Business Climate

WPC's Center for Small Business focuses on improving Washington's small business climate by working closely with business owners and policymakers. The Center provides accurate information and analysis on the state's regulatory climate, tax structure, health insurance systems, and more.

What's New

U.S. District Court Smacks Down FCC's Net Neutrality Assertions

April 6, 2010 in Blog

The Internet is awash today with news out of the D.C. District Court that the FCC has no authority to impose Net Neutrality regulations on Internet Service Providers. (Read the 36-page Court decision)  This big news comes on the heels of the FCC's National Broadband Plan, which they released three weeks ago.

WPC to “Lead the Way” for small business

April 5, 2010 in In the News
Wenatchee Business Journal
Source: 
Wenatchee Business Journal
Date: 
Monday, April 5, 2010

How Much of a Hit Will Business Take from WA Legislature?

April 2, 2010 in In the News
The Biz Coach
Source: 
The Biz Coach
Date: 
Friday, April 2, 2010

Are Green Jobs Growing?

April 2, 2010 in Publications

As the state’s unemployment rate rose to 9.5 percent, Governor Gregoire rolled out her own news of economic success, claiming job growth in the green sector of the state’s economy. To support her claim, the Governor cites the findings of the 2009 Washington State Green Economy Jobs report which found that there are more than 99,000 green jobs in Washington.

"Small Business Taxpayer Bill of Rights" legislation introduced

April 1, 2010 in Blog

Though we're still mired in special session, today Reps. Campbell and McCune introduced HB 3217, the "Washington small business taxpayer bill of rights." Basically, the legislation aims at:

1) Provides relief from unintentional mistakes regarding state tax obligations;

2) Requires the Department of Revenue to provide information about a business's industry-specific tax obligations at the time of tax registration; and,

3) Requires DOR to adhere to any specific official written advice unless the department later modifies the advice in writing.

The legislation applies to small businesses registered as a sole proprietorship, a limited liability business in its first year of business if its assets amount to less than $500,000, or any small business with less than $500,000 in gross income in the prior calendar year.

Basically, the le!
gislation looks to waive penalties and interest on penalties for small or new businesses that incur these penalties and interest through unintentional actions. The bill also confers "rights" upon the qualified business that DOR must supply certain tax information to these businesses and must supply, in writing, explanation of any tax deficiency assessments, penalties, interest against the small business.

It's doubtful this legislation will go anywhere, and the definition of "not intentional" tax violations is pretty vague and will need further tweaking. But with our tax code becoming more and more complex each session, and now with Congress wreaking havoc on the federal tax code with health care reform, perhaps a little codification of taxpayers' rights is in order. 

Who bears the brunt of taxes in WA, businesses or people?

April 1, 2010 in Blog

A new report released this week from the Council on State Taxation, along with Ernst and Young, show the precarious balance between who bears the tax burden in Washington state, businesses or individuals. 

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. Businesses don't pay taxes. People do. As the COST report points out,

"...the legal liability of businesses are ultimately passed forward to individuals through higher prices or backward to labor (employees) and owners of capital through lower income. By analyzing the economic incidence of taxes, the product of the shifting taxes to consumers, labor and capital, it becomes clear that taxes levied on business are ultimately borne by consu!
mers, employees, and owners of capital. What, then, is the rationale for taxing businesses?"

That rationale, is the businesses need to pay for their fair share of government services (infrastructure, property right enforcement, regulatory and licensing, et. al.), whether the business benefits directly or indirectly. Ok, fair enough, there shouldn't be any freeloaders. But the report goes on to say that,

"If state and local business taxes were equal to the value of the benefits business received from state and local public services, they could be considered a payment for services and taxes would not influence business locations decisions or impact competitiveness. However, if state and local business taxes exceed the value of the benefits received from government services, the difference represents an excess cost to business that will reduce profitability in the absence of shifting the tax through higher prices or lower paym!
ents to labor. When such excess costs exist, they can affect a!
company's choice of locations."

As it turns out, in nearly every state the business tax burden exceeds the value of government services that directly benefit business, regardless of how you take into account the level of education spending.

What then, is Washington's ratio of state and local taxes on benefits versus spending benefiting businesses? 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. The national average is 3.5:1. Also, Washington is higher than Oregon (2.4:1) and Idaho (2.8:1).

Even when assuming, on the low end, that 50% of education spending directly benefits business, Washington is still above the national average at 1.4:1 -- the national average being 1.1:1. Again, businesses in Oregon (0.8:1) and Idaho (0.9:1) are both better off with this calculation.

There are lo!
ts more interesting factoids in this report, but one other interesting tidbit is the comparison of tax revenues between fiscal years 2005 and 2009. 

Even though 2009 was in the midst of the Great Recession for tax revenue, in Washington revenues were up 15.2% over 2005 levels in the amount collected from businesses and up 17.6% in the amount collected in total state and local taxes, which is pretty much along national trends. Yet, even with these increases, Washington and most other states are facing the reality of making drastic cuts in spending, raising taxes, or both.

Washington's $200 million question: taxes or more cuts?

March 31, 2010 in In the News
The Herald (Everett)
Source: 
The Herald (Everett)
Date: 
Wednesday, March 31, 2010