Tax the rich? Not so fast, say Microsoft, other Washington state businesses

Western Washington's business community is sounding alarm bells about a package of new taxes on wealthy companies and individuals proposed by state Democrats.

Lawmakers in the state Legislature have introduced a range of proposals to brace against a projected $15 billion budget deficit over the next four years. They include a tax on intangible assets, like stocks and bonds held by residents with more than $50 million of those assets and a new payroll tax on companies with annual payroll expenses exceeding $7 million.

Microsoft and business trade groups are pushing back on the revenue package, taking particular issue with the wealth and payroll tax proposals.

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In an interview with KUOW last week, Microsoft President Brad Smith questioned why the state Legislature is seeking to raise more money when revenue has nearly doubled over the past decade.

“ Even if there's no increase in taxes, state spending can rise another 7% in the next two years,” Smith said. “Most families are not going to be able to increase their spending by 7% over the next two years. We have more money to spend as a state. The state government can allocate more. It can prioritize. It just needs to prioritize.”

A joint statement released by the Seattle and Bellevue chambers of commerce and other local business groups also sharply criticized the proposals.

“The options range from the deeply troubling, to downright irresponsible,” the statement said. “Rather than do the real work of balancing the budget, officials have proposed new taxes that would generate between $13 billion and $17 billion for the state — representing by far the largest tax increases in state history and making everything from groceries to housing more expensive for all Washingtonians.”

On Wednesday, a letter signed by close to 70 business leaders, including Zillow Co-Founder Rich Barton, Microsoft President Brad Smith, T-Mobile CEO and President Mike Sievert, and David Zapolsky, Amazon’s head of global affairs, urged legislative leaders and Gov. Ferguson to reconsider the wealth tax and reduce state spending during “a time of economic uncertainty.”

“Given national economic trends, Washington state cannot sustain continued tax and spending increases and simultaneously maintain our economic resilience and competitiveness,” the letter states. “We urge you to work with us and others to develop a budget approach that aligns with current economic uncertainties, preserving as much flexibility as possible to respond to the changing national and international landscape. The focus should shift from dollars spent to outcomes achieved.”

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Sen. Noel Frame (D-Seattle) is chair of the Senate Ways & Means Committee and architect of the Senate Democrats’ plan. In an interview, she said the proposal is an attempt to make Washington’s tax code — often criticized as excessively burdensome on the lowest earners — more fair.

“ We need to think through having more progressive tools rather than doubling down on our existing regressive tax code to have the revenue to meet the needs that are happening, with those programs we've already passed,” Frame said. “We're doing that instead of going back to the same working people and small businesses that the current tax code is overly reliant on.”

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Representatives of the business community, like Smith, fear the taxes will push the biggest earners out of the state. They cite Seattle’s payroll tax, which came up $47 million short of projections last year as Amazon shifts teams to nearby Bellevue. But Frame said investments in public services attract more people than taxes repel.

“ There's sort of virtuous cycle,” she said. “If you tax extreme wealth and take the revenue and invest it in those same public resources that everybody is depending on to help grow their businesses, good schools and natural resources and all of that, people put down roots. They grow their businesses and have their families, and you have this cycle where then they're the wealthy ones and then you tax them.”

EDITOR'S NOTE: This article was updated on Wednesday, April 2, 2025, to include details from a letter signed by 69 business leaders to Washington legislative leaders and Gov. Bob Ferguson.