Washington State Targets Tech Giants with New Taxes

What do you get when the land of tech titans flips the tax script? A fiscal firestorm with ripple effects across every corner of Washington’s economy. Once known as a business paradise with zero income tax, the Evergreen State is now slapping new levies on its richest residents and corporations. And guess what? Amazon and Microsoft are on the hot seat. Washington’s new tax package is causing more buzz than a Bezos rocket launch, and everyone from grocers to hospital execs is bracing for impact. Let’s rewind, break it down, and unpack what this really means for the future of doing business in Washington. 

From Chill Zone to Bill Zone

Let’s take a stroll down memory lane. Washington earned its tech darling status by offering no personal or corporate income tax. The setup lured in giants like Amazon and Microsoft and nurtured a thriving startup ecosystem. But that same structure, heavily reliant on sales, property, and the unique gross receipts tax, has long been called out for being regressive and brittle, especially when federal funds started drying up post-pandemic.

Fast forward to 2025, and the state is facing a $16 billion shortfall. Lawmakers moved fast, passing a suite of tax increases that target high-earning companies and services, raising over $9 billion in projected revenue over four years. But this fix comes with friction.

Tax Me If You Can

Here's the lowdown on the tax shakeup:

• Business & Occupation (B&O) Tax Surcharge: Advanced computing firms like Amazon and Microsoft will see a 7.5% surcharge if they rake in over $25 billion annually tripling the previous rate, though capped at $75 million per company.
• Sales Tax on Digital Services: Exemptions are gone. Everything from online ads to software development and IT support now faces taxation.
• Capital Gains Tax Hike: Long-term investment gains over $1 million will now be taxed at 10%, up from 7%, a direct hit to startup founders planning exits.

This may sound like a “make the rich pay more” move, and in some ways, it is, but the side effects? Let’s just say they’re not exactly chill.

Ferguson's Fiscal Tightrope

Governor Bob Ferguson isn’t giving this package a blank check. While he’s slammed the now-nixed wealth tax as “untested” and legally shaky, he hasn’t ruled out the rest. Ferguson made it clear: “This is a five-alarm fire.” He wants to preserve the rainy-day fund and avoid gutting services, but he’s also wary of legislation that could spook courts and businesses alike. He hasn’t signed the new revenue measures yet, but unless he vetoes them, they’ll become law. His message? Thoughtful reform, not reckless risk.

And while the wealth tax didn’t make the final cut, it wasn’t forgotten. The Senate took a symbolic vote on a first-of-its-kind measure that would have taxed financial assets over $50 million. The House didn’t take it up, but Senate leaders made clear they plan to revisit the proposal in future sessions, signaling that the push to modernize Washington’s tax structure is far from over.

“Sticker Shock” Isn’t Just for Shoppers Anymore

While the big Tech giants like Amazon and Microsoft can absorb the costs, smaller players are feeling the heat. Kelly Fukai of the Washington Technology Industry Association didn’t mince words: “We're probably hurting the people we want to protect the most.” Tech startups with tight budgets are staring down steeper ad costs, pricier services, and tougher odds when pitching to investors. The risk? These companies might pack up for tax-friendlier hubs like Austin or Miami.

And it’s not just tech.

• Hospitals: Chelene Whiteaker warns of a $260 million shortfall, saying hospitals—often seen as "big guys" run on razor-thin margins and may be forced to cut services.
• Grocers: Tammie Hetrick calls out "tax pyramiding," where taxes stack at every step from farm to shelf. Translation: food prices climb.

Thanks to Trump’s second-term federal budget cuts, states like Washington can’t count on D.C. for backup. With less federal funding for healthcare and infrastructure, Ferguson and crew had to move fast—or risk even bigger shortfalls.

Past Growth, Present Tension, and a Murky Future

Washington’s tax structure once made it the go-to for tech. But today’s changes raise big questions about tomorrow. Lawmakers argue it’s time for the wealthiest firms to chip in more. Critics say the rushed process and unclear economic impact are red flags. Even as Ferguson tries to balance reform with caution, tech leaders like Raji Subramanian (formerly of Opendoor) are already spooked. “We work with very limited capital... If the cost of business increases, it impacts our ability to prove out our business models.”

Business leaders fear this could be a turning point. "You can’t milk the cow forever," quipped Akvelon CEO Sergei Dreizin. If costs keep rising, future growth might sprout in more tax-friendly states. Even perception matters; investors and founders may start to see Washington as less welcoming.

The Bottom Line

Washington’s tax reboot is bold, ambitious, and fraught with risk. While the intent is noble, fairness, better services, and balanced books, the execution could alienate the very companies and workers that helped build the state’s boom. Will it be a model for progressive tax reform, or a cautionary tale of overreach? As Governor Ferguson weighs his next steps and businesses reassess their plans, one thing’s for sure: Washington’s economic identity is at a crossroads. Do you like stories that break down policy with impact? Join 250,000+ readers who get MYCPE Insights in their inbox, fast, sharp, and always ahead of the curve. Subscribe now.