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The Greater Seattle Area, which is home to over 130,000 Indian Americans among a diversity of other immigrants, has long been a beacon of "non-ostentatious ambition." However, as we navigate March 2026, a wave of legislative tax increases is threatening to dampen that spirit.

While proponents argue these measures—including the newly passed "Millionaires’ Tax"—aim to improve fiscal health and reduce inequality, a sober economic analysis suggests we may be trading long-term growth for short-term revenue.

Recent economic modeling I published along with my team (Infinite Sum Modeling) and the Washington Policy Center reveals a sobering trajectory for the Evergreen State. We utilized a computable general equilibrium model built based on those used by several top academics across the world, the World Bank, the European Commission, and the US government.

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The suite of taxes adopted in 2025 is projected to reduce Washington’s GDP by up to US $4.5 billion this year compared to a business-as-usual baseline, a figure that could swell to US $11.3 billion by 2029 relative to that year’s baseline.

The most alarming finding isn't just the headline GDP number; it’s the erosion of the foundations of our prosperity: investment and wages. Investment in the state is projected to fall steeply, with a reduction of about 1 percent relative to the baseline in 2026, growing to over 2 percent by 2029. This represents a loss of US $2.4 to US $5.8 billion relative to the baseline as industries hesitate to commit capital to a shifting regulatory environment.

For the average resident, these policies trickle down as smaller paychecks. Total wages for Washingtonians are estimated to drop by US $1.78 billion this year relative to the baseline, reaching a US $4.46 billion loss by 2029.

Sector Volatility: The information technology and retail/wholesale trade sectors are among the most heavily impacted when any of these taxes are imposed. Even our vital forestry sector is expected to see a cumulative output decrease of over US $48 million by 2029, relative to the baseline.

The 2025 legislative session didn't just raise rates; it fundamentally restructured how we tax productivity. House Bill 2081 increased the B&O surcharge for manufacturers and retailers to 0.5 percent while hiking the service tax rate from 1.75 percent to 2.1 percent for businesses earning over US $5 million. Perhaps more invasive is the expansion of the tax net to include previously exempt services like website design, custom software development, and even temporary staffing agencies.

Simultaneously, Senate Bill 5813 introduced a 2.9 percent excise tax on long-term capital gains exceeding US $1 million, layered atop an existing structure that already taxes gains over US $1.27 million at 9.9 percent. When you add the adjustment of estate tax slabs—now reaching up to 35 percent—the state is aggressively targeting the capital necessary for entrepreneurial reinvestment.

Adding to this pressure is the discourse surrounding the "millionaires' tax." While supporters view it as a tool for equity, the modeling suggests a "demand contraction" effect. While we might see a slight, temporary drop in the Consumer Price Index due to a slump in demand, this is a symptom of a cooling economy, not a victory for affordability.

When we combine these levies with the elimination of 780 distinct tax exemptions under Senate Bill 5794, we are witnessing a broad-based increase in the cost of doing business in Washington.

While the tax increases target high-revenue businesses and wealthy individuals, economic modeling indicates that unskilled labor often faces a more severe and immediate impact on both wages and employment stability. Unskilled labor is projected to lose US $901.47 million in wages by 2026, compared to US $886.70 million for skilled labor. By 2029, the total wage bill for unskilled workers is estimated to decrease by 1.63 percent, a more significant contraction than the 1.51 percent drop projected for skilled labor.

Because unskilled roles are often found in low-margin sectors like retail, wholesale trade, and agriculture, these positions are typically the first to be reduced when businesses face the "tax pyramiding" effects of increased B&O rates.

The structure of Washington’s business taxes creates specific vulnerabilities for lower-wage workers. The B&O tax is a gross receipts tax, meaning it is assessed on total sales regardless of profit. Businesses with narrow margins—which disproportionately employ unskilled labor—have little ability to absorb these costs and often must choose between raising prices or cutting staff.

The 2025 legislation expanded the sales tax to include services like security and temporary staffing. These industries rely heavily on unskilled labor; as the cost of these services rises, demand typically drops, leading to fewer job opportunities for those workers. As the cost of labor increases due to payroll-related taxes or general economic pressure, firms are incentivized to invest in technology—such as AI or automation—that acts as a substitute for unskilled labor.

While some of these policies are designed to be progressive, the modeling suggests a demand contraction across the entire economy. As investment and household spending drop, the sectors that rely on high-volume consumer traffic—such as food services and retail—experience the sharpest declines.

The retail and wholesale trade sectors are among the "most impacted" by the B&O tax hikes. These industries are major employers of the state's unskilled workforce, making these workers the most exposed to the resulting demand slump.

We are at an economic crossroads. The "Big B&O" tax alone is responsible for the largest share of these negative impacts, accounting for a projected US $5.6 billion GDP loss by 2029. Legislators must recognize that a tax system is an ecosystem. When we shock the system with higher rates and narrowed exemptions, the result isn't just a fuller treasury: it's a contraction of the very investment that fuels our future.

To remain a global hub of innovation, Washington must balance its social goals with the hard reality of economic competition. Otherwise, we risk taxing the very ambition that built this state, and Indian Americans here in particular.

The writer is the founder of Infinite Sum Modeling, Sammamish, WA.

(The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of New India Abroad.)

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