Federal Tariffs, a State Income Tax, and the Eastside Advantage

Bellevue Chamber of Commerce  |  April 23, 2026

The East King Chambers Coalition convened on April 23 for a dual-presenter briefing on economic policy at both the federal and state levels. Chris Eyler, Western Regional Director for the US Chamber of Commerce, led the first session with an update on the "3% growth imperative" and the escalating tariff landscape. Ryan Frost, Director of Budget and Tax Policy from the Washington Policy Center followed with a close look at Washington's structural budget gap and what the newly passed state income tax means for Eastside employers.

Federal policy: tariffs and the tax bill

Eyler opened by framing the US Chamber's central economic goal: returning the country to 3% annual GDP growth, a rate that defined the post-World War II decades but has slipped to 2.2% since 2010. The passage of HR1, which made the 20% pass-through deduction and other 2017 tax cuts permanent, was a significant step in that direction. But tariff escalation is working against it. The average U.S. tariff rate has risen from roughly 3% a year ago to 12-13% today, the highest level since the 1930s, and businesses that initially absorbed those costs are now passing them to customers.

"These are nothing more than taxes. Tariffs are paid by importers at the port of entry, and for the most part, importers pass those costs along to their customers." -- Chris Eyler, US Chamber of Commerce

A recent Supreme Court ruling struck down tariffs imposed under the International Emergency Economic Powers Act, covering roughly $166 billion in tariffs collected from more than 300,000 businesses across 53 million transactions. A refund portal opened this week. However, Eyler cautioned that the administration is already using other statutory authority to reimpose tariffs, most recently applying Section 122 of the Trade Act for up to 15% across-the-board tariffs for 150 days, through roughly mid-July. The US Chamber is also pushing Congress to pass the Speed Act and Permit Act, both of which cleared the House before the December recess and are awaiting Senate action, and to reauthorize the surface transportation bill before the Infrastructure Investment and Jobs Act expires September 30.

Eyler asked Coalition members to collect and share concrete examples from their business communities. Those examples are most effective when brought to Capitol Hill advocacy meetings.

State budget: a structural problem getting harder to ignore

Ryan from the Washington Policy Center followed with a state-level picture that reinforced the same core theme: predictability. Washington's biennial budget has grown from $38.2 billion ten years ago to $80.2 billion today, with spending growing at 15.8% in the 2023-25 biennium against revenue growth of just 3.5%. That gap is structural, not cyclical, and it has produced a recurring pattern: a deficit emerges, a new tax is passed, the new revenue is absorbed by spending growth, and the deficit returns.

The newly passed state income tax carries a 9.9% rate on income above $1 million, with an effective date of January 2028 and first filings due April 2029. Washington would rank 10th nationally for top marginal rate; Seattle, stacking its own local taxes on top, would reach an 18%-plus combined marginal rate, highest of any major U.S. city. A voter initiative on the income tax is expected, though the timing between November 2026 and 2027 has not yet been decided. Also, a $7 billion structural shortfall is projected for the next legislative session even after accounting for income tax revenue.

The Eastside as a competitive asset

Also notable was Ryan's analysis of the growing tax differential between Seattle and East King County cities. Modeling three firm sizes and comparing city-level tax burdens, he found that a firm with $500 million in revenue saves roughly $3.5 million per year by operating in Bellevue rather than Seattle, a gap that compounds sharply over time given that Seattle's newer taxes fall hardest on the highest-compensated employees. Starbucks's decision to establish a second headquarters in Nashville, projected to save the company between a quarter billion and $900 million over the next 20 years, was cited as a leading-edge signal of what accelerating local tax stacks can produce at scale.

"The Eastside's predictability is only durable if the same cycle Seattle is going through is not allowed to take hold at the city or council level east of Lake Washington." -- Ryan Frost, Washington Policy Center

Lastly, Ryan outlined three actionable steps for Coalition members: monitor council agendas across East King County for any early signals of local option tax authority proposals; engage the Department of Revenue's public rulemaking process on income tax implementation, where critical questions about non-resident earners and pass-through treatment remain open; and lean into the Eastside's comparative tax story when talking to employers considering expansion or relocation.