As the 2026 legislative session begins, lawmakers are once again facing a multibillion-dollar budget gap. They were in the same spot last year – and they responded by passing the largest tax increase in state history. 

Businesses have only begun to feel the impact of the $9.4 billion tax package, paying higher B&O rates and a new sales tax on services that’s especially tough for small businesses. Yet, legislators are already talking about billions more in additional tax hikes to fill this year’s budget gap. 

More revenue won’t fix the state’s budget problems. Washington’s tax revenue is at record highs, roughly doubling over the last decade – but spending has grown even faster. 

This cycle of higher and higher spending is hurting the business climate. We now rank 45th overall for state tax competitiveness, and that ranking has continued to slide in recent years. As costs go up, employers are forced to make tough decisions – they scale back on investments, pause hiring, or look at other states for opportunities to grow. And a recent study found Washington has the worst rate of business survival with more than half of new ventures failing within their first five years.

It’s time to do something different. 

Let’s find ways to grow the economy, not shrink it. A stronger economy means more investment, more jobs, more opportunity – and more tax dollars to fund essential public services. Washington in the Making 2040, a long-term economic vision introduced last year by the Association of Washington Business and Washington Roundtable, offers one idea of what that might look like.

The budget is far from the only issue lawmakers will face this session. December’s devastating floods underscored the fragility of Washington’s transportation system, with more than 30 state roads closed at once. Not to mention the roughly 300 bridges more than 80 years old. While the state continues to invest in preservation, road and bridge maintenance remains underfunded by an estimated $1 billion annually.

And lawmakers will also face tough questions on the financial health of Washington’s main social safety net programs, the Paid Family & Medical Leave program, unemployment insurance and workers’ compensation. Lawmakers should act now to stabilize these programs rather than asking employers and employees to absorb higher costs later down the road. 

As it is, employers are struggling under the weight of higher costs. In a recent survey conducted by AWB, nearly two-thirds of businesses said taxes are their biggest challenge, an even wider margin than in previous surveys. Rising health care costs and government regulations followed close behind. The survey also found that fewer companies are planning to expand in the next six months and more report a downturn in their business. 

We’ve heard from dozens of small businesses concerned about the significant sales tax expansion that took effect last fall. Routine services like IT, advertising, website design and temporary staffing cost on average 10% more. On top of higher costs, businesses are dealing with the complexity of collecting the tax — time and money that could be spent growing their business.

Washington voters agree that new taxes aren’t the answer. A statewide poll conducted by EMC Research and reported by the Seattle Metropolitan Chamber of Commerce last summer found that voters want smarter spending and results, not another round of tax increases. They want lawmakers to prioritize affordability.

Washington is a great state, but it’s becoming increasingly unaffordable for families and businesses. As lawmakers go about their work this session, let’s hope they understand that they can’t make Washington more affordable by making it more expensive.

Kris Johnson is president of the Association of Washington Business, the state’s chamber of commerce and manufacturers association.