Republican panelists urge repeal of proposed state income tax, cite crisis for small businesses

At a Mainstream Republicans of Washington event in Issaquah, former state Attorney General Rob McKenna and fellow Republican lawmakers and business leaders warned onstage that a proposed state income tax and accumulated regulatory costs are driving companies and entrepreneurs out of Washington.

Rob McKenna, a two-term former attorney general, said the immediate priority is to "repeal the state income tax," calling the initiative a threat to the state’s competitive advantages and a signal to the legislature that voters reject more taxation. "Repeal the state income tax," McKenna said in the panel's lightning round, adding courts would be used where appropriate and the group would press the issue at the ballot.

The panel tied the tax threat to broader problems for small business. Rep. Travis Couture, the ranking member on the state House Appropriations Committee and a small-business owner, said Washington posts the country’s highest failure rate for startups at the five-year mark even though its one-year startup success rate is the highest. Couture argued the state lacks a culture and institutional focus on helping young businesses survive beyond the first year and said his proposed legislation would create a clearer responsibility in state government for entrepreneurship support.

Carrie Lonergan Drake, identified as a Snohomish County restaurant owner and former Washington Hospitality Association board member, described daily business pressures in hospitality: "It's almost impossible to make money in the hospitality industry right now," she said, and urged policies such as a tip credit against minimum wage and reform of Washington’s business-and-occupation (B&O) tax, which she said applies to gross revenue rather than net income and penalizes low-margin months.

Joe Fain, president and CEO of the Bellevue Chamber of Commerce and a former state legislator, emphasized housing and regulatory costs as key drivers. He cited survey data presented at the event showing roughly one in four businesses saying they are considering leaving Washington and said 55% of responding executives were personally weighing moving out of state. Fain also cited research estimating that regulation and growth-management rules can add about $250,000 to the cost of building an average multifamily housing unit in the state.

Panelists repeatedly linked housing shortages, high development costs and business-facing regulation to decisions by entrepreneurs and executives to relocate. McKenna warned that losing the state’s absence-of-income-tax advantage would compound those forces, listing historically cheap power, a skilled workforce and the lack of a personal income tax as pillars of Washington’s prior competitiveness.

The session included a rapid-fire "lightning round" of policy prescriptions: McKenna urged repeal of the income tax; Fain recommended a spending cap tied to population growth plus inflation; Couture said legislative and cultural change were needed and that he has sponsored bills aimed at those ends; and Drake urged electing lawmakers receptive to small-business priorities.

During audience Q&A, an attendee asked about enforcing Initiative 900 (the 2005 performance-audit measure). Couture said he had sponsored audit bills but that those reforms could not pass with the current legislative majority and framed electoral change as a necessary precondition for many reforms discussed.

The panel did not take votes or make formal motions. The event proceeded to further agenda items after a brief question period and applause.

The discussion centered on political and policy remedies rather than immediate legislative outcomes; panelists emphasized ballot measures, litigation where applicable and political organizing as next steps.