WA Tech Leaders: Proposed Startup Tax an “Extinction-Level Event” for Business

For years, despite massive tax hikes aimed at 'regular' business and industry, the massive WA tech industry was largely left alone.  But that changed in the 2025 legislative session. And now, again tech is pushing back.

    Proposed Democrat bill would expand capital gains tax on startups

It's a fair statement to say the Democrat-controlled legislature over the last decade has had an insatiable appetite for money.  Regardless of the cost to business, or fallout, legislators have sought dozens of ways to stick their hands in businesses pockets.

Now, Senate Bill 6229 and it's House Companion, HB 2922, would expand the controversial (and lawsuits say illegal) capital gains tax to what Geekwire describes as founders, early employees, investors and startups in the tech sector.

The tax, according to Geekwire, is eyebrow-raising:

"... the proposed bills would apply the capital gains tax to profits from the sale of qualified small business stock, or QSBS, even when gains are fully exempt under federal law."

Startups, say tech experts, would be convinced to take their business elsewhere. Founders are said to be mobile, and it's not hard for a digital or tech startups to move to another state.

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Democrat Legislators Tone-Deaf to Warnings Over Businesses Leaving WA

In a not-so-shocking example of not reading the room,  Democratic Legislator House Rep April Bird (who con-sponsored the bill) claims the bill is about "fairness and consistency."  And Dem House Rep Cyndy Jacobsen said she doesn't think business made decisions based on tax fairness. She'd been asked about the possibility of businesses leaving the state if this tax passes.

READ MORE: "whammy" taxes to hit WA businesses, including tech

Several tech leaders who testified in legislative hearings this week, called the proposal an "extinction-level event" for businesses and startups.

The tech sector is already pushing back against 3 new taxes passed last year that went into effect in 2026, including the Advanced Computing Surcharge, the High Income Business and Occupation Surcharge, and the Expanded Sales Tax on Services which now includes IT firms.

Apparently the two legislators were on vacation when Fisher Investments pulled their headquarters out of Camas, WA in March 2023 in response to the State Supreme Court upholding that the capital gains tax doesn't violate the State Constitution by being an income tax (which even the IRS says it does). Their departure took about 1,800 workers out of state, leaving a handful to operate a shell office in Camas.

A major Northwest law office, Hawley Troxell, closed its Spokane office in 2024 and took 147 attorneys and other office workers out of state with it. It maintains 5 offices in Idaho.

A highly successful digital international marking company, Om Spark, located in Redmond, WA closed after 13 years due to the massive tax hikes.

WA state's business climate ranking has fallen from 6th nationally to 45th the last few years.