(The Center Square) – The National Federation of Independent Business just released its most recent Small Business Economic Trends report – also known as the optimism index – for September, showing a 2-point decline to 98.9, the first decrease in three months. The drop was driven by lower expectations for future business conditions and an increase in reports of excess inventory.
While the NFIB notes the index remains above the survey’s 52-year average of 98, Patrick Connor, NFIB Washington state director, is less optimistic about what the report means for the Evergreen State’s economy.
“Let’s hope September’s downtick in small business optimism nationally is an aberration,” he said in a news release. “If not, the already troubling economic situation on Washington Main Streets, caused by the biggest tax increase in state history and worsening revenue forecast, could become dire as year-end approaches.”
In 2025, the state Legislature passed a package of tax increases widely described as the largest in state history, designed to address a multi-billion-dollar budget shortfall. The new taxes, which are predicted to generate billions in revenue, include adjustments to the capital gains, business and occupation taxes, and estate taxes, as well as an expanded sales tax on services.
Proponents defend the recent tax increases in Washington as necessary to close the budget shortfall and fund various programs, particularly education and infrastructure.
Meanwhile, Washington’s latest near general fund revenue forecast for the 2025-27 and 2027-29 biennia has been lowered by more than $900 million due to slower national economic growth and reduced residential construction activity.
Critics, such as Connor, contend that state spending is unsustainable and will have a detrimental impact on Washington’s economy.
“Our state’s largest-in-history tax hike will likely accelerate price increases here, compounding the inflationary problems Washington families already face,” Connor emailed The Center Square in response to asking him to expand on his original comments.
Based on data for the Seattle-Tacoma-Bellevue metropolitan area, Washington’s inflation, as measured by the Consumer Price Index, was 2.8% for the 12 months ending in August, according to the U.S. Bureau of Labor Statistics. That’s an increase of 0.2% for the two months ending in August.
There is no official CPI for Washington as a whole; however, the inflation rate in the Seattle area is a key regional indicator that often tracks national trends.
Connor says NFIB Washington is actively working to find ways to offset the impact of more and higher taxes.
“NFIB is working with lawmakers to secure some modest tax relief, especially for our smallest businesses,” he said. “In addition to adjusting the Small Business Tax Credit to offset looming B&O tax increases, we will continue our efforts to lessen the business personal property tax burden. We will also urge legislators to resist pressure from labor unions to adopt a $20 or $25 minimum wage, add paid vacation mandates, and raise Paid Family & Medical Leave premiums on small employers.”
According to NFIB’s optimism index – a national snapshot of NFIB-member small-business owners not broken down by state – The Uncertainty Index rose by 7 points to 100, the fourth-highest reading in more than 51 years, largely due to uncertainty about expansion plans. Supply chain disruptions also remain a concern, with 64% of business owners reporting them.
