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.

Why Not Transparency for Good, Open Government in Washington State?

 

March 24, 2010

Even after concluding its regular 2010 legislative session and after nearly two weeks of a special session, there is no balanced budget. There are no efficiencies. Worse, there is little transparency about taxpayer assets. The Legislature hasn’t learned to stop chasing ill health.

By extension, it’s clear that Senate Majority Leader Lisa Brown is not passing the transparency test of good, open government. She has failed to spearhead passage of a balanced budget and has largely ignored efficiencies, such as the Opportunities for Washington, recommended by a prominent member of her own party – State Auditor Brian Sonntag.

Instead of focusing on successfully ending the special session, The Seattle Times reports she sent a letter to Washington State Attorney General Rob McKenna demanding that he stop his health-care efforts and accused him of being “far outside the mainstream interests” of the state. But my straw poll of businesses and consumers shows a majority in favor of his position.

Meantime, here’s a news flash: There is furtive, dubious activity under her leadership – everything from secretly raising taxes; gutting The Taxpayer Protection Act, Initiative 960; and passing ghost tax bills. There are no efforts to create a good economic environment and private sector jobs.

Actively highlighting the disingenuous behavior has been Jason Mercier, director of the Center for Government Reform at the Washington Policy Center (WPC), the nonpartisan think tank.

After seeing this TVW video posted on the Washington Policy Blog in which Speaker Brown denies knowing why Mr. Mercier has repeatedly raised concerns about legislative transparency, how could she be so disconnected?

Most state newspapers have commented to no avail, such as The Seattle Times in Gov. Gregoire: Use veto to keep transparency and in The Washington State Senate and the age of hubris.

When Gov. Gregoire failed to honor the request, the newspaper ran this editorial, Governor, Legislature should have kept two-thirds rule on taxes.

Even The Olympian commented in A bad example of legislative ‘transparency’.

There are plenty of other indications about the absence of transparency. How could she not have noticed any of WPC’s analysis? See for yourself at www.washingtonpolicy.org.

Plus, I’ve written numerous Biz Coach columns on the issue.

I cited $65 million in waste in this column, “Will Government Policies Ever Promote Economic And Political Liberty?” State employees are allowed to carry forward and cash out their unused sick leave.

You see, the state paid $65.3 million in unused sick leave from 2007 to 2009. And state workers have received millions of dollars in this budget cycle. This is a perk you will rarely, if ever, see for taxpayers in the private sector.

The largest employer in Washington, 17.6 percent of the workforce, is government. The retail sector is second with 10.8 percent. In the state’s 2009 comprehensive annual financial report, government expenses outgrew revenue.

Another eye-opener in the report: “Governmental activities resulted in a decrease in the state of Washington’s net assets of $2.2 billion.”

Because of the extravagant spending, the gap in unfunded Washington’s retiree health benefits is $7.9 billon.

Meantime, ranking member of the Senate Ways and Means Committee, Sen. Joe Zarelli, has unsuccessfully argued in favor of transparency with Committee Chair, Sen. Margarita Prentice. This TVW video illustrates violations of legislative transparency standards.

All of this employee pork, unnecessary spending, and violations of transparency standards are why WPC is advocating a constitutional amendment for transparency:

BE IT RESOLVED, BY THE SENATE AND HOUSE OF REPRESENTATIVES OF THE STATE OF WASHINGTON, IN LEGISLATIVE SESSION ASSEMBLED:

THAT, Transparency and public disclosure in the legislative process is vital to a representative democracy.  THAT, At the next general election to be held in this state the secretary of state shall submit to the qualified voters of the state for their approval and ratification, or rejection, a new section amending Article 2, an amendment to Article 2, section 19, and an amendment to Article 2, section 22 of the Constitution of the state of Washington to read as follows:

Article II, new section.  No bill shall be eligible for a public hearing until 72 hours after introduction.  No bill shall be eligible for legislative action of any kind unless it has first been subject to a public hearing in the same session of consideration.  No bill shall be eligible for legislative action on the floor of either house until 72 hours after it has been placed on the floor calendar.  This section may be suspended with two-thirds of the members elected to the house in which it is pending suspend this requirement, and every individual consideration of a bill or action suspending the requirement shall be recorded in the journal of the respective house. 

Article II, section 19. No bill shall embrace more than one subject, and that shall be expressed in the title.  No bill shall be eligible for public hearing or legislative consideration of any kind unless the bill shall lay forth in full the changes to any act or sections of law. Title only bills shall be prohibited.

Article II, section 22. No bill shall be eligible for final passage in either house unless copies of the bill in the form to be passed shall have been made available to the members of that house and the public for at least twenty-four hours, unless two-thirds of the members elected to the house in which it is pending suspend this requirement, and every individual consideration of a bill or action suspending the requirement shall be recorded in the journal of the respective house.  No bill shall become a law unless on its final passage the vote be taken by yeas and nays, the names of the members voting for and against the same be entered on the journal of each house, and a majority of the members elected to each house be recorded thereon as voting in its favor.

BE IT FURTHER RESOLVED, That the secretary of state shall cause notice of this constitutional amendment to be published at least four times during the four weeks next preceding the election in every legal newspaper in the state.

 Let’s have a discussion about WPC’s suggestion. Implementing transparency is the right thing to do and will promote good, open government in Washington state. Stop chasing ill health.

From the Coach’s Corner, courtesy of Enterprise Washington, click here to find your legislators’ phone number and email address.

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