PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

State of the Week: Washington

By at 2 July, 2018, 9:04 pm

A State of Policy Extremes

 

by Raymond J. Keating-

When it comes to policymaking affecting entrepreneurship and small business, Washington is a state of extremes.

According to SBE Council’s Small Business Policy Index 2018: Washington ranked seventh best among the 50 states.

“Small Business Policy Index 2018” ranks the 50 states according to 55 different policy measures, including a wide array of tax, regulatory and government spending and performance measurements. 

On SBE Council’s Small Business Tax Index 2017: Washington ranked fifth best among the 50 states. 

“Small Business Tax Index 2017” ranks the states according to 26 different tax measures. Among the taxes included are income, capital gains, property, death, unemployment, and various consumption-based taxes, including state gas and diesel levies.

The Good News on Washington State

Overall, the state offers one of the best policy climates. According to the Small Business Policy Index 2018: Ranking the States on Policy Measures and Costs Impacting Small Business and Entrepreneurship, which I write for the Small Business & Entrepreneurship Council, Washington offers the seventh best public policy climate for entrepreneurship and small business among the 50 states.

The “Small Business Policy Index” arguably offers the most comprehensive comparison of the states in terms of policy decisions affecting the economy.  Of the 55 measures included in this 22nd edition of the Index, 27 are taxes or tax related, 20 relate to rules and regulations, 5 deal with government spending and debt issues, with the 3 remaining measures gauging the effectiveness of important government undertakings.

Among the big positives for Washington is the fact that it imposes no personal, individual capital gains, corporate income, and corporate capital gains taxes. That provides strong incentives for investing in, starting up and building businesses in the state.

However, there are Negatives

For example, the state imposes an ugly gross receipts tax, and the highest state minimum wage ($11.50 per hour). For good measure, the minimum wage in Seattle is even higher – currently standing at an effective $15 per hour.

And then there was the bizarre story of Seattle’s head tax. By a vote of 9-0 in May 2018, the city council voted to impose a $275-per-employee tax on larger businesses (some 600 firms). A tremendous backlash led to the same city council voting 7-2 to repeal the tax within a month. The repeal obviously was good news, but the original imposition of the tax and the impulse behind such a measure remain deeply troubling.

Just because Washington ranks so well on the “Small Business Policy Index” certainly does not mean that will always be the case. The Index is all about decisions made by policymakers.

State and local officials would do well to emphasize a lack of state income taxes, and work on reining in an assortment of other tax and regulatory burdens. Washington should be vying to offer the best policy climate for entrepreneurship and small business, not looking to undermine what the state has accomplished on this front.

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Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

 

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