Association of Washington Business – Updated Weekly

Income tax debate heats up: AWB testified in opposition to legislation that would impose an income tax on high-earning taxpayers in a hearing Friday. Though framed as a personal income tax, the tax would impact many small and medium businesses, including S corps, LLCs and other pass-through entities, AWB warned. The hearing also drew strong public opposition. Read more in AWB News and KING 5 News.

“In practice, a tax on individuals could become the new tax on employers, including businesses that may have a strong year on paper but need cash to re-invest into their business,” AWB’s Max Martin testified during the hearing. “This is coming at a time when many employers are still absorbing last session’s operating cost increases.”

The latest: The bill advanced out of the Senate Ways & Means Committee Monday. The legislation is fluid and likely to undergo additional revisions. Stay tuned for additional updates.

High-level overview: The proposal would create a new 9.9% tax on Washington taxable income over $1 million. We’re working on an issue brief with more details — look for it in next week’s Fast Facts.

• The bill includes limited tax relief, including expanding the small business B&O tax credit and ending the large-business B&O surcharge one year early. While AWB appreciates these steps, far more can be done to support small and mid-size businesses and improve Washington’s competitiveness.

• Gov. Bob Ferguson said last week he did not support the original version of the bill because the tax relief provisions didn’t go far enough. “This proposal does not come close to doing that,” the governor said.

• It would not address the state’s immediate budget crunch, since revenue from the tax would not come in until 2029.

Broader impacts: The income tax proposal comes as more Washington businesses are considering leaving the state, or expanding in another state, amid the state’s rising tax burden (more in AWB’s latest survey results below).

Taxes fuel relocation interest: AWB’s winter employer survey found more businesses are considering relocating their businesses or personal residence outside Washington amid a deteriorating business climate. Explore the data or read more in AWB News and The Olympian.

• The number of employers looking to move their business to another state has nearly doubled in the last year, going from 9% to 17%. Taxes were the most common reason given for relocation.

• Additionally, businesses are now more than twice as likely to expand outside the state than within it (30% vs. 14%).

• 44% of business leaders are considering moving their personal residence out of Washington (this was the first time AWB asked this question).

Views on state economy, business prospects: Only 9% rate the Washington economy as strong, with 33% rating it weak or very weak. Meanwhile, one-third of the businesses said they are struggling or in a downturn, compared to only one-fifth that are growing. Nearly half are flat.

“With lawmakers back in Olympia and debating even more new taxes, they need to understand that Washington employers, especially small- and medium-sized businesses, are under severe strain right now,” AWB President Kris Johnson said. “We need lawmakers to support a plan to grow the economy, not tax it more, if we want to avoid stagnant employment, worsening competitiveness and businesses leaving our state.”

Early-bird discount: Registration is now open for AWB’s 2026 Spring Summit, co-presented by BECU and Boeing, May 5-7 at the Hilton Vancouver Washington. There are just 50 early bird tickets available - register now before spots fill up!

• Connect with Washington’s business leaders and gain insights on the political and economic landscape.

• Stay tuned for a major keynote speaker reveal soon and other exciting panels and speakers.

Room block now open: AWB has a discounted room block at the Hilton Vancouver Washington for Spring Summit attendees. Ensuring your spot at the event hotel not only provides convenience but also allows for prime networking opportunities throughout the summit.

Cataloging tax bills: The Washington Research Council has put together a list of the tax increases being considered by the Legislature this year. From major income and payroll taxes to dozens of smaller bills, the proposals would “add to an already high tax burden in Washington” if enacted.

These proposals include:

• An income tax of 9.9% on Washington residents earning more than $1 million a year (Read more)

• A statewide payroll tax of 5% on wages over $125,000 for certain companies (Read more)

• Repealing tax preferences relating to insurance tax premiums

• Removing a tax exemption for data center refurbishments

• Additional tax proposals relating to health care, social media, energy and environment, local government funding and more

Stay up-to-date, earn credits: AWB’s six-month HR & Employment Law webinar series kicks off this Wednesday with a session on pre-hire, hiring and job descriptions. Over the six-part series, Washington’s top law firms will share practical guidance and legislative updates in the areas of handbooks, wage and hour, performance management, workplace safety and more.

Virtual training: Webinars will take place on Zoom at 10 a.m. PST on Wednesdays February through July. Each 90-minute session includes Q&A, plus a wrap-up package with slides, video links, and sample documents. View the full topic list and dates.

Bundle & save: Get the best value by purchasing the full six-month series. Individual webinars are also available for purchase.

Credits available: Earn HRCI, SHRM and CLE credits for each course.

EMPLOYMENT LAW

Updates from James Crandall, lead on legal affairs, labor & employment law:

• 32-hour workweek bill dies: A proposal to shorten the standard workweek from 40 to 32 hours failed to advance out of committee before last week’s deadline, meaning it’s dead for the session. AWB and many other employer groups opposed this bill, warning it could result in employers capping hours to avoid paying overtime and ultimately push jobs out of state.

• Immigrant worker protections: House Bill 2105, sponsored by Rep. Lillian Ortiz-Self, D-Mukilteo and requested by Attorney General Nick Brown, would create new requirements for employers regarding federal work eligibility inspections. Improvements have been made since the bill’s initial introduction. However, penalties including a private right of action remain, and AWB still has concerns with its potential impacts. We will continue to work closely with the bill sponsor and the Attorney General’s office to make the legislation work for both Washington employers and employees.

• Electronic monitoring: House Bill 2114, sponsored by Rep. Lisa Parshley, D-Olympia, would require employers to notify employees if their employer uses electronic monitoring, including artificial intelligence, to conduct performance evaluations. The main problem with this bill is that the definitions are overly broad and it creates a private right of action.

Op-ed: Bill targeting data centers is the wrong approach

New Seattle Metro Chamber leader Joe Nguyen and Heather Kurtenbach of the Washington State Building & Construction Trades Council wrote a joint op-ed against a bill AWB also opposes, House Bill 2515, which places new limits on data centers.

The data centers that allow the online cloud to exist are critical infrastructure, they write:

HB 2515 is well-intentioned, but it does not address the real challenge Washington faces. The solution is not to slow or penalize critical infrastructure. The solution is to build clean energy faster, modernize the grid, and hold all participants to high standards.

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Seattle Times editorial supports bill to fix expansive Supreme Court ruling on email marketing

The Seattle Times editorial board supports a bill that would update a consumer protection law after the Supreme Court last year significantly opened up new ways for businesses to be sued over emails. “Fine-tune law to protect WA consumers from misleading emails,” the editorial board writes about House Bill 2274, which would update the state’s Commercial Electronic Mail Act in response to the high court’s ruling in a case called Brown v. Old Navy.

CEMA protects Washingtonians from deceptive marketing practices, but the state Supreme Court interpreted the law in a way that put some retailers at significant risk of financially crippling class action lawsuits. Only eight class-action lawsuits had been filed since CEMA’s passage in 1998, but in less than a year since the Supreme Court’s ruling in April, more than 80 have been filed.

HB 2274, sponsored by Rep. Larry Springer, D-Kirkland, passed out of committee 12-3 and awaits a floor vote in the House.

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Seattle area sheds 12,900 jobs in first decline since pandemic

Employment in the Seattle region declined by 12,900 jobs last year, the first drop since the Covid-19 pandemic, according to a report from the Puget Sound Regional Council. Before that, the last time the region lost jobs was in 2009 during the Great Recession.

Ongoing layoffs in the tech industry and a slowdown in the construction industry led to the drop-off. “I think this has to be a big wake-up call for the region,” Puget Sound Regional Council Executive Director Josh Brown said. “We’re going back in history.”

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AWB award winner Side Piece Kitchen owner severely burned in kitchen accident

Hailey Hernandez, owner of Tacoma’s Side Piece Kitchen, suffered severe burns after a freak kitchen accident at her home last week. Side Piece Kitchen, known for its scratch-made biscuits, was the winner of AWB’s 2025 Entrepreneur of the Year Award.

A restaurant employee and friend launched a GoFundMe for Hernandez to help cover medical bills and lost income. The fundraiser has raised more than $70,000.

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National Civics Bee essay deadline extended until Feb. 17

Attention 6th–8th graders, parents and teachers! The deadline to enter the 2026 National Civics Bee has been extended to Feb. 17 due to widespread storm impacts in other parts of the country. Learn more and submit your essay.

Top-scoring essay finalists will be invited to compete in a regional competition this spring, with the finalists advancing to the statewide finals June 20 in Olympia. The state champion will be invited to Washington, D.C. to compete in the National Civics Bee national championship in fall 2026.

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Nominations sought for AWB's Board of Directors

As a member-driven association, AWB's robust Board of Directors is an important source of strength. Nominations are now open for diverse business leaders from across the state, and from employers of all sizes, to serve on the AWB Board. The nomination deadline is March 15.

Send nominee names and contact information to Bonnie Millikan.

Help us spotlight manufacturing: AWB’s 2025 Manufacturing Week tour showcased the diversity and innovation of Washington’s manufacturing sector — from the innovations in regenerative agriculture at Royal Family Farming to the people crafting custom-made wheelchairs that are changing lives for the better at Permobil. Read about more highlights from the most recent tour.

Your shop floor could be next: We’re already planning the route for the 2026 Manufacturing Week bus tour, which will visit manufacturing facilities across the state Sept. 30-Oct. 7. We want your business to help us celebrate the 10-year anniversary of the bus tour!

• If you are interested in becoming a tour stop, fill out this application of interest form.

• Check out our manufacturing tour stop guide to learn more about becoming a stop.

Time to shine: Nominations for AWB’s 2026 awards program are open now! We recognize employers in 11 categories, from excellence in family-owned business and environmental practices to entrepreneur and employer of the year. Fill out the nomination form.

• Self-nominations are accepted and encouraged to recognize the quality in your own firm. We also have many nominations come in as employers recognize clients and partner firms.

As you plan your employee benefits for 2026, consider AWB’s HealthChoice Trust. More than 2,500 small employers participate, with 24 competitive, comprehensive benefit plan designs tailored to meet your needs. PPO plans provide 100% coverage for in-network labs, X-rays and diagnostics.

HealthChoice offers broad access to physicians throughout Premera Blue Cross’s extensive provider networks. Coverage is available to companies with as few as two employees in the following industries: agriculture, automotive services, construction, communications, hospitality, manufacturing, professional services, retail/wholesale, technology and transportation.

For a quote, talk with your insurance producer or visit our website at www.propointservices.com You can also contact Billy Sangster at ProPoint: 866.448.9577.

“I think this has to be a big wake-up call for the region. We’re going back in history.” ~ Josh Brown, executive director of the Puget Sound Regional Council, on data showing the Seattle region shed nearly 13,000 jobs in 2025 — the first jobs decline since the pandemic and, before that, the Great Recession.