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recommendation that the Legislature’s double standard exempting lawmakers from the state’s public records law be repealed,” he says.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:
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: Healthcare 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: “Slow 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 the first time, when will you have time to do it over?
From the Coach’s Corner, here are more planning suggestions:
23 Tips to Reduce Stress, Work Happier for Top Performance
Business Success Checklist to Work Smarter, Not Harder
9 Dos and Don’ts for Best Decision-making
“If opportunity doesn’t knock, build a door.”
-Milton Berle
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Columnist Terry Corbell is also a business-performance consultant and profit professional. Click here to see his management services (many are available online). For a complimentary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
