State Income Tax Would Cause More Empty Office Spaces in Seattle
Seattle investor Charles Fitzgerald believes his hometown is on the verge of becoming a modern Cleveland, the city symbolic of the post-industrial Rust Belt era during the 1970s and 1980s. A similar urban decay could happen in the Puget Sound region if a new income tax is passed by the Washington Legislature.
That bill (SB 6346) is currently before the State House, after passing the Senate on Feb. 16, with bipartisan opposition. If adopted by the House and signed by Governor Bob Ferguson, the state will stop being attractive to expanding businesses. Home-grown businesses will follow Boeing’s example, moving jobs to more business-friendly locations, according to Fitzgerald.
He writes in a Geekwire op-ed that during the mid-20th century, Cleveland was home to major industrial giants Standard Oil and Republic Steel, and was a significant outpost for General Motors, Westinghouse, and U.S. Steel. When the industrial bubble burst, the city plummeted from being the nation’s 8th largest city to the 56th. As manufacturing companies made tough decisions on where to close facilities, Cleveland lost jobs, partially due to its confrontational anti-business reputation.
Today, Seattle and Washington State are home to such tech giants as Amazon and Microsoft, while Google, Meta, and other industry giants also have a strong presence. Recent tech industry layoffs have hurt the Puget Sound region hard. Fitzgerald blames a “deteriorating business environment” for why Seattle was hit harder than other cities as big government advocates continue to target the hi-tech industry to fund its massive bureaucratic growth.
Beginning in 2021, Seattle’s JumpStart payroll tax forced companies to pay up to 5% tax for any employee making approximately $200,000 or more. The tax was supposed to bring in $407 million in 2024. Yet revenues came in 12% ($47 million) short of projections, as high-paid workers easily moved their domicile location outside Seattle.
The JumpStart tax, declining public safety, and a steady stream of anti-business rhetoric from city hall has led many employers to make tough decisions whether to stay in Seattle. The mass departures caused the $47 million deficit, along with boarded up windows and record-breaking vacancy rates for office spaces in Seattle’s downtown retail core. 2025 Quarter 4 vacancies were at an all-time high of 35.6% as the market continued to decline.
King County Assessor John Wilson stated that the high commercial vacancy rate is impacting the residential taxpayers. When vacancy rates are near normal (around 6%), businesses pay 35% of the county’s property tax. But with the depressed commercial market, business revenue is only bringing in only 17%, forcing residential property owners to now pay 83% of the property tax revenue.
After imposing the largest tax increases in state history during the 2025 legislative session, Democrat leaders are now pushing for a state income tax, despite the 2024 bipartisan passage of I-2111, which bans the income tax. Senate Majority Leader Jamie Pederson brushed off concerns about his party breaking its previous anti-income tax pledge by saying it was “only a pie crust promise. Easily made, easily broken.”
While tax supporters promise that the income tax will only be imposed on millionaires, there are many indications the salary minimums will soon be dropped so that middle-class workers will also be paying an income tax. Tax opponents state this is just another “pie crust promise” from Democrat leadership. As soon as the bill is passed, they will easily break the promise and begin reducing the salary minimums so that they have another source to fund their massive expansion of wasteful state government.
Even longtime Democrat legislators warn that their leadership will break this promise. 11-term Democrat Representative Larry Springer stated, “Why should the public assume that it’s not going to be an income tax on them by 2031? You shouldn’t.”
Seattle start-up attorney Joe Wallin warns of the cumulative impact of the many taxes Olympia has recently imposed. In a recent Geekwire opinion piece he authored, Wallin warns that the “tax stack” the legislature is building will be the “most punitive in the country for startup(s).” He stated that IRS data already shows that the state is losing its “investor class,” and this was before an income tax was even introduced.
The state income tax will be yet another reason why tech companies will continue to cut Seattle area jobs and why other tech companies will not open facilities in the state. A recent Tax Foundation survey found that if the income tax is passed, Seattle will have the highest income tax rates in the country at above 18%, when adding in payroll taxes. The next closest, New York City, is at 14.7%.
Companies will not be able to attract top talent if the tax rate is higher here than it is in other cities and will need to pay more in order to equal the salary packages offered by other companies in non-income tax cities/states. It’s the same as Seattle sports teams will need to offer free agents 10% more money than many other cities’ teams to make up for the income tax.
The lack of an income tax has been instrumental in Seattle’s recent success. Jeff Bezos often stated that one of the primary reasons why he chose to start Amazon in Seattle in 1994 is due to Washington State not having an income tax. He has recently joined many other hi-tech executives to leave Seattle since the passage of Seattle’s JumpStart tax and the state’s 9.9% capital gains tax.
Many successful entrepreneurs built their companies in Washington because we had a tax advantage, but we are no longer one of those states. And if a state income tax is passed, not only can we expect no companies to move here, but we will likely see more companies that are here either reduce or terminate their Washington operations and jobs.