Prices We Pay:
The Cost of Doing Business in Washington
Washington families are paying more for nearly everything. This report explains a critical part of why, and much of the answer lies upstream: rising costs for Washington’s more than 160,000 small businesses that families depend on every day.
This report pairs statewide data and secondary research with direct interviews and five to 10 years of financial records from Washington small businesses, tracing how broad cost pressures show up in pricing decisions and bottom lines.
VIEW FROM OUR TABLE
Rachel Smith, Washington Roundtable President
The data in this report are part of a bigger story about Washington’s economic future. We set out to understand how shifting cost drivers are affecting small businesses in Washington state—examining wages and benefits, cascading labor costs, taxes, regulatory compliance, occupancy costs, inflation, and tariffs. The picture that emerges is a business environment that has been increasingly squeezed over the last 10 years.
While this report focuses on small businesses, the underlying pressures extend across the economy. Larger employers face many of these same cost drivers, often at an even greater scale, along with additional industry-specific taxes and regulations. They, too, are making hard choices about how, when, and where to grow, invest, and expand. And these dynamics are interconnected: small businesses account for roughly half of the jobs in this state; larger businesses account for the other half. Small businesses provide the vibrancy of a place; larger businesses the volume. And, they are often one and the same: small businesses today become the larger businesses of tomorrow.
The affordability challenge for Washingtonians is being driven, in part, by the rising cost of doing business here. That’s a reality we need to reckon with, together. Rising costs get passed on to consumers, families, and communities. Addressing that requires an honest look at the significant and rapid changes to what it costs to do business here.
THE DRIVERS:
Washington small businesses face seven cost pressures at once
Washington’s small businesses aren’t facing a single cost pressure — they are facing a convergence of many. Wages, cascading labor costs, taxes, regulatory compliance, occupancy, inflation, and tariffs have all moved in the same direction over the past decade: up, and faster than the national average. The cumulative effect is visible across industries and regions.
DRIVERS 1 & 2
Employers in WA pay some of the nation's highest base wages — cascading costs add 43% on top of every dollar
Washington’s minimum wage has grown 81% since 2016 — nearly double the Seattle-Tacoma-Bellevue MSA inflation rate. Washington also has the 5th-highest wages in the nation. But base wages are only the beginning. A cascade of labor costs — unemployment insurance, workers’ compensation, paid family and medical leave, and payroll taxes — add approximately 43% on top of every dollar of base wages.
For many employers, it is not wages in isolation that prove challenging; rather, it’s the speed and compounding nature of the increases—outpacing inflation by more than double—and the cascading cost structure that multiplies their impact, particularly for small employers with thin margins and limited pricing power.
DRIVER 3
Washington's tax structure ranks 45th for business competitiveness
Washington is one of only seven states that tax businesses on gross revenue rather than profits, meaning a business can owe more in taxes the year it loses money than the year it breaks even. That structural feature, combined with one of the highest combined sales tax rates in the country, has produced a tax environment ranking 45th in the nation for competitiveness, down from 33rd just six years ago.
In practice, these taxes do not stay “inside the business.” They get passed on to consumers. One major study estimates that 31% of corporate tax costs are reflected in higher consumer prices, with higher pass-through when competition is limited. More recent research finds the consumer share can be between 61% and 72%.
Drivers 4 & 5
The Costs That Don’t Show Up in the Headline Numbers
Washington ranks as the 8th most regulated state in the nation. Before a Washington business sells its first product or serves its first customer, it has already paid fees, waited on approvals, and navigated layers of compliance spanning city, state, and industry-specific requirements—each potentially modest on its own, but significant in the aggregate. For businesses operating across multiple jurisdictions, every location multiplies the cost.
The same dynamic plays out in the cost of space. Most small businesses in retail, restaurant, and personal services spaces operate under triple-net leases, meaning base rent is only part of what they pay. Tenants also pay their landlord’s property taxes, building insurance, and common area maintenance costs. As these pass-through costs rise, businesses face increased occupancy costs that don’t show up in headline rent figures or vacancy statistics. Commercial insurance premiums for the two lines most relevant to consumer-facing small businesses grew 69% statewide between 2019 and 2024. For a business with margins of 2–6%, an insurance cost increase representing 1–2% of gross revenue can wipe out 25–50% of net profit before any other cost changes are factored in.
DRIVERS 6 & 7
Washington businesses face a higher inflation environment—and the nation's tariff exposure lands here acutely
For the 12 months ending June 2026, the Seattle-Tacoma-Bellevue area posted a headline inflation rate of 4.5%, a full point above the national 3.5% rate. Stripping out volatile food and energy, Seattle’s core inflation still ran at 3.5% compared to 2.6% nationally. The persistence of that gap in the core rate suggests the pressure is structural, not a spike.
Washington’s trade exposure adds another layer. With $120 billion in annual trade volume, Washington is one of the most trade-dependent states in the nation. When federal tariff policy shifted significantly in 2025, Washington businesses felt it immediately—tariff costs paid by mid-sized businesses tripled over the course of that year. About 90% of tariff costs fall on U.S. consumers and companies, not foreign exporters.
THE EVIDENCE
Six businesses. Six stories. One consistent pattern.
This research draws on five to 10 years of profit and loss data from Washington small businesses across industries tied directly to what families need and spend money on every day. Tap any tile to hear from the owner.
Winery · Eastern Washington
What the B&O Tax Looks Like When Revenue Grows But Profit Doesn't
Restaurant Company · Statewide
What Rising Costs of Goods Do to a Menu
Childcare Center · Seattle
What Labor Costs Do to the Price of Care
Hardware Store · Seattle
What Rising Labor Costs and Triple-Net Leases Do to a Neighborhood Store
Bookstore & Café · Central Washington
What Doubling Insurance Costs Do to Thin Margins
Outdoor Gear Store · Western Washington
What Multiple Cost Pressures Do to One Retail Store
WHAT THIS MEANS
Relief for families and survival for businesses are the same goal
Taken together, the drivers documented in this report point to three policy principles work exploring, including reexamining the culumative impact of the tax structure; pacing the introductin of new mandates so they don’t compound simultaneously and outrun small businesses’ ability to operate and grow; and modernizing regulatory compliance to reduce duplication, streamline permitting, and ensure compliance costs are proportionate to risk.