Terry Corbell, The Biz Coach
By Terry Corbell
Business Consultant

How Much of a Hit Will Business Take from WA Legislature?

 

Updated April 2, 2010

While the Washington State Legislature dallies after yet another week of a special session, businesspeople worry about how they’re going to meet payrolls and pay their taxes.

Most lawmakers are oblivious to the desperate straits of business. They’ve eliminated transparency; suspended The Taxpayers Protection Act, Initiative 960; and they continue their unnecessary spending and taxing. They are unfriendly to employers and unemployment is astronomically high.

The net effect of their behavior: Theft of the average Washingtonian’s economic and political freedoms.

A perfect symbol is the embarrassment over the July 4th celebration near Seattle’s Lake Union. A longstanding fireworks display — a symbol of our freedoms — was in doubt this year because it was announced a sponsor couldn’t be found. Following the sad publicity and a concerted radio promotion begging for dollars, Microsoft and Starbucks each offered $125,000 in matching donations, and then smaller donors stepped to the plate. Thankfully, The Seattle Times was able to report a front page story, Donors save Seattle’s Fourth of July fireworks. Nevertheless, it’s a near black eye for the nation’s 13th-largest market, and still typifies the impact of the downturn from bad government policies.

The Legislature has not been discussing efficiencies to solve its $2.8 billion deficit. Instead, lawmakers have been debating how to raise taxes. They’re in the special session because Senate and House couldn’t agree on whether to hike the sales tax.

Otherwise, the House of Representatives’ version would nail businesses or their sales about $650 million in new taxes. That includes hiking the business and occupation tax by .25 percent on most service businesses to raise $201 million; $76.5 million in sales taxes on custom computer software; and $50.7 million in taxes on mortgages and community banks. The aggregate House tax increases would total $795.3 million.

There are a few differences but the Senate’s tax increases would total$818.2 million.

The good news is that the state’s Tax Freedom Day, April 15, is just around the corner. Coined by the Tax Foundation in 1948, Tax Freedom Day is the date that we stop working for local, state and federal governments. Coincidentally, it’s the deadline for filing federal tax returns.

The Tax Foundation says Washington has the fifth-worst tax situation in the country. In general, “…Americans will pay more taxes in 2010 than they will spend on food, clothing and shelter combined,” according to the Tax Foundation Web site.

Regarding the debate over who pays the most in taxes, Carl Gipson of the Washington Policy Center (www.washingtonpolicy.org), cites an analysis of tax burdens. It’s from the Council on State Taxation (COST) and Ernst and Young.  

“As policymakers continue to exhort the need for businesses to ‘pay their fair share’ in taxes, it might be worth taking into consideration that business paying taxes to play fair is a bit of a misnomer,” he wrote in a recent blog. “Businesses don’t pay taxes. People do.”

Mr. Gipson says businesses do not receive benefits in proportion to their taxes. He asked: “What then, is Washington’s ratio of state and local taxes on benefits versus spending benefiting businesses?”

Not good.

“On the high end (assuming no education spending directly benefits businesses) our ratio is 4.1:1— businesses are taxed 4.1 times as much as they receive in benefits from government spending,” he stated. “The national average is 3.5:1.”

What about including the benefits of education?

“Even when assuming, on the low end, that 50 percent of education spending directly benefits business, Washington is still above the national average at 1.4:1 — the national average being 1.1:1,” he wrote.

“Even though 2009 was in the midst of the Great Recession for tax revenue, in Washington revenues were up 15.2 percent over 2005 levels in the amount collected from businesses and up 17.6 percent in the amount collected in total state and local taxes, which is pretty much along national trends,” he added. “Yet, even with these increases, Washington and most other states are facing the reality of making drastic cuts in spending, raising taxes, or both.”

So, the Legislature still dallies, violates transparency standards, deprives businesses and consumers of The Taxpayers Protection Act, and hikes taxes.

They learned a lesson after the 1993 tax increases, but they’ve forgotten. This Legislature will never be able to tax its way into a healthy economic environment and job creation. It’s time lawmakers head in a new direction, and stop the theft of economic and political freedoms.

From the Coach’s Corner, why don’t you get involved?

Enterprise Washington is an excellent place to start. They’ve got some terrific programs for businesspeople.

Seattle business consultant Terry Corbell provides high-performance management services and strategies.