Study: Tax Increases Threaten More Job Losses in Washington

January 11. 2009

A new study shows proposed tax increases in Washington state threaten more job losses.

With the state’s unemployment rate consistently above 9 percent with nearly 500,000 being out-of-work, Washington state lawmakers are considering a host of tax increases to balance the state’s $2.6 billion budget deficit. But it means thousands more people will lose their jobs, according to a new study by the Washington Research Council.

“As legislators wrestle with the state budget shortfall, it’s important that they recognize the effects of tax hikes on job preservation and creation,” says Dr. Kriss Sjoblom, who is the vice president for research and an economist with the organization.

The study created multiple scenarios. It says 15,072 more jobs would be lost if lawmakers increase the state Business and Occupation tax (B&O) by $1 billion. Some 38,958 workers will lose their jobs with a $2.6 billion B&O tax increase.

The conclusions are similar if sales taxes are increased. The study indicates 14,759 jobs would be lost with a $1 billion sales tax increase. If a sales tax increase equaled the deficit, 38,024 jobs would go down the drain.

Many businesses are struggling to survive.

“Raising the B&O tax on businesses, some of which are struggling and are not making a profit, would have serious ramifications not only on businesses but also workers,” said Carl Gipson, small business director for Washington Policy Center (WPC). “Thousands of jobs are at stake with this decision.  Burdening small businesses with higher taxes today will lead to fewer jobs and lower economic output tomorrow.”

It’s not just businesses that are suffering.

“Washingtonians are already struggling in the worst economy since the 1930s.  Lawmakers should not try to make balancing the budget easier by making people’s lives harder,” said Mr. Guppy.

50 percent increase

The state’s Employment Security Department (www.esd.wa.gov) says more than 170,000 businesses face a 50 percent hike in their unemployment tax rates.

The agency’s staff worked 65,000 overtime hours to process claims in 2009 even though the staff was doubled.

“To put the state on firm fiscal footing, any budget adopted must not raise taxes during a recession, or result in a projected deficit in the next biennium,” blogged Jason Mercier of the WPC. “This will mean that some of the programs we’ve grown accustomed to during good times must be eliminated. Taking more money from businesses and cutting people’s take-home pay through higher taxes is not the solution.”

And, yes, as stated before in this column, tax increases threaten the economic and political freedom of businesses.

Additional Washington information:

The Economic Impact of Hiking Taxes to Close the Budget Gap

Full-page newspaper advertisement in The Olympian

Budget solutions will require tough decisions and real reforms

Economists Warn Tax Increases Will Hurt Washington’s Economy

Resources for Building the State Budget

Principles of Taxation for Elected Officials

From the Coach’s Corner, to get a different snapshot on how the economy is faring in Washington and the rest of the country see the Bureau of Labor Statistics:

BLS reports