting local economies, supporting frontline workers, and maintaining safe retail spaces, prioritizing this type of funding must be a priority. We look forward to working with legislators to restore it. 
 
Income Tax

The legislature passed the first income tax, under the guise of it being a “millionaires’ tax.” This statewide income tax impacts households with income exceeding $1 million dollars – which is $500k/year for people filing jointly. Income taxes, coupled with other anti-business and anti-economic development policy decisions, make Washington less competitive and drives residents and businesses out of state. This is especially harmful when Washington already ranks near the bottom nationally in tax competitiveness and overall business climate. 


The Legislature’s rationale for the tax is to generate additional revenue to make up for the current 2025-27 budget deficit, which sets itself up to expand the tax further in 2027-2029 as they continue to fail in balancing the budget with new revenue. But to be clear, Washington does not have a revenue problem - it has spending and fiscal management priority and policy problems. 
 
Data Centers
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In a devastating blow to businesses, ESSB 6231 was passed and signed by the Governor, repealing a sales and use tax exemption for the refurbishing of data centers. This tax exemption is meant to attract these facilities to Washington since they bring millions in investments, create lots of local jobs, generate additional tax revenues, and promote economic development. These exemptions have been particularly critical for Pierce County as our data center has brought high paying job opportunities and generated millions of tax revenue. 
 
Transportation

The legislature did approve a $16.6 billion transportation package. The package emphasizes additional preservation and maintenance of existing infrastructure including, road and bridge repairs, ferry system preservation, highway safety improvements and more. In addition, it is estimated this package could support up to 30,000 jobs statewide. 
 
Veterans

In a big win for our veteran community, the Governor signed ESHB 2534 which promotes education stability for children of military families. Our team advocated for this bill, and we are happy to see the Legislature’s support for our veterans and military families. 
 
The 2026 Legislative session, with few exceptions, proved to be a challenging one for Washington’s business community, marked by increased costs, new regulatory pressures, and continued spending growth without any long-term solutions. We will be closely monitoring the impact of these policies in the months ahead while continuing to advocate for a more competitive, sustainable economic and fiscal environment by supporting our local business community through the challenges ahead.
 
My question for you, when you interact with your legislative members can you ask them this simple question: What exactly did they do for your business to make the South Sound the place for business?