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Wednesday, July 11, 2007

Forbes to Dino Rossi: Really Sorry, Dude.

posted by on July 11 at 9:30 AM

Forbes magazine is handing Gov. Christine Gregoire a campaign gift.

You’ll remember that Republican Dino Rossi campaigned in 2004 on improving Washington state’s business climate. He said it was his number one priority.

Well guess what? Forbes is coming out with its rankings of the 50 states by business climate and Washington State is the feature story.

Why? Because it made the biggest leap over the last year from 12th Best State to do Busines to 5th Best State to do Business.

From the lead paragraph of the Forbes round-up:

In’s second annual Top States for Business, Virginia may be the top-ranked state for the second straight year, but Washington is the big story. The biggest mover (tied with Tennessee), rising from 12th to fifth place, Washington is also the only state to finish in the top five in three main categories (labor, regulatory environment and growth). And Washington’s numbers are up across the board when you look both backward and at projections into the future.

One of Washington’s big strengths is reduced red tape. The Office of Regulatory Assistance helps individuals and businesses sort through the many layers of government regulation all in one place. If a number of state agencies need to be contacted for a new business to obtain permits, it can be handled from one source.

That’s part of why Washington has had more businesses open per capita the past three years than any other state in the U.S. Another reason: A culture of innovation. “Innovation is the common thread throughout every industry in Washington,” says Juli Wilkerson, who heads up Washington’s economic development office. Venture capital spending in the state is the fifth-highest in the country, totaling $2.6 billion the past three years.

Man, Rossi and the Republicans just got seriously tasered. Their whole thing is supposed to be that Gregoire is expanding government at the expense of the marketplace. Actually her budget is just keeping up with the economy. And apparently, she’s doing a damn good job with the marketplace.

The Forbes article ends with this bullet to Rossi’s head:

With a highly educated work force and a pro-business regulatory environment, Washington is poised to remain one of the best states to do business in—and to climb even higher on next year’s list.

RSS icon Comments


The core reason why Washington is so good for business is because the combined state and local tax burden falls too heavily on people. Instead of progressive taxes on businesses (the more employees, the bigger the tax; the greater the dividends paid, the bigger the tax; the more profit, the bigger the tax; etc.), regressive sales taxes that hit the poorest people the hardest make up too much of the overall revenue streams to governments.

Business owners like Washington: no income tax, and WAY too much sales tax. They pay very little, working poor families, the unemployed, the elderly on fixed incomes - they get hit hard by what taxes our fearless leaders decided to impose.

The ST2/RTID behemouth is a great example of why businesses like Washington. Those neverending taxes would make the regressive tax structure here far worse. And who benefits from what those taxes would pay for? You guessed it: business owners. The wealth of business owners and property developers in downtown Bellevue, downtown Seattle, and downtown Renton would skyrocket. Poor folks would be hit way too hard. Screw that.

Posted by obdurate | July 11, 2007 9:44 AM

I moved here some years ago, and one of the draws for relocating was 'No income tax'. 'obdurate' is full of shit. Other states have income taxes AND high sales taxes and special taxes too. I hate how business fatcats line their pockets, but facts is facts, and it's nice to be in a part of the country that is not stagnant and dying, like so much of flyover country is currently doing.

Posted by Leftie in Sea | July 11, 2007 10:52 AM

The Gov. deserves credit for the work she has done. She has kept an eye on exports. The B & O tax is a bear, but probably the only limitation in the state. The State is awash in cash, knowledge, industrial capacity, booming sectors (software, aerospace, life sciences and food), trade partners who love us and people who want to live here.

Dino Rossi needs to review "the facts on the ground"

Posted by Lawrence Molloy | July 11, 2007 11:18 AM

Thank you for posting, Josh. This is such a burn and particularly well-timed.

Posted by hee | July 11, 2007 11:18 AM

@2, you are correct, not to mention that some places, like New York City, have a CITY income tax in addition to their STATE income tax...not to even go into how much higher their property taxes are.

Posted by Justy | July 11, 2007 11:44 AM

"The core reason why Washington is so good for business is because the combined state and local tax burden falls too heavily on people."

That is complete and utter b.s. The business community has long complained about Washington's state and local tax system precisely because businesses pay an unusually high percentage of total taxes in Washington. The Gates Tax Structure Study (a pretty moderate and objective group) specifically noted: "Our proportion of state taxes colelct from businesses compared to households is dramatically different from norms: 46 percent from business in Washington compared to a western state average of 30 percent." Tax Alternatives for Washington State:
A Report to the Legislature at p. 29. This makes since when you consider that businesses pay all of the B&O tax and a substantial percentage of sales and use taxes (we are talking about sales/use tax paid by business as a consumer, not taxes collected by retail businesses). In fact, one of my biggest concerns about an income tax is that it is likely to shift liability away from business and onto individuals. As a generality, the biggest winners under a traditional state income tax system would probably be the poor and businesses. (The benefit to business would be offset some by the tax hit their employees will take).

There are a number of big problems with the fairness of Washington's tax system, but the share of taxes paid by business isn't one of them.

Posted by Bob | July 11, 2007 1:38 PM

The ignorance on display here is breathtaking.

The overall state/local tax burden around here is about the most regressive in the country. The poor ARE paying way more than their fair share, and post # 1 is correct that the RTID/ST2 measure would make things much worse.

Here are some real data showing just how regressive the combined state and local taxes around here are, from WSDOR:

On page 14 it shows us near the top with an 8.9% sales tax rate. That figure now is 9%, because of the new local "Transit Now" tax. Now look what would happen if the new RTID and ST sales taxes are approved – we'd have the sixth highest sales tax rate (9.6%) in the country.

Those very high sales taxes make our tax structure really bad for those who can least afford it. Those who have little in the way of resources are hit the hardest. Now, check out the charts on pages 38 and 39:

When you combine state and local tax rates, we are JUST ABOUT THE WORST in terms of regressive taxes. And the Roads + Transit ™ measure would make that bad situation much worse. We'd be third or fourth worst in the country in terms of regressive taxation structures. Plus, the MVET rate would go up and only about 10% of MVET revenues come from businesses (people own vehicles, not businesses for the most part).

The best way to improve the tax structure would be to rely more heavily on user fees, especially for transportation (gas tax, tolls, farebox increases, per-mile driving charges, etc.).

It is true that the B&O tax is unduly burdensome on unprofitable businesses. But the burden on large businesses, and profitable businesses and their owners, is much lower than in most states. A tax such as several dollars per month on employers with greater than 6 employees would be progressive and raise revenue from entitities that can afford it, instead of just pumping up sales taxes. That’s one example, there are others.

Posted by cookin' | July 11, 2007 2:45 PM


I didn't say Washington taxes weren't regressive--they are. I was merely correcting the clearly erroneous statement @1 that "The core reason why Washington is so good for business is because the combined state and local tax burden falls too heavily on people." That is false. Washington busiensses pay a very high percentage of total taxes compared with other states; individuals pay a relatively low percentage of total taxes compared with other states.

One of the problems with the system is how the tax burden is distributed among individuals--the regressivity. I agree that the poor pay more than their fair share. However, unless you plan to cut services, this means the tax burden needs to be shifted to the middle and high income earners.

While I understand and agree with your regressivity concerns, your remedy (user fees and an employee head tax) is surprising. Many of the user fees that you mention will fall disprorionately on the poor who may need access to a car because as they are pushed by housing costs further from employment centers and further away from good transit. Sin taxes and user fees are an easy way to raise money and influence behavior, but they make our system more regressive. I don't understand why you'd want to tax a business based on the number of employees. You acknowledge that the current B&O tax based on gross revenue is an unfair tax because it is imposed without regard to profit. Of course, number of employees is a worse proxy for profit than gross revenue.

Posted by Bob | July 11, 2007 3:56 PM

whatever. NO higher sales taxes, even if it would mean more trains in thirty years.

Posted by Whelp | July 11, 2007 5:26 PM

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