Historically, Washington has been a hub for innovative, cutting-edge companies. Boeing, Starbucks and Amazon got their start here and blossomed into global brands. Microsoft moved to the state in its infancy and altered how businesses and households around the world function.
While such companies have drawn headlines and become identified with Washington, businesses that are not known outside of their neighborhood are equally important. According to the U.S. Small Business Administration, some 650,000 small business in Washington account for more than 99 percent of the state’s companies and employ 1.4 million people.
With a mix of businesses large and small, manufacturing and service companies, brick-and-mortar and online outlets, Washington has an economy that is the envy of most states. Maintaining that status, however, will require diligence and attentiveness on the part of policymakers.
With that in mind, the latest survey from the Association of Washington Business deserves examination. The organization conducts quarterly reviews of employers to assess the state’s business climate.
In the latest query, 63 percent of respondents rated the state’s economy as moderate, while 12 percent assessed it as strong and 21 percent as weak. Smaller numbers called it very strong or very weak.
But more interesting is what employers listed as their key business challenges. That category is where insight can be found for how to attract, grow and keep businesses.
The largest concern, cited by 58 percent of employers, is overall tax burden, which the Legislature has seemed eager to increase in recent years. A capital gains tax has been aimed at extremely high earners; the Climate Commitment Act has proved costly for large polluting industries; and the business and occupation tax has been expanded.
Overall, according to WalletHub, Washington taxpayers face the 28th highest tax burden in the nation — a reasonable spot as long as those taxes provide valuable services. But according to The Tax Foundation, Washington ranks as the sixth-worst state for business taxes.
Such a standing is not necessarily a death-knell for a state’s economy. New York has the highest corporate tax burden, and also has the nation’s highest per-capita gross domestic product. California has the third-highest corporate tax burden but maintains the largest economy of any state and ranks fourth in per-capita GDP.
But there is an inevitable breaking point to increasing the tax burden on businesses. For example, a survey this year by Oregon’s economic development agency and the University of Oregon found that state “has lost thousands of potential jobs and billions of potential private investments in the past five years and is poised to lose even more in the next five years. … A concerning number of businesses indicated they were choosing to expand outside of Oregon due to tax and regulatory burdens, challenges attracting and retaining talent, and an unfavorable business climate.”
The label of “unfavorable to business” can be difficult to shake. Although reputations often are unfair, they influence decisions by prospective employers and prospective employees, and they can mark businesses as a target for poachers from other states.
Washington is not yet at that point, and it remains an attractive destination for both new and established businesses. But in order to maintain that status, state leaders should heed the business owners who actually pay the bills.