CEO Magazine Thinks Washington State has Slipped over Last Five Years
CEO Magazine, which issued its annual "Best/Worst States for Business" this week, ranked Washington state below average at 34th. The more telling statistic from this survey of over 500 CEOs is that our state has fallen 18 spots over the last five years. In 2006 Washington ranked an above average 16th.
The survey takes into account "Taxes and Regulation," "Workforce Quality," and "Living Environment."
The best states: Texas, North Carolina, Florida, Tennessee and Georgia.
The worst states: California (50th), New York, Illinois, New Jersey and Michigan.
From the survey results,
"'Do not overtax business,' offered one CEO. 'Make sure your tax scheme does not drive business to another state. Have regulatory environment and regulators that encourage good business -- not one that punishes businesses for minor infractions. Good employment laws help too. Let companies decide what benefits and terms will attract and keep the quality of employee they need. Rules that make it hard, if not impossible, to separate from a non-productive employee make companies fearful to hire or locate in a state."
Seems like pretty good advice. It's unfortunate that enough CEOs nationwide think Washington is doing a fair-to-poor job at implementing such policies. But at least we're not Illinois, which has fallen 40 spots in five years. Ouch.
Comments
CEO Magazine
One of the few things the WPC has ever said that makes sense is that "businesses don't pay taxes; people pay taxes." That statement is in the introduction to a report it prepared to defend the B&O tax, which it acknowledges is Washington's "most hated tax." Another gem of wisdom offered by the WPC is that the strongest tax code is one that offers "a fair field and no favors." The WPC never explains why a flat personal income tax without loopholes does not satisfy its own definition of a strong tax code.
It seems to me that a tax code that relieves businesses of ALL tax obligations, allowing their management, their employees, and their investors the full benefit of good management, good marketing, and reasonable pricing would be the best one possible. A tax code that makes products more expensive (through a stupid tax like the B&O tax and ever-increasing sales taxes added to the base price) and increases overhead via property taxes and vehicle taxes only diminishes the income of everyone who has a stake in a business.
Many Washington residents drive to Oregon to avoid sales taxes, and many more can simply shop at military stores or buy goods online from a tax-free source (e.g., Florida) that has no permanent presence in Washington. Our state and our businesses lose every time. No wonder Washington's business-friendly rank is dropping like a stone and its deficit is ballooning. If Mr. Gipson and his fellow WPC directors can't figure that out, I think they ought to pursue another line of work.
Thanks for commenting Jim.
Thanks for commenting Jim. I'm not sure where you see WPC defending the B&O tax, as numerous publications we've published talk about its unfairness. I assume the report you cite is the "Replacing the B&O tax with a Single Business Tax"?
We have never, to my knowledge, spoken out against the flat income tax with no loopholes that you cite either. We have expressed reservations, serious reservations, about a corporate and/or personal income tax that is progressive or, in the case in I-1098, only hits a small portion of earners. In fact, a flat income tax with little to no loopholes is a very intriguing idea but not one that has come forward in the legislative process. All the proposals I have seen contain a progressive mechanism to punish high earners and are filled with exemptions and loopholes. The bottom line is most people in this state do not trust policymakers in Olympia to craft the kind of tax code I think you and I could agree upon. So, with this in mind, we issued the B&O report which does not get rid of the gross receipts tax, but does attempt to lessen the impact on unprofitable businesses, as well as gets rid of many of the loopholes.
As far as out-of-state tax issues is concerned, this is mostly a federal issue, as I'm sure you're aware states must comply with the Quill Supreme Court decision. Quill needs some updating but I agree with the Court's interpretation of not requiring a business to comply with over 8,000 different sales taxing jurisdictions. I would be in favor of an origin-based sales tax system rather than this destination-based system the Streamlined Sales Tax project is advocating. This is not a perfect solution because yes, businesses that do a lot of online shipping, might move to non-sales tax states like Oregon, but then the onus would be on Congress to craft a national solution, rather than the current situation where states are bumping up against Quill, causing a lot of confusion and outrage and lawsuits (see Amazon vs. N.C., TX, NY et al).
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You say, " . . . a flat income tax with little to no loopholes is a very intriguing idea but not one that has come forward in the legislative process." Well, what is the WPC for if not to propose and defend creative ideas? If you are waiting for someone to do it for you, my 10th District state representatives and senator know where to reach me. With regard to the B&O tax, your report just said that it will "take time to fix it," as if the people who dreamed it up and the WPC haven't already had about 78 years to do so. Your B&O "fixes" have just been exemptions, which only decrease revenues and toss the hot potato to someone else. It still is a lousy tax, so just dump it and be like the 48 other states that had the good sense not to enact one.
"As far as out-of-state tax issues are concerned," did you miss the point or just intentionally inject a red herring to muddy the issue? My point was that online buying decreases state sales tax revenue or diverts the revenue to other districts, and the state and the federal government are not likely to do a thing about it.
You certainly know as well as I do that the only tax that can be applied equally across the board is a flat income tax, which IL, IN, MA, MI, NH, and TN already have. Why they haven't also made it their ONLY tax and avoid spending millions of dollars to collect sales and property taxes is beyond me. Maybe they are afraid of offending the people who earn the most money and just don't don't want to give it up. Is that your fear, too?
And another thing. . .
Here is more gobbledygook from a 2002 report written by Eric Montague and referenced in the WPC's 2010 "analysis" of the B&O tax: "Why does personal income growth fall off and government spending increase faster in states that tax personal incomes?
First, he says, "Personal income growth is largely a function of market incentives. When government imposes a tax on earnings, individuals lose incentive to work harder and increase their wages."
Then, he does an about face: "Second, an income tax is not as visible to citizens as, say, a sales tax . . . The obscure nature of an income tax increases the temptation of elected policymakers gradually to increase the tax rate with less fear of political consequences."
Interesting. He starts off by saying that an income tax is so onerous that it stifles incentive, and then he says that it is so obscure that the state can gradually increase the tax rate without fear of consequences. You can't have it both ways.
As a matter of fact, neither assertion makes any sense. If a reasonable (say 10%) tax is deducted from income before the taxpayer receives it, then the taxpayer pays less for everything he buys tax-free. It just becomes part of each taxpayer's budget. "I pay this much for food, this much for clothing, this much for utilities, this much for entertainment and travel, and this much (10%) for roads, health care, education, ferries, public transportation, bridges, ...." Looking at it that way, it's pretty easy to see that what we pay for public services is quite a bargain.
Easy to increase? With Tim Eyman's tax-limiting laws in place, it would be nearly impossible for the legislature to increase a flat income tax.
CEO's Rating
It is interesting that CEO magazine rating of Washington would be so much different than the rating for Fortune magazine. One of the big concerns for business is workforce education and training and another is taxes. I wonder who is supposed to pay for the K-12, colleges and universities.