During AI Week 2025, Washington state Gov. Bob Ferguson said he thinks about AI daily. He called it one of the “top five biggest challenges” and said, “There is no better place anywhere in the United States for this innovation than right here in the Northwest.” With Washington’s rich history as a tech hub, we might expect to inherit the innovation in the AI era.
But in Forbes’ list of the top 50 AI companies in 2025, not a single Washington-based company made the list. It’s not that Washington innovators have suddenly lost their edge, but the state’s welcoming climate has eroded substantially. For Ferguson to be able to enact his vision for responsible AI use, Washington needs to be a place where AI startups actually exist. There are three steps he should take to bring this flourishing industry back to Washington and help shape the future of AI policy.
First, bring down energy prices. AI companies require datacenter capacity, which is only feasible with reliable energy access and prices. Proximity to datacenters allows companies running or using large AI models to optimize performance and reduce latency.
While datacenters consume large amounts of data, many utility companies already charge data centers tariffs to offset the increased costs, keeping prices stable for existing customers. Even with datacenter tax breaks, increasing energy costs can make Washington a less appealing place for datacenter growth. Now, Governor Ferguson is proposing to eliminate a tax break for datacenters, making them more expensive to build and maintain.
To reduce energy costs, Ferguson should support bills like House Bill 2090 to allow advanced nuclear energy to meet future demand. Washington’s energy production is already on pace to see severe energy shortages by 2030. Advancement in nuclear technology with innovations such as small modular reactors can help provide safe, clean energy in a much smaller footprint.
Ferguson should also consider advocating for the repeal of the Climate Commitment Act (CCA), which has spent hundreds of millions of dollars on projects that do little to nothing to cut emissions. The projects funded by the CCA’s tax spent $399 to remove $99 worth of harm. Lastly, reevaluating electrification requirements for vehicles, much like Ferguson has done with the executive order on ferry electrification, could help relieve future price speculation for energy.
The governor’s next strategy should be to pursue his original vision for Washington’s budget and business climate; cutting spending without raising taxes. After declaring, “We can all be more efficient and more streamlined, and that’s the type of approach we need to make before we even start having a conversation about any kind of taxes,” he proceeded to sign the largest tax increase in Washington’s history, including huge increases on B&O taxes and expansion of sales tax on many new businesses and services. Now, he is advocating for an unconstitutional state income tax.
This tax climate is also causing large companies to reconsider their place in Washington. Microsoft has discussed leaving the state and we’ve already seen Amazon’s movement from high-tax Seattle to Bellevue. If the state continues to put pressure on the tech industry, a hop over the border isn’t unthinkable. Ferguson should present a plan to cut taxes immediately and continue to advocate for his plans to reduce inefficiencies in state government.
Lastly, Ferguson should establish a regulatory sandbox dedicated to helping businesses understand what rules their business would fit under and help the legislature craft AI policy narrowly and specifically. The danger of broad legislation can scare companies who lack clarity on whether they fall into a nebulously defined rule. Utah has established this type of agency to great effect, allowing the legislature to see areas of need and address them in a targeted manner. Light-touch regulation helps keep AI innovators from being scared off, an approach recommended by Washington state’s own AI taskforce report.
Like every industry in Washington state, AI policy does not live on an island. If Ferguson wants to shape its future, Washington must be a place where AI companies can live and thrive. That starts by making sure we don’t chase them away with high energy costs, high business taxes, and nebulous regulations.
Donald Kimball is the communications manager for Washington Policy Center and a contributor with Young Voices and America’s Future.
