House tax increase proposal would eliminate 9,800 private-sector jobs

Jason Mercier, Government Reform director
jmercier [at] washingtonpolicy [dot] org

Erin Shannon, Small Business director
eshannon [at] washingtonpolicy [dot] org

OLYMPIA - Job creation has been one of our state’s most important issues since the Great Recession started. After years of high unemployment and a lagging economy, there aren't many who disagree that encouraging job creation is, and should be, the top priority for lawmakers right now. Both parties have jumped on the jobs bandwagon — Gov. Inslee’s promise to “focus like a laser beam” on job creation was a major platform of his gubernatorial campaign, and House Democrats say they “are working on issues that matter: creating good jobs and a competitive business climate.” Of course, when talking about creating jobs to spur the economy, it is implicit that private-sector jobs are the jobs that will accomplish this goal.

Washington Policy Center has analyzed the tax package to demonstrate the impact on employment. But based on economic modeling by WPC and the Beacon Hill Institute on the House Democrats' proposed $1.3 billion package of tax increases, it seems the only “good jobs” being created are government jobs.

According to WPC, using the Beacon Hill Institute’s economic modeling of $1.1 billion in proposed tax increases, that plan creates plenty of government jobs, but private-sector jobs don’t fare nearly as well.*

  • 9,800 private-sector jobs would be lost in 2014
  • 5,236 government-sector jobs would be created in 2014
  • 4,564 net jobs would be lost in 2014

The biggest driver impacting the job loss would be the cumulative effect of the tax increases. Simply put, the $1.3 billion in proposed tax increases would reduce take-home income for the citizens of Washington. The House proposal breaks the promise Democratic lawmakers made in 2010 that the temporary, three-year B&O and beer tax increases they enacted would end on July 1, 2013 (see floor statements on March 7, 2010 and April 12, 2010). Here is a list of the proposed tax increases:

  • Repeal preferential B&O rate: Travel agents & tour operators - $15 million
  • Repeal preferential B&O rate: Insurance agents - $46 million
  • Repeal preferential B&O rate: Resellers of prescription drugs - $29 million
  • Repeal preferential B&O rate: Stevedoring - $28 million
  • Narrow: B&O and sales tax exemptions for import commerce - $24 million
  • Repeal exemption: Sales tax on bottled water - $52 million
  • Repeal exemption: Sales tax for non-residents - $64 million
  • Repeal exemption: Sales tax on janitorial services - $36 million
  • Repeal exemption: Public utility tax on interstate transport, in-state portion - $63 million
  • Repeal exemption: Extracted fuel - $41 million
  • Repeal: Handling losses fuel-tax deduction - $5 million
  • Narrow: High-tech R&D B&O credit - $23 million
  • Repeal exemption: High-tech R&D sales & use tax exemption - $56 million
  • Repeal sales tax exemption for residential landline telephone service, other tax parity changes - $110 million
  • Estate tax clarification & parity: Tax estates equally w/o regard to marital status - $160 million
  • Extend 0.3% B&O surcharge - $534 million
  • Extend & lower Beer tax - $59 million

A net loss of nearly 4,500 private-sector jobs will certainly not help our state’s sluggish economy. The jobs that will turn our state’s economy around are those created by the private sector. Under this proposed tax package, nearly 10,000 Washingtonians could lose their jobs, and thousands of job opportunities will be shifted from community-based businesses to the public sector.

*Note: For technical reasons, the $160 million in estate tax increases were not included in the simulation.