Why the Sales Tax Debate Erupts in Washington State
Nov. 22, 2011
The buzz in Seattle and other Washington locales is over another attempt to raise taxes. Yes, Gov. Chris Gregoire wants to raise $500 million via a temporary half-cent increase in the state portion of the sales tax to offset continued budget deficits to prevent more state government cuts in spending.
Either the Legislature could pass the increase providing it passes with a two-thirds majority in an upcoming special session. If it can’t, the Legislature can pass a referendum bill by the end of this year for voter approval.
Gov. Gregoire’s request also threatens to risk relations with Oregon and neighbors by repealing their sales tax exemption when traveling and shopping in Washington state.
Washington’s sales tax debate request follows four developments:
- Failure by public officials to practice good stewardship of existing revenue.
- Lack of jobs – nearly a double-digit unemployment rate.
- Businesses are struggling.
- Washington’s two-thirds vote requirement for tax increases – demanded by voters in four referendums.
No. 1 – the sales tax increase request is not a surprise to watchdogs in the wake of years of overspending. For years, analysts have been warning about public policies, including in this space as long as two-and-a-half years ago when this portal was launched (Analysis: Steps for Economic Success in Washington State).
Part of the problem stems from furtive policymakers and the failure to answer the right questions: Why Not Transparency for Good, Open Government in Washington State?
No. 2 – 314,700 people are unemployed in Washington state out of the 3.5 million-person workforce. In October, 4,600 jobs were created in government, education, health services, manufacturing and wholesale trade.
No. 3 – With many of the new jobs in government and education, it underscores the point about the state’s business climate. The tech sector in Seattle is doing well. But ask any business owner or manager if their companies are better off now than they were in 2006 before the recession.
No. 4 – It seems unlikely the Legislature will be able to pass such an increase, but will authorized a vote of the people thanks to I-1053, which was passed last year after the Legislature circumvented the three previous voter-approved referendums (I-1053: Critical to Washington
State Businesses and Workers).
The Secretary of State’s timeline for the sales tax debate:
- Dec. 30 – Last day for Legislature to pass tax referendum bill for March 13 election
- February 10 – Military and overseas ballots mailed for March election
- February 21 – Mailing of voters’ pamphlets begins for March 13 election
- February 24 – Regular ballots mailed for March 13 election
- March 13 – Election Day
“There will be plenty of time to debate the merits of the Governor’s tax proposal but one thing isn’t open for debate, I-1053 is working exactly the way voters intended by providing them the opportunity to ultimately decide this important question,” writes Jason Mercier of the Washington Policy Center.
He offers this proviso:
“To help ensure this opportunity continues in the future, if lawmakers are going to send voters a proposed tax referendum they should also put a constitutional amendment enforcing the four-time voter approved two-thirds vote requirement for tax increases on the ballot,” he writes.
“This would provide the public and businesses with predictability about whether this tax protection will exist from year to year and clarify whether or not the four-time approval of the voters for this policy was a fluke or actually reflects their consistent and ongoing desire for lawmakers to build a strong public consensus on the need for any proposed tax increase,” he explains.
Agreed – tax increases would be unnecessary if the public officials worked to improve the business climate and performed to voter expectations. Tax increases are never temporary in Washington and the economic environment isn’t improving.
From the Coach’s Corner, Washington state has budget woes and high unemployment because legislators don’t ask the right questions, such as What Do Small Business Owners Need from Washington State Policymakers?
“Be thankful we’re not getting all the government we’re paying for.”
-Will Rogers
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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?
AWB Has Right Solution to Mounting UI Costs Pounding WA Businesses
Updated – Jan. 14, 2010
The battle over high unemployment-insurance costs is raging in this year’s legislative session in Olympia – a debate over public-policy fairness.
Businesses led by the Association of Washington Business (AWB) are asking for a bill that will lower unemployment insurance costs (UI) for employers scheduled to increase an average of 38 percent this year. But a consortium of unions is actually trying to increase unemployment checks as a condition for lowering the UI costs. Unions want employers to underwrite more than $60 per child each month in UI costs for unemployed workers.
“While their goal is well intended, remember Washington employers pay the entire unemployment premium and over the last two years in the worst recession since the Great Depression, UI costs have skyrocketed – some by more than a thousand percent and many in triple digits,” wrote Don Brunell in a post as president of AWB.
“Washington employers pay the nation’s 5th highest unemployment insurance rates. Our state’s unemployment benefits are 2nd highest in the country,” he added. “And, workers compensation benefits in Washington are 5th highest, according to the 2011 Competitiveness Redbook produced by the Washington Alliance for a Competitive Economy.”
So, it boils down to a question of fairness. Unions should instead consider paying part of the onerous premiums.
AWB practices what it preaches and Mr. Brunell provided this recommendation:
“A system along the lines of what AWB put in place several years ago for long-term care,” he wrote. “AWB provides a basic policy for long-term care for the people who work here. If they chose to add a family member to the plan, they pay a small premium for that coverage. It is fair and it works. That would be an innovative approach to consider for UI.”
He pointed out Washington businesspeople and other residents already have a heavy tax burden:
“…I posted a Olympia Watch post based on Tax Foundation findings showing that Washington’s ‘Tax Freedom Day’ is April 15, not April 9,” wrote Mr. Brunell. “In other words, when unemployment insurance and workers compensation taxes are added in, Washington families and employers pay a higher than average tax load and work an extra 6 days for the government.”
The AWB president agrees – the welfare of Washington’s children should be taken into account.
“Refocusing the issue is important. It is about kids and families. AWB believes it is better for Washington workers and their families to have jobs. Relying on unemployment payments is no way for families to manage their finances. Besides, those benefits are time limited. Taxes and costs of doing business drive location and hiring decisions for Main Street businesses and large factories. Global competition is fierce and real. This isn’t about tradeoffs. It is about stimulating jobs.”
Mr. Brunell’s conclusion is valid. On a personal note, I recently became aware of the plight of two unemployed workers, who are a world apart in their self esteem and philosophy about receiving unemployment benefits.
One worker who was unemployed for two years told me he was appreciative of a job offer from Boeing. He accepted the job even though it requires a commute well in excess of 50 miles one way each day. As a family man, he’s thrilled to have a future with a world-class company – even though it nets $300 a month less than he received in unemployment benefits.
The other person is staying on unemployment because he receives about $100 a month more in benefits than a recent job offer would net him.
These two examples underscore what is wrong with the exorbitant UI system in Washington and the ominous, ever-increasing entitlement attitudes of some workers. The Legislature must alleviate the financial pain of businesses for the creation of jobs.
From the Coach’s Corner, you can stay current with the moderate recommendations of Mr. Brunell and his illustrious staff at AWB’s site, www.awb.org.
Common Sense for Washington State Pension Reform
Dec. 8, 2010
Periodically, for a decade, this column has expressed concerns about public-sector pension reform in Washington State and the nation. It started when I was writing Biz Coach columns for media Web sites. Since mid 2009 when launching The Biz Coach – a business-news portal — I’ve continued to express heart-felt concerns.
No one has disagreed with the opinions. That’s probably because hardworking moderate to conservative businesspeople – the target audience for these columns – represent the majority of readers.
Sample columns that mention the state’s public-policy quagmire in this portal’s Public Policy section include:
My two salient concerns:
1. Public-sector pensions are on average about 74 percent higher than the private sector.
2. The Legislature has been delinquent in funding them in the billions of dollars.
But lawmakers aren’t exactly shy about high spending and taxes.
Fortunately, I’m not alone in sounding the alarm. Concerned analysts also include Jason Mercier of the Washington Policy Center, www.washingtonpolicy.org. The Seattle Times just published his Op-Ed on constitutional pension reforms .
“According to the state actuary, two of Washington’s nine pension plans are already in the red with unfunded liabilities totaling nearly $7 billion,” he reminded readers. “This does not include an additional $8 billion in unfunded post-retirement benefit liability, primarily for retiree health care. Unlike pensions, however, these other retirement benefits are not a contractual right, meaning the Legislature has the ability to make changes as necessary.”
He, too, understands the adverse pension impact on the state’s budget.
“Already our state is facing nearly a $6 billion projected budget shortfall for 2011-13. Included in these projections is the need for additional pension contributions” Mr. Mercier wrote. “The state’s Office of Financial Management projects that an additional $700 million in pension payments above the base will be required in the 2011-13 biennium.”
He further states that pension costs will continue to grow – to $1.2 billion during the 2013 to 2015 budgeting cycle.
“To help avoid kicking the pension liability can further down the road while putting the state’s credit rating in jeopardy, it may be time to pass a constitutional amendment that forces state officials to make the required pension payments and creates a higher threshold to provide enhanced benefits,” he observed. “While funding these past pension promises may crowd out other spending, the alternative puts taxpayers in a worse position.”
He offered another vital solution:
“Meanwhile, legislators must stop enhancing retiree benefits until all the state’s pension plans return to healthy status,” Mr. Mercier explained. “Exacerbating taxpayer exposure while billions in unfunded liabilities exist is the height of irresponsibility. It may also be time for additional reforms to help minimize future pension liabilities.”
It’s also worth noting that constitutional pension reforms are advocated by State Treasurer Jim McIntire.
Amen.
From the Coach’s Corner, you might want to read Mr. Mercier’s article on constitutional pension reforms. Then, contact your state public officials. If the pension system is not reformed, you will pay the price for a long time.
What and Whom Deserve your Vote on Nov. 2?
Updated Oct. 29, 2010
By now you’re weary from all the political ads, and the false claims about candidates, tax issues and initiatives. But what have you done about it?
If you want a strong economic climate and job creation, and freedom from bad public policy and public officials, obviously it’s time to act. This is a critical time. What is decided at the polls will affect us now and our grandchildren, too, when they’re in the business world.
Similar concerns are felt and expressed by the leadership of Washington’s state chamber of commerce –the Association of Washington Business (AWB).
“In my mind, it comes down to a choice of whether we are going to have a heavier reliance on government and more taxes and regulations; or, whether we are going to allow the market-based, free enterprise system to be innovative, to create new products and jobs, wrote Don Brunell, president of AWB. “That is the bottom line in this election.”
So this is the most succinct business-coaching column ever published here on this site. The message is simple. If you haven’t already, please do your homework and discuss these issues with your associates, friends and relatives. Then vote by Tuesday, Nov.2.
From the Coach’s Corner, visit these Web sites:
- AWB – www.awb.org
- Enterprise Washington - www.growwa.com
- Washington Policy Center – www.washingtonpolicy.org
This all about knowing and implementing what’s important for economic development and job creation. You’ll be glad you did.
Options for Hotel Owners – Seattle Ranks Among Worst 5 Cities in Travel Taxes
July 23, 2011 – updated 12:14 a.m.
Yes, hotel owners are panic-stricken – hospitality profits are down in Seattle and everywhere else.
But for the second consecutive year, Seattle ranks among the most-expensive for travelers, and hotel owners want to hike room taxes for a tactic that will not work. Not to criticize, they have better options, which I’ll explain later.
Seattle imposes the third-highest car rental, hotel and meal taxes among the 50 largest markets in the nation, according to a 2011 business study by the Global Business Travel Association Foundation.
Taxes include: A general sales tax, and taxes on car rentals, hotels and meals.
Ironically, the Seattle Hotel Association wants to tack on another $2 tax for each room per night for travelers. That’s in addition to the 15.6 percent in sales and room taxes already levied on hotel guests.
Unfortunately, they think the excess funds should be used in an advertising campaign to boost tourism. The Seattle City Council will vote on the issue.
The five highest-taxing cities: 1. Chicago. 2. New York City. 3. Seattle. 4. Boston. 5. Kansas City.
Ironically, Seattle ranks among the three most-expensive but is only the 15th-largest city in America.
The foundation’s director of research, Joe Bates, says there’s a huge difference among the 50 cities – as much as 80 percent. It’s not surprising that such taxes affect the travel plans of business people.
“If you are a travel manager planning a meeting, this is important information to take into consideration,” says Mr. Bates. “And if you are a retail business attempting to lure travelers, this tax rate differential is a competitive advantage or disadvantage.”
Better Options for Seattle Hotel Owners
In my experience as a confidential business-performance consultant, who has also produced hundreds of radio-television commercials, my sense is that an increase in Seattle hotel taxes to fund an advertising campaign is ill-advised. There are good reasons why stay-cations have been prevalent.
Sometimes you can’t buy the market, especially in the tourism sector for a rainy region in a downturn. In addition, Seattle hotel owners have already committed missteps — three of the 14 reasons for the failure of a marketing campaign (How to Win Your Major Marketing Campaign).
Don’t get me wrong, I love Seattle, but hotel owners would be better served using other less-costly strategies for a positive return on investment.
Short-term, in times like these, it’s much better to be creative in strategy with an effective public-relations campaign and strategic partnerships with contests as the anchor element in a promotion.
Consider a Seattle asset: Alaska Airlines. Why do you think Alaska Airlines is loaded with Seattle passengers in February for flights to warm-weathered Mexico and Hawaii? Conversely, Alaska Airlines would love to strategize as a partner in savvy promotions to bring tourists to Seattle in the wintertime.
Long-term, strategies should include sharing the cost with other groups in underwriting image-building initiatives. For example, Washington Filmworks (www.washingtonfilmworks.org) and the Seattle Film Office (www.seattle.gov/filmoffice) to promote filmmaking.
It was a win-win with these two organizations until legislators killed a great tax-incentive program and opportunities for growth (How Washington Fails in Filmmaking for Economic Development). Maybe it happened but I don’t recall the Seattle Hotel Association lobbying the Legislature last session.
Films create emotions, which fill hotel rooms in rainy weather by helping to overcome resistance by winter travelers who’d prefer to visit sun-soaked locales.
So, a two-pronged strategy — a strategic public-relations program and partnering for image-building films — are the solution.
Oh, by the way, filmmaking also creates jobs while enhancing both the city’s and state’s economic image. In terms of public policy – for a region that’s thirsting for jobs and tax revenue – hotel tax increases and eliminating tax incentives are deterrents to economic development.
Consumers, out-of-state corporations and small businesses have budgets, too.
From the Coach’s Corner, are you surprised Washington state also doesn’t even rank among the top 10 pro-business states? That’s according to a 2010 study by Pollina Corporate Real Estate.
Pollina’s 2010 top 10 pro business states:
- Virginia
- Utah
- Wyoming
- South Carolina
- North Carolina
- Nebraska
- Kansas
- South Dakota
- Alabama
- Missouri
Here’s more information.
Over-taxing business travelers and maintaining anti-employer public policies hurt Washington state’s business competitiveness. Job creation and economic health will not be enhanced. The prescription: A heavy dose of economic patriotism.
“The economy is bad. It’s so bad, third graders in China are being forced to take second jobs.”
-Jay Leno
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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 complementary chat about your business situation or to schedule Terry Corbell as a speaker, why don’t you contact him today?
Big Surprise in Washington State Race for U.S. Senator
July 17, 2010
A new Rasmussen poll indicates a three-time incumbent senator might be in trouble. Sen. Patty Murray (D-WA) continues to slide in popularity. A two-time unsuccessful gubernatorial candidate, Dino Rossi; and a former National Football League star turned-farmer, Clint Didier, now hold narrow leads in the Senate race.
“Incumbents that fall short of 50 percent at this stage of a campaign are considered potentially vulnerable, but worrisome for Murray is that this is her poorest showing of the year,” according to an article at Rasmussen. “She was reelected to a third term in 2004 with 55 percent of the vote.”
Mr. Rossi and Mr. Didier both have 48 percent of the responding voter preferences against Ms. Murray and her 45 percent. Fewer than 10 percent are undecided or indicate a preference for other candidates.
The poll was conducted with likely voters.
“Washington’s Senate race looks increasingly like a referendum on incumbent Democrat Patty Murray with two Republican candidates edging past her this month,” according to the article.
Rasmussen reports Ms. Murray and Mr. Rossi have been tied in every poll in 2010.
“Incumbents that fall short of 50 percent at this stage of a campaign are considered potentially vulnerable, but worrisome for Murray is that this is her poorest showing of the year,” “She was reelected to a third term in 2004 with 55 percent of the vote.”
The Washington state race is a toss-up – one of nine according to Rasmussen Reports’ Senate Balance of Power rankings.
But in Washington state, the biggest decline for Ms. Murray occurs in a matchup with Mr. Didier.
“Last month, Murray led Didier, a former professional football player, 48 percent to 40 percent,” states Rasmussen. “Prior to that survey, Didier’s support had ranged from 30 percent to 37 percent since January. In the same time period, Murray earned 47 percent to 51 percent in match-ups with Didier.”
A third Republican candidate is also faring better against Ms. Murray.
“… businessman Paul Akers, continues to trail Murray. But in the latest survey, the incumbent leads Akers 46 percent to 41 percent, while a month ago she was ahead 48 percent to 38 percent,” states Rasmussen.
In every matchup, Republicans are favored by men and Democrats get support from most women.
Among Independent voters, Mr. Rossi has a slightly more than two-to-one edge, and Mr. Didier performs almost as well. Mr. Akers is also ahead but not as much as either Mr. Rossi or Mr. Didier.
“Just seven percent of Washington voters now rate the economy as good or excellent, while nearly half (49 percent) say it’s poor,” reports Rasmussen. “Thirty percent think the economy is getting better, but 45 percent say it’s getting worse.”
The poll indicates 72 percent believe the U.S. is in a recession.
“Support for last year’s $787-billion economic stimulus plan which Murray supported is higher in Washington than it is nationally with voters in the state closely divided over whether it helped or hurt the economy,” states Rasmussen. “But even in Washington, only 30 percent think the increased spending in the stimulus plan created new jobs, while 52 percent disagree and say it did not create any new jobs.
As far as job creation is concerned, responding voters – by 58 percent to 25 percent – prefer cutting taxes vis-à-vis more government spending.
“Fifty-four percent of Washington voters favor repeal of the national health care bill, which Murray supported, while 44 percent oppose repeal,” according to the pollster. “This is in line with voter sentiments nationally and includes 43 percent who Strongly Favor repeal and 37 percent who are Strongly Opposed.”
The poll’s margin of error is plus or minus four percent.
From the Coach’s Corner, my sense is that factors for the changes reflected in this Rasmussen poll include voter unrest over new taxes and violation of transparency standards by the Washington State Legislature. See: Tax Increases Will Cost Washington Businesses, Consumers $6.7 Billion Next 10 Years.
Analysis: Steps for Economic Success in Washington State
July 29,2009
In assessing economic-development strategies, it’s shortsighted to merely look at the headlines. But you can tell a lot about the economy by taking a cursory look at the unemployment rate. Unfortunately, Washington ranks No. 34 in the nation – tied with Missouri at 9.3 percent.
How can government brighten the unemployment picture? The effectiveness of economic policies depends on government and whether it has economic wisdom. That means allowing for economic and political liberties.
Economic liberty is the freedom to make decisions in a free-enterprise system. Political liberty is possible when government stops its unproductive practices so entrepreneurs can have the necessary tools to create jobs and take full responsibility for their successes or failures.
Here are economic strategies for government to consider:
Discernment of Main Street’s issues. Listen to business. This column warned about economic conditions long before the recession was recognized. My confidential discussions with businesses revealed an undercurrent of pending economic chaos long before the recession was publicly acknowledged.
Encourage consensus building among stakeholders, including business and unions. Adversarial relationships and chest-beating fail to create and maintain jobs. Better communication among stakeholders is paramount. Management must listen to workers, and develop quality plans and implement them. Unions need to understand how business works. In other words, choose to disagree but focus on principles, not personalities.
Prioritize government services. You might recall the inspiring headlines when Gov. Gary Locke implemented Priorities of Government budgeting. The goals were fiscal responsibility while providing quality services. But when was the last time we enjoyed such headlines? To most businesspeople, government is not concerned with performance, but is seen as focused on imposing financial barriers and justifying costs.
Develop budgets that enable us to live within our means. Admirably, Gov. Chris Gregoire publicly denounced tax increases when the economy soured. It was heartening news.
But public servants have a history of failure to treat budgets as they would their own pocketbooks. You might recall when state spending skyrocketed by an average of more than 17 percent per biennium – so voters passed Initiative 601. They obviously wanted spending limits, but the Legislature amended I-601 seemingly countless times. To make matters worse, a lawsuit was filed when government played what was described as a shell game to artificially manipulate spending limits.
Another challenge: Underfunding of government pensions. In addition, except for many big-business CEOs, public-sector pensions are too laissez-faire compared to the private sector – a time bomb set to go off.
Quality government behavior. Many government workers try to do a good job. But some employees overseeing business, e.g. Department of Revenue employees, do not understand their own regulations.
In a panic to increase revenue, they’ve forced businesses to waste time and resources to justify tax filings because the agency employees were unfamiliar with their own guidelines.
Agency employees could learn another lesson from the private sector. Companies succeed when they correct their mistakes and apologize to customers.
Create a healthy tax system. Start by listening to small business owners – review and correct the state’s business and occupation tax. Washington’s B&O tax is unfair. The tax is based on a business’ gross receipts instead of net profits. It’s a major reason why new companies fail to sustain their workforces and close down.
And why should companies carry the burden for more than 50 percent of state and local taxes? Washington is the second-highest in the nation for unemployment insurance taxes and the third-highest for workers’ compensation benefits.
Government must review its policies, procedures, taxes, fees and charges. At every juncture, governments should ask the question: “Is this productive for economic development?”
Outlaw predatory financial practices. Thousands of state residents have been victimized in financial services – from credit card companies to post-transaction marketing. Work with representatives in Congress to outlaw predatory behavior by credit card companies and debt collectors.
To his credit in 2009, Attorney General Rob McKenna requested lawmakers to pass a law that would stop the deceptive Internet marketing behavior of a Bellevue company, Intellius. But lawmakers failed to act.
Instill greater public confidence. Today’s public officials can learn lessons from President Franklin D. Roosevelt and his fireside chats on radio to reassure Americans. Businesses will start making investments in their businesses and hiring workers, if they have reasons to be confident.
After developing strategic plans, government leaders at all levels – the state, counties and cities – can be a positive influence. Like any good marketing campaign, they should tell the public what they’re going to do to improve the economic climate. Remind citizens as they enact new policies and procedures. Then, tell businesses about their economic accomplishments.
If governments get this done, Washington will become the leader.
From the Coach’s Corner, it’s helpful to be mindful of I call “The 20 Characteristics of a Healthy Economy.”
Here are my 20 healthy-economy characteristics:
- A big-picture consensus and strategic plan for economic development
- Action plan resulting in increased entrepreneurship – local businesses that hire more local workers
- Diverse industry base of employers
- Success at encouraging families and businesses to invest and locate in the community
- Family wage jobs
- Decreased need for social services
- Balance between responsible development and redevelopment without driving out residents or businesses
- Infrastructure and solutions, including diversity of land uses that are self-sufficient without relying on outside sources for repeat, large funding
- Growth that doesn’t damage the environment or use excessive space
- Accessibility and equity for residents in education, employment, housing and transportation
- Happy and healthy residents who have a strong pride in the community
- Festivals and celebrations
- Positive public image
- Enhanced shopping opportunities
- Anchor projects that encourage commercial, retail and related mixed uses
- Optimal tax revenue
- Continuous efforts for beautification, for improvement in quality roads and transportation
- Widespread charitable contributions for robust nonprofit organizations – vibrant civic and service clubs, churches and their respective organizations, and other groups.
- Open and creative community leadership that encourages and nurtures emerging leaders
- Ongoing review and fine-tuning of the strategic plan for economic development and creation of jobs
