There is a lot of talk about companies leaving Washington because of the capital gains tax (passed in the last few years) and the punitive income tax this year, but this is not the only reason.
Speaking with a financial services company owner who relocated his company out of state last year, including all the employees that wanted to move, stated that while the capital gains tax was a catalyst for the decision, other elements were at play.
In addition, the instability and uncertainty of Washingtons future weighing heavily into the decision to leave, the ability to hire well qualified employees was becoming more and more difficult.
For many smaller employers, hiring tech and financial talent is difficult given the high salary and benefit expectations of employees that see Amazon and Microsoft as the baseline for the salaries in the tech industry. Not all tech jobs pay as high as the tech giants do.
The new location for the financial services company has provided a much easier hiring process, lower cost of living and a better work life balance for the employees. Employee satisfaction has increased and productivity increases have followed.
The Puget Sound area has some of the smartest, highest paid tech workers in the nation which is why other companies, like Facebook and Google, have offices here to draw on that talent base. These are the very employees the capital gains tax and income tax target specifically.
The trickle-down effect will be those employees that are disenfranchised with the high taxes and high cost of living that are seeking a more cost-effective way of life, will seek options out of state. Look no further than the exodus from Seattle, the frontrunner of punitive taxes, to Bellevue. Amazon, once the largest employer in the city, has been eclipsed by the University of Washington. While Bellevue is still in Washington obviously, once the state starts implementing similar policies, the next logical step is to move out of state.
The FinTech company I spoke with said the new location is a big hit with the employees, their families and their pocketbooks. They don’t regret the move and with the introduction of the income tax, or even the threat of an income tax in Washington have no plans to move back. They, like many small businesses, are the canary in the proverbial tax mine.
Washington legislative leaders need to wake up before it’s too late. Put down the income tax, roll back the capital gains tax and consider something they might consider radical – a tax cut for business. The legislature has a history of broken promises. Instead, create a stable economic environment, promote Washington as a business-friendly environment, codify this into state law and those companies who haven’t started to leave might just stay.
