In July, Forbes Magazine ranked Washington as the fifth best place for business in the nation. However, the small business community views the Washington State business climate very differently and says more needs to be done.
First, let’s consider Forbes Magazine. It’s a long way from Wall Street to Main Street, and Forbes clearly is focused on large corporations more than the 300,000-plus small businesses that operate in Washington. In Forbes’ article on the rankings, Boeing, Microsoft, Starbucks and Amazon.com are mentioned. These businesses operate in a very different “world” than the average small business in Washington.
Second – looking at what was evaluated to determine the rankings – we need to examine the first category, “business costs.” Washington ranked 33rd in business costs, including labor, energy and taxes. For small businesses, business costs are the number one problem in their business. Labor costs include wages, benefits, workers’ compensation, Social Security taxes, Medicare taxes, unemployment taxes and much more – and Washington’s costs significantly outpace those of other states. Our business taxes are considered very high, particularly when you factor in the state business and occupation tax which is a tax on gross receipts and equivalent to a 15 percent business income tax (that would be about the highest in the nation).
The people pleased with the ranking bring up low energy costs but fail to mention that larger businesses pay the lowest energy costs and small businesses pay the highest energy costs – much higher than larger businesses and higher than what residential consumers pay.
Small business owners are people who want to live, raise children and retire here. They usually earn about the same as their employees and provide jobs for other people. So the question we ask is why do big businesses get tax breaks and other benefits while small business is ignored? If our elected officials truly addressed the real needs of small business, Washington could sit at number 1!
Eighty-six percent of all businesses in Washington are small businesses with 49 or fewer employees. These small businesses created 44,129 jobs from 2001 to 2004 while large businesses laid off 77,521. That’s a very real indicator of the value and economic horsepower of small businesses.
Small businesses need real health care reform that will actually reduce costs and increase access. Real small business solutions are needed for workers’ compensation and taxes, including tax equity with large firms so the costs are not so out of whack with the average small business profit margin.
More work needs to be done at the state level to extend regulatory assistance to small businesses.
As C. Paul Sandifur Jr., president and CEO of Metropolitan Mortgage and Securities Co. was quoted in the Spokesman Review just before he moved his business from Spokane to Idaho, “Idaho has a can-do, will-do attitude that we really like…Our feeling is that Washington has an adversarial feeling toward business.” Idaho is right behind us with a number 6 overall ranking by Forbes and is 22 states better than Washington in terms of business costs. Our Washington state leaders must make a better place for small business.
Gary Smith is the executive director of the Independent Business Association.