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Stay Away from Tax Hikes

June 04, 2013 J,

As the special session continues in Olympia, there appears to be little progress in working out a budget. The House and Senate chambers have passed their own versions, but there doesn’t seem to be any progress in coming up with a budget both can agree on. The bipartisan majority in the Senate passed a responsible budget, one that doesn’t raise taxes, provides for adequate reserves, and increases K-12 spending while living within the State’s expected revenues.

The budget passed by the House, however, is not satisfied with $2 billion more in revenue expected in the upcoming budget cycle. It turns to increasing taxes, mainly on businesses, by almost $1 billion more in order to increase state spending by 10%. The bulk of these tax increases – $534 million – come from the Business & Occupation tax on service businesses. A temporary rate increase was passed in 2010, but despite assurances at the time that the surcharge would not be made permanent, that is precisely what is proposed now.

The B&O tax is especially unjust, since it is a fixed portion of gross sales, not profits. The same tax is collected whether the business makes a profit or loses money. The businesses affected by this B&O tax are not rich mega-corporations, they are 144,000 mostly small businesses providing a wide variety of services. This group includes not just your doctor, lawyer and accountant, but your child care center, the beauty salon, the dry cleaner, technical/trade schools and a host of other personal care services. These are businesses already suffering in the recession, working hard to survive. Making permanent a 20% increase in B&O taxes is just another hit to the bottom line that they can ill afford right now.

Some in Olympia argue that this revenue is desperately needed, that it isn’t unfair to target only service businesses, and that it really isn’t a tax increase because it only makes permanent a temporary tax. One thing is certain: at a time when businesses in Washington are struggling in a slow/no growth economy this B&O tax will take $534 million out of the private sector. Growing state spending by 10%, while draining the private sector that supports it is a recipe for disaster.

With the unfortunate passing of state Sen. Mike Carrell, the bipartisan majority in the Senate has temporarily lost their one-vote margin, leaving a real possibility that the House budget might be passed through the Senate before his replacement can be seated. Such a move would be a disaster for cooperation in Olympia, and worse for Washington State’s economy.

We need to contact our Representatives and Senators in Olympia and ask them to support a responsible budget that keeps our commitment to education and other vital services while still living within our means. We don’t need to burden Washington’s small businesses, the job creators, with more taxes.

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