As we celebrate Small Business Month this May, it’s with a heavy heart and growing frustration that we must also confront the legislative decisions made earlier this year in Olympia.
The 2025 session saw Democrats in Olympia pass the largest tax increase in Washington state history. It delivered a series of blows to small businesses across the state, creating an environment where entrepreneurship is not nurtured but punished.
For a state that often champions innovation, economic opportunity and working families, the actions of the 2025 Legislature stand in sharp contrast to those ideals. Instead of supporting the small businesses that form the backbone of our communities, lawmakers passed a string of tax hikes and regulatory mandates that will drive up costs, increase compliance burdens and squeeze already-thin margins.
Perhaps the most damaging move was expanding the business and occupation (B&O) tax in House Bill 2081. Despite overwhelming feedback from small business owners and chambers of commerce, Democrats passed a party-line rate increase on service-based businesses. For sole proprietors and small shops barely recovering from the economic effects of the pandemic and inflation, this added tax isn’t just a cost — it’s a threat to survival.
This regressive tax structure, which taxes revenue rather than profit, particularly punishes small businesses with narrow margins. Unlike large corporations with in-house accountants and economies of scale, mom-and-pop shops don’t have the flexibility to absorb these costs or pass them along to consumers.
Despite objections and amendments, Democrats left no prisoners. Tax increases were even increased on child care, health care and housing construction. This sent a message that the majority party was not interested in addressing child care deserts, rising health care costs or the housing inventory crisis.
In addition to the direct costs, several policies passed this year will make it difficult for small businesses to succeed when Washington is already one of the least tax-competitive states in the nation.
Democrats in Olympia raised the cost of gas by 6 cents per gallon and diesel by 12 cents per gallon, which will almost immediately increase the cost of goods and services. Unfortunately, small business owners often can’t raise prices quickly or easily without losing customers, unlike larger companies with more pricing power.
The same can be said for the passage of a new and expensive extended producer responsibility program in SB 5284. Washington state already has the fourth-highest cost of groceries in the nation, mainly due to bad economic policies passed by Democrats in Olympia. This new program will significantly increase the cost of goods at the grocery store by creating a monopoly called a producer responsibility organization and requiring new packaging on virtually everything you buy. In addition to the cost estimated at $300 million per year being passed down to consumers, the anti-competitive nature of the scheme and market barriers it establishes push small businesses right off the shelf.
Lastly, tourism and quality of life taxes imposed and increased this year could have major impacts on small businesses due to reduced travel and vacations. In addition to massive gas tax increases, the cost of hunting licenses, fishing licenses, Discovery passes, marriage licenses, rental car taxes, banquets and events, and liquor licenses all were increased. These taxes hurt small businesses and working families least able to afford the increase.
It is time for Olympia to refocus. Small Business Month should be a time to celebrate and uplift entrepreneurs, not to watch them struggle under the weight of bad policy. As small business owners and consumers, we must hold our elected officials accountable and demand a more balanced, thoughtful approach in 2026 and beyond.
Washington’s small businesses deserve better — and so do the communities that depend on them.
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State Rep. Peter Abbarno, R-Centralia represents the 20th Legislative District and is the House Republican Caucus chair.