WPC Hits Target, but Will Washington State Legislature?

Dec. 7, 2011 –

The clock is ticking. The state government spends $41 million each day but the Washington State Legislature has made little, if any, progress in its 30-day special session to solve a $2 billion deficit. Meantime, Office of Financial Management Director Marty Brown sent an email to lawmakers warning them action is needed – now.

No floor votes. Nada. Nothing.

At the request of Gov. Chris Gregoire, the special session started Nov. 28. The state is scheduled to spend more money than it will have for policies, programs and salaries.

Earlier, the governor proposed a half cent sales tax increase to raise about $500 million. The events prompted this Biz Coach piece: Budget Debate: Will Legislature Read Seattle News Media Headlines?

Actually, more than balancing the budget, the state needs to reform government for a healthy economic environment.

“While it’s true that state revenues are projected to grow by $2 billion over the previous budget cycle, this time there’s no federal bailout to prop up past overspending,” said a WPC press release.  “Some in Olympia are talking tax increases, yet our state’s fragile economy, and especially small businesses, are struggling to survive as it is.”

The Washington Policy Center (WPC) has some ideas worth adopting – the suggestions were sent in a  letter to Governor Gregoire.

WPC’s recommendations:

  1. Provide the governor discretionary authority to cut spending. Adopt performance-based Priorities of government budgeting to control the rate of spending growth.
  2. Restore the legislature’s ability to amend collective bargaining agreements.
  3. Direct state managers to use more competitive contracting.
  4. Repeal unaffordable programs instead of suspending them.
  5. Bring state employee health care premium contributions in line with those of the private sector.
  6. Ask state lawmakers to set aside a 5 percent reserve when adopting the next biennial budget.

Following its statewide conference to discuss small business issues, WPC sent the legislature these recommendations:

  1. Revisit the voluntary settlement agreement as passed by the state Senate in 2011 – $1.2 billion
  2. Reform the displaced worker retraining program
  3. Simplify sales taxes by using an ‘origin based’ tax (as opposed to a ‘destination based’ tax) and creating a flat rate for out-of-state businesses
  4. Review regulations to ensure that Washington rules don’t exceed federal regulations
  5. Enact Tort Reform
  6. Do no harm in transportation policy – do not reduce road lane capacity
  7. Do not follow Seattle in enacting statewide paid sick leave

From the Coach’s Corner, see WPC’s Coverage of the special legislative session here.

Here are related columns:

“There’s no trick to being a humorist when you have the whole government working for you.”

Will Rogers



Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

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.

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.

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