PNW Business Owners Lag Behind US In Confidence. Thanks Taxes.

In recent research published by my agency, we found one especially startling finding: PNW small business owners are 36% less likely than their US counterparts to feel very optimistic about their business performance in 2019. As a whole, our region’s business owners are looking forward to a solid new year...just not at the same rate as business owners in other regions.

It turns out a variety of factors are driving down optimism. Over 30% of small business owners are concerned about not having the right marketing skills while nearly one-in-four also cited the absence of sales and accounting/finance expertise. But one factor trumped them all: Money. Limited access to funding and money was the top factor PNW business owners report as driving performance concerns.

Sadly, our state’s policies are doing nothing to help this situation. On the contrary. From Seattle City Council’s tax proposals to existing statewide levies, we’re only hurting small businesses.

For starters, let’s take Washington State’s Business & Occupation Tax for a spin. This tax is levied on a business’s revenue. What this means is that the state doesn’t care how much labor or materials were required to make a business’s product or service. In fact, they generally don’t care about any expenses it took to make a product. The state takes its cut from how much money a customer gives each business, not from how much the business actually made after settling all of its expenses. If you’re a small business scraping to get buy, that could be the difference between being in the black or in the red.

And then of course, there’s the recently enacted Paid Family & Medical Leave Tax. Yes, I’m proud to live in a state that makes sure our citizens have a safeguard when family or medical issues force them to miss work. But, Washington State executed this tax in a way that deals the hardest blow to small businesses. The premium is paid to the state, and is paid partially from employee wages and partially from a business’s own revenue. If you’re a small business with limited revenue, this is yet one more haircut to your bottom line.

And of course, let’s not forget the Head Tax, an ill-conceived tax that would have forced everyone from small- to enterprise-sized businesses to pay up $275 per employee per year to the city. The smaller the company, the harder the blow.

Yet our boogeyman continues to be a state-wide income tax, something that would actually match tax levels with ability to pay. As a result, we’re left with tax policies that discourage small business reinvestment and growth and have the power to harm small business confidence.

Don’t think this matters? Consider just for a moment that the Small Business Association reports our state having over 550,000 small businesses that employ over 50% of our state’s private workforce. That’s a lot of businesses, and a lot of individuals, impacted by our ever-present regressive tax system. Perhaps it’s finally time to address the white elephant in the room.