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.

Transparency and Why WA Unemployment Rate Jumps to 9.5 Percent

 

March 16, 2010

Universal criticism of the Washington State Legislature’s failure to be transparent is validated once again as the state’s unemployment rate continues to climb – now at 9.5 percent.

The increase stems from another 8,300 lost jobs, including 3,200 in construction and 2,100 in business services.

The timing couldn’t be more symbolic during this national Sunshine Week. The unemployment rate dovetails with the declining transparency at the Washington State Legislature. It’s in a special session to finalize the state budget with seemingly countless tax increases following years of over-spending.

If it weren’t for the watchdog efforts of people like Jason Mercier, Washingtonians would be in the dark regarding the chicanery of the Legislature. Lawmakers have refused to implement efficiencies at the expense of a suffering electorate and business community. They’ve passed ghost tax bills and made many decisions in private, but have not accomplished anything to improve the state’s economy. Mr. Mercier, who is the director of the Center for Government Reform for the Washington Policy Center, has issued countless updates from Olympia.

As a result of the secrecy in passing numerous unnecessary tax increases and other dubious legislation, newspapers across the state are clamoring for good, open government in Washington state.

Here’s a sample:

A bad example of legislative ‘transparency’, Olympian
“In the waning days of the regular legislative session, Senate Majority Leader Lisa Brown, a Democrat from Spokane, claimed the Legislature is much more transparent than it was when she entered the Legislature.  Brown is wrong . . .”

Sunshine and Clouds in Olympia, Kitsap Sun
“The bad news is that public access to information and hearings about legislation has been … challenging. There’s been a flurry of ‘title-only’ bills introduced and set for hearings, sometimes on short notice, and with no timely public information on their content. Members of the public deserve better than that — and if they want to get it, they’d better say so this fall to those who seek to represent them in the Legislature.”

It’s National Sunshine Week, but state’s transparency forecast remains cloudy, Longview Daily News
“Shutting down the Sunshine Committee less than three years after it was formed is as difficult to justify as that legislative exemption from public disclosure. It proved too much for legislators to pull off in the light of day. The Sunshine Committee was taken off the bill’s termination list — less than a week ago. Sadly, that remains this legislative session’s single accomplishment on behalf of government transparency.“

State government clings to double standard, News Tribune
“Is it any wonder that city and county officials clamor for relief from open meetings and records laws when they see their counterparts in state government behave as they do? State officials profess a belief in public disclosure. They’re just not sure it always applies to them. Lawmakers in particular hold themselves apart from the state’s sunshine laws. They caucus in secret for any reason and insist that their correspondence is somehow constitutionally protected from public dissemination. They also apparently reserve the right to skip public process in the interests of expediency.”

Public input? Who cares?, Everett Herald
“With increasing audacity, key state legislators are taking control from the people and seizing it for themselves. Amid the difficult process of closing a $2.8 billion budget shortfall, they’ve skirted, waived or ignored the public’s right to know what they’re up to and comment on it.”

And there others we can cite.

Meantime, Mr. Mercier offers some excellent solutions for transparency and the Legislature’s practice of passing ghost tax bills.

“Add the preamble of the state’s public records act to Article 1,” he writes. This would help re-enforce this transparency intent for any wayward court.” (See the preamble about the voters’ sovereignty.)

“Add a new section to Article 2 which would require 72-hour public notification before any bill could receive a public hearing, he adds. “While the requirement currently exists in legislative rules, it is often waived.”

Amend Article 2, Section 19 to prohibit title only bills. No public hearing or vote should occur on a “ghost bill.”

Amend Article 2, Section 22 to prohibit votes on final passage until the final version of the bill to be approved has been publicly available for 24-hours.”

He points out it would not be a stretch for the Legislature to be transparent and give the voters adequate notice before passing bills that affect their livelihoods.

“Florida’s Constitution (Article 3, Section 19) requires a 72-hour public review period for appropriations bills before they can be voted on,” Mr. Mercier explains. “Hawaii’s Constitution (Article 3, Section 15) requires a 48-hour review period before any bill can be voted on for final passage.”

Is transparency too much to ask? No. So, why don’t we tell lawmakers how we feel? Otherwise, the unemployment rate and the economic climate will remain unnecessarily unacceptable. Not to mention the theft of Washingtonians’ economic and political freedoms.

From the Coach’s Corner, here’s a link from Enterprise Washington to find your legislators’ phone number and email address.

Washington State Spending, Taxes – ‘Katy Bar the Door’

 

Updated March 7, 2010

Watch out. A desperate situation is at hand. The 19th century phrase, “Kay Bar the Door,” is applicable to the 2010 Washington legislative session. The Legislature is creating tax bills and is spending at a dizzying pace.

You mean it isn’t helping to create a strong, state economy and environment for job-creation while facing a $2.8 billion shortfall? No efficiencies anywhere? What about the reports of mismanagement, poor results revealed in performance audits, and hundreds of thousands of dollars in state-employee bonuses?

Well, let’s consider:

• At least one formal hearing has been scheduled sans a 24-hour notice.
• Sen. Rosa Franklin, D-Tacoma, introduced an income tax bill, SB 6250.
• A ghost tax bill was introduced (that’s right, no text – it was blank).
• The Senate wants to raise $918 million with a sales tax increase of three-tenths of a cent to 6.8 percent.
• Senate Majority Leader Lisa Brown’s income-tax proposal on the fall ballot and would reduce the proposed new sales tax by one cent. It would put an income tax of 4.5 percent on many job-creators – individuals earning $200,000; heads of households making $300,000; married couples would face a new tax if they earn $400,000.
• Imposing a sales tax on out-of-state businesses and consumers who buy Washington products.
• Imposing a surcharge on auto insurance.
• Hitting out-of-state financial institutions with a business and occupation (B&O) tax.

But that’s not all – not by a long shot.

Of course, you know Gov. Gregoire signed into law the bill that “temporarily” repealed The Taxpayer Protection Act, Initiative 960. That’s a clear rejection of voters’ wishes. Three times voters have formally stated their wish for tax protections. But again, the Legislature does not have to pass tax bills by a two-thirds margin. It also removes transparency for voters about taxes they’re forced to pay.

Personally, I don’t mind taxing out-of-state credit card companies with a history predatory interest rates and fees for bogus reasons. They’re domiciled in states permitting predatory behavior that was not retroactively rectified in a credit-card protection bill passed by Congress. The predatory practices are a major reason small businesses have poor credit.

However, it appears an income tax that only hits the wealthy is unconstitutional. It would require approval by voters and a two-thirds majority in the House and Senate. But a Seattle Times report indicates Senate Democratic leaders are hoping to bypass the required two-thirds vote in the Legislature because they know they can’t overcome the Republican opposition. If they’re successful in another end-run around legal checks-and-balances, of course, lawyers will get involved.

The Democrats’ idea is patterned after a 2010 voter-approved measure in Oregon, which hiked income taxes on individuals earning $125,000, households making $250,000, and on businesses.

However, unlike Washington, Oregon does not have a sales tax.

Lawmakers lax on major revenue source

Considering Washington relies heavily on sales taxes from vehicles, the Legislature is incredibly uninformed.

For example, a sales tax on Oregon and Alaska businesses and consumers will discourage commerce in Washington and threaten the livelihood of the state’s businesses and will worsen the state’s already-weak jobs situation.

Secondly, when buyers stop shopping in Washington, state businesses will pay reduced B&O taxes to the state.

A new tax will especially impact the sale of big-ticket items. Ask any Washington commercial-truck dealer if they have out-of-state customers. Their answer will be yes.

They’re already concerned their sales are down. What’s worse, relatively few have the cash flow to advertise now – ask any media advertising salesperson. During good times, the auto sector is the No.1 advertiser on radio and television. Even Honda dealers have had to lay off employees. (Disclosure: I’m very familiar with the auto sector. My firm formerly had auto dealer clients who advertised on radio and television. A regional truck dealer has an ad on this site.)

Out-of-state businesses come to Washington to buy fleets of trucks because the quantity and selection is superior. Privately, one dealer confides that some buyers travel 3,000 miles to Washington to buy commercial trucks. So they patiently wait for the economy to improve.

However, it’s also well-known that Washington state car buyers journey to Idaho for savings and to avoid paying high sales taxes by buying from Dave Smith Motors – a high-volume car dealer who advertises heavily in an in-your-face style on Seattle radio stations.

The dealer’s slogan: “Serving the Pacific Northwest and Beyond Since 1965,” and on its Web site it boldly states: “We cannot sell any NEW vehicle for Export or Resale.” The hint being that Washington car dealers could get a better deal in Idaho, too.

In fact, the dealer is the world’s largest Dodge, Chrysler and Jeep dealer, and is a leader in sales of General Motors cars and trucks.

The sales tax for the metropolitan King and Pierce counties is 9.6 percent.  Idaho only charges a 6 percent sales tax, which is shared with cities’ coffers, and the state affords a lower cost of doing business.

Bad planning

Moreover, the budget ramifications for Washington state:

• No B&O taxes are collected
• Reduced sales taxes because after making a purchase, motorists drive over the state line to Washington where they can register their vehicles in less-populated counties to save 1 to 3 percent on their vehicle’s sales tax.

The Legislature is behaving unproductively in another matter. Adversely affecting dealers and consumers, alike, the Senate wants to halt another major car-buying incentive – the long-time tax deduction for used-car trade-ins. In other words, the Senate wants to tax motorists at both ends – when buying and when selling a vehicle.

Incredibly, lawmakers insist on staying in the liquor business – is liquor a core state service? The state employs 1500 liquor employees and taxpayers are saddled with their costly pensions.

At best, the surcharge on car insurance is disingenuous. “Perhaps if the Legislature hadn’t raided the account the funds would be available for the use intended – preventing auto theft,” says Jason Mercier of Washington Policy Center.

FYI, if it weren’t for the tireless efforts of Mr. Mercier, much of the Legislature’s chicanery would not come to light. It’s a full-time job making sure there’s transparency. Many lawmakers are doing their best to make certain Washington does not have an open government.

The Legislature also wants to heavily tax candy – in the aggregate, a big state employer. Simply consider just one heritage state company, Brown and Haley, an employer of 250 workers but is in the midst of financial woes even without a burdensome sales tax.

Other sin taxes include a 500 percent increase on cigars, but gives favored documented treatment to Tribal smoke shops.

Let’s not forget the stifling new tax on bottled water.

Some lawmakers want to double the death tax.

And others want to triple the tax on gasoline and diesel as hazardous or toxic but they won’t use the revenue for badly needed road repairs or construction. Meantime, Washingtonians will undoubtedly pay even more for fuel.

Meantime, nothing has been done about the state’s bloated payroll and associated costs. Ask any employer if they are able to pay 88 percent of health insurance, or if their retirement plans can compete with the state pension system. The answer will be no. Don’t forget the Legislature is tardy in plans to fund $7.9 billion in retiree health benefits.

That sums up the debacle pretty well – continued spending, boundless chicanery in violating transparency standards, unsatisfactory performance audits, mismanagement and stifling taxes. Nothing has been accomplished that will strengthen the state’s economy or create jobs. In fact, it can be easily concluded that the 2010 legislative session has resulted in a sharp decline of voters’ economic and political freedoms.

From the Coach’s Corner, to stay informed, here are other sites you’ll find helpful:

• Washington Policy Center, www.washingtonpolicy.org
•  Enterprise Washington, www.enterprisewashington.org
• Association of Washington Business, www.awb.org
• Washington State Auditor’s Office, www.sao.wa.gov
• Washington Votes, www.washingtonvotes.org

How Enterprise Washington Helps State’s Businesses

Feb. 28, 2010

In trying to solve a $2.8 billion budget shortfall, Washington state lawmakers have been debating the wrong issues. Instead of debating whether to increase the sales tax or to eliminate tax exemptions for industries, lawmakers would better serve voters if they dealt with the core issue.

The core issue: Developing a healthy economic climate with public policies that help – not hinder creation of private-sector jobs.

Most businesses have had to significantly cut payroll – 175,000 jobs were lost in two years. However, instead of being good stewards of taxpayer assets, many public officials are frantically looking to spend money and generate more tax revenue. The only jobs the state helps to create are government jobs that exacerbate the economic climate.

Worse, state pensions are 74 percent higher per person compared to the private sector. And the Legislature has failed to fund at least $7.9 billion in healthcare and pension liabilities – a financial time bomb set to explode.

Thirty percent or more of your business headaches are caused by onerous government regulations and taxes.

These and countless other issues hurt the economy.

However, there is hope. At the grass roots level, Enterprise Washington (EW) is an organization effectively clearing the air. They know a strong economy will create jobs in a way that helps the environment.

In essence, the EW folks understand the core issue, and they are recruiting and helping business-friendly candidates get elected to office. I recently met with the group’s principles at their Issaquah office and walked away with favorable impressions. And what’s really neat is that they understand it’s important to be open-minded. They recruit both Democrats and Republicans.

It was refreshing to hear the insights of EW President Erin McCallum.

My sense is that you’ll want to know more about EW. Here are Ms. McCallum’s answers to my questions:

Q: What is your success rate?

A: Since EW’s formation in 2007, there are seven more business-friendly lawmakers in Olympia.  

Five GOP include: Sen. Randi Becker, Reps. Kevin Parker, Jan Angel, Bruce Dammeier and Terry Nealey.

Two Democrats: Reps. Reuven Carlyle and Scott White.

EW was instrumental in five of the seven victories (Becker, Parker, Angel, Nealey and Carlyle).  

In each of these races, EW either identified and recruited the business person or ran a significant independent expenditure campaign that helped educate voters about the candidate who was the stronger champion of the economy and the health and sustainability of Washington’s private sector.

Q: How would you describe your mission?

A: Recruiting, training and electing business-minded state lawmakers. 

Q: You have different organizations under your wing?  

A: Yes we do. EW, the mission is described above and EW’s Jobs PAC which is a 527 political action committee.   There is also a legally separate 501 (C)(3), charitable organization called Business Institute of Washington. It is an educational resource for our communities that helps Washingtonians gain a stronger understanding of the significant role our lawmakers play in establishing laws that govern our state. 

Q: Please describe how they’re structured cohesively.

A: EW is legally organized to influence the outcome of elections in key districts (C-6, membership organization, and a 527 political action committee). EW has established these separate entities to accommodate the different reporting requirements for various political expenditures.

As a result of the economic downturn and what a majority of the public sees as government spending run amok, the current political climate is favorable for pro-business/anti-tax candidates.  Business has an opportunity to capitalize on this shifting political climate during the 2010 election cycle.

Q: Briefly, what is the history of your organization?

A: EW grew out of an old business political action committee, United for Washington. We developed our business model using best practices from business communities in other states, and taking examples from currently successful players in Washington state politics. 

Our research has unveiled that successful special interest groups in Washington state have not been friendly to private sector business for some time.

Q: How would you describe the state of politics in Washington?

A: The political stage was set many years ago for what’s happening in Olympia and state government today. For decades, special interest groups outside of the business community have worked tirelessly in recruiting candidates who will champion their issues and helped get them elected.  Our state’s current political climate augurs opportunity for pro-business candidates – Democrat and Republican, alike. And with the new top two primary, business-friendly Democrats are viable again.

Here are some examples of how other special interest groups operate in our state, and how the private sector community has assisted in bringing them to power:  

Organized labor has done an incredible job in helping to elect candidates to champion their issues in Olympia. Organized labor, with SEIU largely driving the effort, has been effective in politics by winning one race at a time. Their efforts have paid dividends for them on shaping public policy.

Other special interest groups such as the Trial Lawyer Bar, WEA, Firefighters, etc., make sure contributions get funneled to close races, usually to Democrat candidates. When business contributes to both parties (often to gain political access) a significant portion of contributions made to Democrat leaders are transferred to competitive races and used against pro-business candidates. Organized labor has been able to rely on a pro-union majority in both the House and Senate to protect its interests.

Q: How many members or supporters does your organization have?

A: EW currently has about 250 members representing businesses from all across the state in a broad range of industries. This year, we are currently in a drive to double our membership.  Any of you who are business owners and who care about the future of our state, please join us by visiting www.enterprisewashington.org and become a member.

Q: A lot of voters think of business-oriented people as Republicans-only, but you have the vision to be nonpartisan.  Please describe how and why you decided on the nonpartisan approach.

A: Business issues do not necessarily cut clearly across political party lines. Also, given our state’s demographics and increase in population, we recognize that voters in this state are fiscally conservative, socially progressive. With Washington state’s two political parties tending to lean more to the extreme we look for balance and middle ground.

Q: What’s your criterion for a political candidate? 

A: Our state is quite diverse, so the ideal candidate can vary quite a lot depending on the location of the district. Having said that we are looking for business people, both employers and more likely employees, who have strong experience in the private sector and can bring their expertise to the state lawmaking process.

Q: What’s on tap for your association?

A: We are in the midst of a $1.6 million campaign for Washington’s private sector and invite everyone in business in this state to get engaged through EW membership. Unlike public employee unions that can collect political contributions through the monthly dues process, EW must appeal to the greater business community, those who have the most at stake, to make our programs succeed.

Please go to www.enterprisewashington.org and become a member today! Through membership, you can help elect more business minded state lawmakers who will understand and support public policy that supports private sector jobs.

Q: What else would you like to add?  

A: The business community has a choice to make: either get involved and help elect more business friendly lawmakers or face steeply higher taxes. EW is the only organization in Washington state that is tackling the political landscape with the goal of making significant positive changes to the makeup of our state legislature.  Democracy is not a spectator sport so join EW today! Having strong elected lawmakers who understand that it’s the private sector that creates jobs and turn builds healthy and happy communities.

From the Coach’s Corner, here’s more on upcoming state-government developments:

To identify state efficiencies and savings, Washington State Auditor Brian Sonntag has announced his performance audit work plan.

Why You Can’t Get Work or Hire Workers

 

Are you one of the countless baby boomers who is relying on Social Security before you reach retirement age? You’re not alone. The dearth of jobs has prompted many Americans to accept lower Social Security payments at the age of 62. This means Social Security is forecast to start paying out more in benefits than it receives starting in 2017.

The Labor Dept. says some 2.7 million Americans will lose their unemployment parachute checks near the tax-filing deadline of April15. About 6.3 million folks have been out-of-work for six months or longer.

The government believes 15 million people are jobless. That’s only an estimate. It doesn’t include the high number of self-employed people desperately taking independent contractor projects because they can’t find jobs, or the under-employed taking temporary jobs.

These numbers also jurt job creation. Higher unemployment rates charged to business by government is a disincentive, too.

After having worked through 6 major economic downturns, my analysis of the data and the trends is that the real unemployment rate is about 25 percent. That’s depression-like, not recession-like numbers.

A recent study proves it’s getting worse for American workers. The Center for Labor Market Studies at Northeastern University in Boston sums up the problem in its study’s subtitle – “A Truly Great Depression Among the Nation’s Low Income Workers Amidst Full Employment Among the Most Affluent.”

For the nation to catch up, most experts believe 100,000 new jobs need to be created every 30 days. But veteran pragmatists know it won’t happen. Count me as one of those.

The job drought is not a new phenomenon in the sense that it’s been years in the making. The federal government began tracking the number of unemployed in 1948.

Many jobs have not and will not return. Not to over-simplify, institutional investors own increasing numbers of companies. Largely, they extract profits by slashing payrolls and encouraging offshoring of jobs in Latin America and Asia where labor is cheaper.

Since 2000, automation is responsible to cutting 5.6 million jobs.

After each recession since 1970, job-growth rates have decreased. Published reports indicate that even before the Great Recession, it was less than one percent a year and was only 2.4 percent in the 1990s and 1980s, according to the Labor Department figures.

Based on trends following recessions, I’m in agreement with economists who forecast it will be at least five years before the unemployment rate returns to more palatable levels – hence, the term, jobless recovery. Even then, I’m not sure it will happen.

Historically, consumer spending has been a key ingredient for economic recovery. But that won’t happen unless there’s a fundamental economic change.

This also means the tax revenue pie for governments at all levels will remain flat.

For good reason, Americans have returned to 1930’s money values. They’re becoming tight-fisted with their money and are demanding government accountability.

The housing bubble resulted in a high volume of excise taxes, but the high rate of foreclosures alters that scenario.

Talk to anyone who checks credit for consumers or small businesses. The aggregate level of bad credit is huge –largely caused by the predatory behavior of big lenders. They’ve nearly destroyed the livelihoods of small businesses with mega interest rate hikes for bogus reasons.

Small business has historically has been the main job-creation engine, but no more.

Small businesses do not have the financial firepower expand and create jobs. New credit card legislation does nothing to correct the injustices.

Instead of focusing on helping business, government at every level, is hindering the economic climate. Economic and political freedoms are being stolen each day by bad government policy (See this site’s other Public Policy columns). The largest employer in many communities is government. Public-sector agencies are still growing, not laying off, while spending and taxing at ever-increasing levels. For the common good of all Americans, change is needed.

Businesses and consumers can no longer afford the status quo in taxes. Government must reform.

From the Coach’s Corner, effective on Feb. 22, 2010, here is the essence of the credit card law:

1. Credit card companies cannot increase the rate in the first year until the introductory rate expires. The banks must give 45 days notice to change the rate.
2. Unless two months past due, rates can’t be changed.
3. The original interest rate must be granted once payments are on time for six months.
4. The fine print will be easier to grasp.
5. Activation and annual fees can’t exceed 25 percent of the credit limit in the first year; and will be unlimited after 12 months.
6. Credit card statements must be sent three weeks in advance.
7. Transactions can’t take place over the credit limit unless the cardholder agrees.
8. The “universal fault” nonsense (if you were late one day on one payment, the other credit card companies jacked up your rate) is stopped and interest rates on existing balances must stay the same (see No.1).
9. Companies can’t give students or anyone under 21 a car unless she/he has a co-signer or the autonomous ability to pay statements. Schools have to make public any credit-card marketing deals, and companies cannot stage publicity or giveaway events on or near campuses.

Washington Legislature Should Smell Some Strong Starbucks

Updated Feb. 10, 2010 3:15 p.m.

With December, 2009 tax-collection revenue up 3.6 percent, the Washington State Legislature is getting some good news as it debates solutions to the anticipated nearly $2.7 billion budget shortfall. But lawmakers are flunking the transparency test during this legislative session.

As the adage goes, they need to wake up and smell the coffee. They need a good, strong venti-size cup of Starbucks. Make it two.

In a recent column, “Government’s Reliance on Huge Tax Increases Reaches Absurdity,” I wrote that a proposed state of Washington sin tax – a 500 percent tax increase – was best described as punitive, full of hypocrisy and discriminatory. That’s because the state operates venues in both gambling and liquor.

But state lawmakers are not done. With seemingly unlimited chicanery, the Legislature is violating the will of voters in a variety of ways in the current session.

Literally, a ghost tax bill, SB 6853, was introduced. It had zero text. Yes, it was blank. It appears it will violate the state principle that requires five days notice of transparency – public notification – before passage.

“This title only bill…subject to a public hearing and received executive action even though there are no details in the bill,” says Jason Mercier who is director of the Center for Government Reform at the Washington Policy Center.

“This means anything related to the bill title can be added on the Senate floor without ever receiving public scrutiny or comment,” he explains. 

Mr. Mercier sheds more light on the disturbing, ongoing chicanery.

“…the Legislature is considering repeal of the state’s Sunshine Committee while failing to act on the committee’s recommendation that the Legislature’s double standard exempting lawmakers from the state’s public records law be repealed,” he says.

You might recall a batch of incriminating legislative/executive branch e-mails as part of a shell game to circumvent spending limits led to a Washington Supreme Court case just a few years ago.

Well now, lawmakers have killed a transparency bill: HB 2872: Establishing a period of public and legislative review of appropriations legislation. “This bipartisan bill would have created a 72-hour public review period before budget bills could be voted on,” says Mr. Mercier. “The bill received a public hearing and was originally scheduled for executive action but was never voted on in committee. The bill is now dead.”

Lawmakers also want to suspend Initiative 960. That’s the voter-passed initiative, the Taxpayer Protection Act. SB 6843: Preserving essential public services by temporarily suspending the two-thirds vote requirement for tax increases.

These unsavory legislative actions undermine the intent of the majority of Washington voters. Further, it’s another violation of the economic freedom and political freedom of Washingtonians.

See the videos of lawmakers in action for yourself.  

Meantime, lawmakers are ignoring all kinds productive ways to streamline. It’s clear they don’t have a revenue problem. They have spending and transparency problems.

Frankly, it will be interesting to see how voters react. In 1993, the Legislature pulled similar stunts and the following year saw a high volume of voter angst at the polls. It was a nationwide trend, too, in the 1994 landslide defeats for countless officeholders.

Following widespread protests over massive business-tax increases in 1993, the Washington State Association of County Assessors decided to take action. I was invited by a client – the-then Kitsap County Assessor and a self-described conservative Democrat – in late 1994 to advise the 60 assessors on media strategies.  As a result, the assessors persuaded state lawmakers to reduce property taxes by 4.7 percent in the ensuing 1995 session.

Perhaps they consumed enough coffee that year.

From the Coach’s Corner, if you agree, voice your opinion to legislators.

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

Do Washington’s Budget Woes Warrant Government Reform?

 

Updated 1o:oo a.m. Tuesday December 15, 2009

“We can’t solve problems by using the same kind of thinking we used when we created them.”                                 – Albert Einstein

 

In applying the logic of the famed Nobel Prize winner to Washington state’s multi-billion dollar budget woes, it would appear government reform is needed for good government. Washington is mirroring California and its budget anguish. However, Gov. Chris Gregoire and state lawmakers say tax increases are necessary to deal with the red ink.

Not so fast say authoritative observers outside state government. Productive steps are necessary to solve the ever-deepening budget hole, which was $2.6 billion in the last forecast despite the massive temporary infusion of federal stimulus dollars.

“At this point, this is a whole new ballgame,” says Jason Mercier, who is the director of the Center for Government Reform at Washington Policy Center (WPC) in Olympia, WA. “Even before the recession, which followed a bubble and fake consumer spending, the spending was not sustainable – this is a reset of spending of what the economy can really bear.”

But Mr. Mercier warns us about a list of suggested tax increases by the Department of Revenue. The agency’s list suggests taxes on tax-exempt credit unions, business and occupation tax increases, and hikes on the so-called sin taxes. The Department of Revenue list was first unearthed by the savvy staff at Everett’s The Daily Herald.

“We need to evaluate services from government,” adds Mr. Mercier. “Increasing taxes during a recession would add economic hardship, while changing the way services are delivered offers part of the solution to closing the deficit without raising taxes.”

WPC’s Communications Director John Barnes issued a press release in April, 2009 stating 32 economists believe tax increases will not lead to recovery.

A Washington political economist also says he is not persuaded about the justification for tax increases.

“First of all, the Governor’s budget is not a serious proposal,” says Dr. Mathew Manweller, a professor of political science at Central Washington University in Ellensburg, WA. “It is what I call a ‘bluff budget.’ She wants a tax increase to cover state services.

“But to get there, she needs to propose draconian cuts to convince people to support a tax increase,” he adds. “In essence, this is a ‘give me your wallet or little Toto gets it’ budget.”

A favorite of businesspeople because he is succinct and accurate in his assessments, Dr. Manweller cites a myriad of reasons for the budget headaches.

“On one level we have very powerful state employees unions,” Dr. Manweller explains. “Their financial demands on the budget in terms of salaries, no-risk pension plans, double dipping, and comparable wage laws are killing us.”

Indeed, at an $83 million cost to taxpayers in 2010, here’s a disturbing headline: Thousands of state workers in line for substantial raises.

Mr. Mercier says another budget problem is the Legislature’s under-funding of public sector pensions.

“They are still skipping payments and must make mandatory pension payments in 2013,” he says. “Government has over promised what the economy can deliver.” 

“Add to that an aggressive environmental lobby that essentially has the DOE and DNR in its back-pocket after the Goldmark election and Jay Manning tenure at DOE, it is difficult to encourage any private development,” the professor says. (He’s referring to Mr. Manning who formerly ran the Department of Ecology, and Peter Goldmark who is Commissioner of Public Lands and who also heads the Department of Natural Resources.)

“We also see a variety of federal mandates that are passed down to states that are passing them down to counties and cities,” adds Dr. Manweller. “More and more revenue is going to what economists call ‘dead weight loss’ or non-productive labor.

“Take those issues, throw in a national economy that is ailing, and you are going to get a struggling economy,” concludes Dr. Manweller.

Budget solutions

Mr. Mercier is among those who contend the budget can be balanced by also taking advantage of the state’s competitive contracting law that’s been virtually ignored since 2002.

“The Legislature and Gov. Locke authorized state agencies to open up public work traditionally held as an in-house government monopoly to competitive bids from the open market,” he points out. “Public employees are encouraged to participate in the bidding process, because the intent of the law is not to benefit private companies, but to secure the best service for the public no matter who does the work.”

The WPC conducted a study of 20 state agencies and guess what?

“In practice, however, state managers rarely exercise their statutory contracting out authority, meaning an important provision of the 2002 civil service law remains largely unused,” says Mr. Mercier.

This raises another question: Why is the state of Washington in the liquor business?

Two State Senators, Tim Sheldon (D-Potlatch) and Curtis King (R-Yakima) have introduced a bill to privatize Washington’s monopoly of 161 stores and 1,469 liquor employees.

Do you find this hard to believe? It’s true. Washington employs nearly 1,500 liquor employees when the private sector would function better. Furthermore, here is Washington’s 2009 personnel report.

As a management consultant who has worked experienced at least five recessions, I know it is not wise to try to tax our way out of a recession. All we have to do is consider the federal tax cuts of 2001 and 2003. They were instrumental for the ensuing economic upturn.

A professor of economics at Harvard University, N. Gregory Mankiw, drew similar conclusions about taxes and recessions in The New York Times in Dec. 2009, “Tax Cuts Might Accomplish What Spending Hasn’t‎.”

He mentioned a 2007 study by David H. Romer and Christina D. Romer at University of California at Berkeley. (Ms. Romer is now the Chairwoman of the Council of Economic Advisers in the Obama Administration.)

“Our estimates suggest that a tax increase of 1 percent of GDP reduces output over the next three years by nearly 3 percent,” wrote the study’s authors.

In conclusion, yes, Washington’s budget woes do warrant government reform. But Washington’s government simply demands more money. There’s increasing talk of tax hikes while countless state businesses and citizens are desperate and hurting.

The state has a spending problem, not a revenue problem.

This is a critical time – government reform is necessary.  We need to heed the Einstein quote. At stake are economic and political liberty for Washington businesses and citizens.

From the Coach’s Corner, here is more reading on how to solve Washington budget woes: “Analysis: Steps for Economic Success in Washington State.”

Here are more resource links:

• WPC – http://www.washingtonpolicy.org
• Dr. Manweller – http://www.mattmanweller.com

If You Own a Small Business, What Songs Are You Singing?

 

To paraphrase a song sung by a Tony Award-winning star of stage and film musicals, Ethel Merman: “There’s no business like small business.” But it appears many small businesses have been singing the blues for years.

Data from Equifax indicates small-business bankruptcy filings are skyrocketing – they were up 81 percent at the halfway point of 2009 compared to June of 2008. It is estimated there are 25 million small businesses in America.

The most small-business bankruptcy filings were in regions of southern and northern California – the Los Angeles, Riverside/San Bernardino and Sacramento metropolitan areas.

Yes, it is true that the bankruptcy trend does not tell the whole story.

Some small businesses have been successful in getting outsourcing opportunities to sell to big firms. In looking for market share, many large companies are catering to small businesses with lower prices for goods and services.

And even though the stock market has been performing more like a raging bull since March, and a study shows small business confidence is hopeful for a turnaround by 2010, not every small-business owner is likely to be enthused.

A recent confidence survey by Administaff, www.administaff.com, showed 40 percent of responding businesses said they have been performing worse than they anticipated while 60 percent were content with their 2009 performance.

But small businesses appear to have reason to be concerned.

Published reports indicate the President Obama healthcare surtax would decrease the federal income tax base according to the nonpartisan, nonprofit Tax Foundation, www.taxfoundation.org. The organization is also quoted as predicting that 1.3 million small businesses would pay even more taxes under his plan.

Actually, healthcare reform and taxes have been issues for small business for as long as I can remember. That’s based on my experience as a business-coaching columnist, management consultant and two-year host of a radio program, which was sponsored and podcast statewide by the Association of Washington Business, www.awb.org.

Unfortunately, the concerns of small businesses in Washington state have long mirrored those throughout nation, for example, according to two different studies released in 2007.

Before the recession, economic confidence had declined among small business owners, according to Discover Small Business Watch. Some 32 percent believed business conditions in their industries were deteriorating while 40 percent complained of cash-flow problems.

The numbers were similar from the National Small Business Association, www.nsba.biz, as 43 percent of responding members said the economy was worse for them in 2007 than it was five years before in 2002.

Other financial concerns: Thirty-nine percent cited health benefits; 31 percent worried about available capital; 27 percent complained about state and local taxes; 25 percent feared federal taxes; and 23 percent mentioned a lack of qualified workers.

In 1995, 67 percent of surveyed companies offered health benefits, but now only 41 percent do so.

What issues did they want addressed in the presidential campaign between Senator John McCain and the eventual winner, President Obama? Thirty-one percent cited taxes while 30 percent said health care costs were the most important.

Overall, while 60 percent of surveyed companies invest in a Web site, a high percentage of small businesses didn’t have a Web presence. They included 57 percent of service companies; 39 percent of retailers; 33 percent of professional services; 67 percent of construction companies; and 32 percent of manufacturers.

Meantime, it appears a common denominator in small-business issues is government and whether it will continue to hinder business with economic policies. Note the concerns about taxes, and health care reform. Small businesses aren’t likely to become really confident until government stops hindering our free-market system and starts allowing economic and political liberties.

From the Coach’s Corner, you can influence your company’s future by focusing on people.

My research shows 53 percent of a customer’s buying motivation depends on people. What are the so-called soft skills of your spokespersons, customer service, finance and salespeople? Customers want value, good service and to be treated well.

And if you don’t have an effective Internet presence, get busy. And good luck!

10 Small Business Tips for Time Management, Profits

 

As a small businessperson, you’re still probably a bundle of nerves even after you’ve successfully coped with the federal tax code this year while preparing for your next return. While completing your tax return, you were also reminded about your financial pet peeves – few of which aren’t even recorded in your profit and loss statement.

You’re probably agitated by a myriad of things that tax your patience: Health care costs, the federal government deficit, ill-advised legislation by the state Legislature, biting your nails as your products sit in a parked truck on the freeway, watching solo drivers crowd into the carpool lanes, or suffering from poor customer service while shopping after a long day.

Certainly, such events tax the patience of many small businesspeople. Yes, it’s very frustrating not to be able to control events.

But everywhere I turn, I hear these words: “There isn’t enough time in the day.”

That’s true. Yet, now it’s important to budget enough time to gauge your current business progress – so that enough corrections can be made in time to improve profits by the end of the year.

Where to start – the first step: Every manager and employee should be asking one key question: “Is my behavior in financial matters matching my goals for performance.” Usually, the answer is a resounding “no.”

The second step: Develop strategies for better time management in analyzing your profits.

Here are 10 keys for micro businesses:

Review your long range goals. When developing your goals, be specific. Identify your priorities in order to list your financial goals. That usually means making your managers and key workers more effective. Develop your strategies and set a specific timeline for action.

Track your progress and delays.  Record everything, including your progress. Avoid frustration by looking for progress – not perfection.

Analyze your progress. Record and analyze how you spend your time. At every juncture, ask: “Is what I’m doing right now helping me to reach my goals?”

Take baby steps. Start your road to success by setting your sights low. Even slugger Mickey Mantle would resort to bunting in order to break out of a slump.

Avoid procrastination. Make sure the first hour of every day is the most productive. The rest of your day will seem like a walk in the park. Then, take advantage of technological efficiencies and budgeting tools to see how your expenses compare to your goals.

Be gentle. Take it easy. Do everything gently. Remember the wise words of songwriter and entertainer Hoagie Carmichael: “Slower motion gets you there faster.”

Plan your time.  Make your “to do” list by Friday for the following week. Review the next day’s schedule before going home each night. Ensure that your employees, particularly salespeople, have their activities and appointments set at least three to five days in advance.

Prioritize: A, B, or C. Not every matter is a top priority.

Avoid desk clutter. Instead of “Post-it Notes,” put all the necessary folders away in the appropriate file drawers.  Once the clutter is off your desk, the “to do” list serves as the master organizer.

The bottom-line:  If you don’t take the time to do it right, when will you have time to do it over?    

From the Coach’s Corner, here is a tip on Windows 7 from IT and business information systems consultant Jerald M. Savin:

“Windows 7 is meant to be fully compatible with Vista compatible hardware and applications, but, as with every other major release of an operating system, confirm that the applications you care about will run on Windows 7,” advises Savin of Cambridge Technology Consulting Group, Inc. (www.ctcg.com).

“If you’re planning to buy new hardware before PCs are available with Windows 7 preinstalled, confirm that the new PC is Windows 7 compatible and that its performance will be satisfactory before the purchase,” he adds.

“Windows 7′s new features are less dramatic than the changes Vista introduced. In fact, some of Vista’s features were removed from Windows 7,” the management consultant says. “The upgrade includes a redesigned Windows Shell with a new task bar, a home networking system, called HomeGroup, and improved performance (hurray).”