Playing ball

Small businesses may need a good defense this legislative session

Carl Gipson
is the director of the Center for Small Business & Entrepreneurship at the
Washington Policy Center.

It is said that the best offense is a good defense. While that adage may aid the Sonics and Seahawks, for business owners that care about staying in the game of public policy, it fails to hold true. Playing continual defense is bad for small businesses because surviving, not winning, becomes the goal.

The recent election results and the 2007 legislative session bring uncertainty to the thousands of small business owners throughout Washington State. And while 95 percent of all employees in Washington work for a business with fewer than 50 employees, one might think legislators’ ears would be fine-tuned to such a large and vital constituency. Unfortunately, that’s not always the case.

Legislators from both sides of the aisle receive high marks for their willingness to talk about legislative policy that affects small businesses. After all, no legislator is going to come out overtly against the mom-and-pop stores – that makes for bad public relations. Besides the ever-present issue of making health care more affordable, small business owners should keep their attention on these few issues to help judge whether the 2007 session is really about moving the ball forward, or only playing defense.

Under both federal and state laws, employees at workplaces with more than 50 employees are entitled to up to 12 weeks of unpaid family leave to deal with medical emergencies within their families. Bills introduced the past few sessions would change that rule and mandate up to five weeks of paid leave for qualified employees. Premiums would be paid through the employer, but premiums would be deducted from an employee’s paycheck.

Arguments for and against this idea typically surround employee "needs" versus employer "rights." Labor unions say that employees need a certain level of subsidized leave while businesses say that mandatory programs such as this curtail their ability to be flexible. In fact, many businesses already offer paid family leave. Though employees end up paying for the premiums there is still an added administrative cost to the business and taxpayers as we get to fund more bureaucracy to run the programs.

Following close behind paid medical leave is legislation for mandatory paid sick time off. Any business, no matter how large or small, would be required to provide up to 10 paid sick days per year to all full-time employees – no exceptions for small businesses. Many businesses, large and small, already provide paid sick leave or PTO (paid time off, a combination of paid sick/vacation days) and mandating it would again curtail the flexibility of a business to run itself. It could also result in unintended consequences, such as a business reducing the number of paid sick days, or rein in other benefits or salaries to ease the cost.

The Business and Occupation (B&O) tax is roundly criticized as one of the more draconian taxes in this state. The simple fact is that the B&O tax punishes unprofitable and startup businesses. And because policymakers are never able to agree on how to go about fixing the problem, nothing gets done.

But here’s an idea that has been introduced in the past by legislators from both sides of the isle: increase the B&O tax exemption. Right now, a business begins paying the B&O tax after gross receipts surpass $28,000. Increasing the exemption level (to, say, $100,000) could ease the burden on small and new businesses. Until now, similar legislation in the past hasn’t gone anywhere – but Washington state didn’t enjoy a $2 billion surplus the past several years either. It does now. The governor is often quoted as wanting to "invest" in the future. So let the government "invest" in our state’s entrepreneurs for once – by cutting their tax burden.

Legislators are going to face a caravan of special interests wanting money during this budget session and many lawmakers are going to want to break out the taxpayers’ credit card and indulge in a spending spree. However, for every action there is an equal and opposite reaction – and the ramifications tend to fall on the small businesses and taxpayers. Too much tinkering on the part of legislators to direct the flow of the economy often results in a regulatory nightmare.

In other words, small businesses must be prepared to play superior defense this year. Again.

The Policy Center is a non-profit research and education organization. Nothing in this document should be construed as an attempt to aid or hinder any legislation before any legislative body. Contact the Policy Center at 206-937-9691 or online at washingtonpolicy.org.

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