When It Comes to Costs on Business, Some Lawmakers Aren’t Interested in the Big Picture
On February 22 I was asked to testify before the Senate Commerce & Labor Committee on SB 5292 (companion bill is HB 1457), a bill that would significantly expand the paid family leave law that was passed in 2007 but never implemented because a funding source was never agreed upon.
SB 5292 would pay for the expanded program via a new payroll tax on employers and workers. Proponents of expanding paid leave testified the new tax is not burdensome. Their argument is that the family leave tax would start at “just” .2 percent of wages in 2014 and then double to .4 percent of wages in 2016 (conveniently omitting that after 2016 the tax will be whatever is necessary to pay for the administrative costs and benefits of this new state program).
My testimony recommending against an expansion of paid family/medical leave centered on a recent conversation I had with a small business owner who compared the burdens of doing business in Washington State to his experience decades ago as a military recruit.
He recounted how basic training included running six miles with a progressively heavier backpack. The first mile began with one ten-pound rock in the pack, the second with another, and so forth until the recruits were carrying 60 pounds while running the sixth mile. He said in the first mile the ten pounds was barely noticeable, by the third mile he could definitely feel the 30 pounds but it was bearable, and by the sixth mile the 60 pound burden was back-breaking.
He said doing business in Washington is like running with a backpack full of rocks. Any one of the state’s many costs of doing business isn’t that noticeable, but added together the cumulative burden is crippling.
I thought this analogy brilliantly and simply explained the cumulative impact of government mandates. In my testimony, I then began to list some of the ten pound rocks Olympia lawmakers have placed on businesses:
- Workers’ compensation taxes have increased 66% in ten years, with another 40% increase planned for the next ten years.
- Washington employers pay the 5th highest unemployment tax in the nation.
- Washington mandates the highest minimum wage in the nation.
- Washington employers bear the 9th highest business tax burden (state plus local) in the nation.
- Washington is one of just seven states that tax gross receipts, so businesses pay even when they have no profit, all for the “privilege of doing business in Washington.”
I only made it to the first “rock” of workers’ compensation costs before I was shut down by a member of the committee (who happens to be the sponsor of SB 5292) who objected to my testimony. “Stick to the bill” is what I was told.
This is a perfect example of the disconnect between some lawmakers (many of whom have never worked in the private sector, much less owned a business) and the realities of running a business in Washington State. In their minds, a new tax to pay for paid family/medical leave is no big deal because the tax isn’t going to break the bank.
And that is the myth I was trying to address in my testimony. Individually, none of these costs are back-breaking for a business. But when weighing the total government burden, the collective effect of all government mandates is what matters.
The lawmakers supporting SB 5292 didn’t want to hear the rest of the story. Because the rest of the story clearly demonstrates that employers in our state are already paying higher business costs than most other states; adding paid family leave would become another of the many costs of doing business already borne by employers and their employees in Washington, and these costs together have a negative effect on our state’s business climate. This explains why Washington has one of the nation’s highest business failure rates.
The cost of a paid family/medical leave entitlement has a seemingly innocuous impact on employers, but businesses in our state are already at their breaking point. Another rock in the backpack is the last thing our job creators need.
