The soft excess seen in the X‐ray spectra of many active galactic nuclei (AGN) can be well modelled by reflection from a partially ionized accretion disc. However, this often requires extreme parameters, both in terms of the underlying space–time and the reflection geometry, and requires that the disc is far from hydrostatic equilibrium. An alternative model uses similarly partially ionized, velocity smeared material but from an accretion disc wind seen in absorption. We explicitly compare these two models for the origin of the soft excess using XMM–Newton data for PG QSOs and narrow‐line Seyfert 1 galaxies (NLS1s). We find that while reflection and absorption give comparably good fits to the data, the absorption model allows a much clearer correspondence with the stellar mass black holes. All the objects are high mass accretion rate AGN, so should be analogous to the high/soft and very high states in black hole binaries. The intrinsic spectral indices derived from the absorption model are all consistent with a one‐to‐one mapping between spectral state and AGN type, with the NLS1s having softer spectra corresponding to the very high state, while the broad‐line AGN have Γ= 2 as expected for the high/soft state. By contrast, a few AGN have intrinsically hard spectra with the reflection model. While this supports an absorption interpretation of the soft excess, we note that the required Gaussian velocity dispersion of ≥0.2c (corresponding to an outflow velocity ≥0.4c) is too fast for a radiatively driven accretion disc wind and instead requires that the material is entrained in a magnetic outflow (jet). We also use the simultaneous optical monitor data to derive the ratio of disc to total accretion power which is another tracer of spectral state in X‐ray binaries. This does not always show that the disc in NLS1s contributes less than 80 per cent of the total power, as expected for a very high state. We suggest that this is an artefact of the standard disc models used to determine the disc luminosity in our fits. The disc seen in the very high state of black hole binaries is often observed to be distorted from the standard shape, and a similar effect in NLS1s could recover the one‐to‐one mapping between black hole binary spectral state and AGN type.