(The Center Square) – Rep. Noel Frame, D-Seattle, initially seemed to downplay taxes as a factor in Washington state’s economic competitiveness during a recent work session held by the House Finance Committee.
She said she didn’t hear the word “tax” or “tax incentives” following a presentation by Dr. Mike Wilkerson, director of analytics at ECONorthwest, detailing a report on efforts to revitalize entrepreneurship and make it easier to do business in the Evergreen State.
ECONorthwest is a Seattle-based consulting firm that helped put together the report.
“You know, we very often in this committee have legislation proposed to us that is a change in tax policy, with the message being this is about economic success and business competitiveness,” Frame, committee chair, said during Monday’s virtual meeting.
She went on to say, “This committee often hears that tax policy is critical to that [economic success and business competitiveness] as a reason to support certain legislation, particularly tax incentives.”
Frame welcomed a reply from Wilkerson.
“I’d just love to give you an opportunity to respond to that in what you are thinking and what you saw in your research,” she said.
Wilkerson said he did hear about taxes and tax incentives in putting together the 105-page report, but that was not the focus of the report.
“The goal here was really the intentionality around defining economic success as the main takeaway from this report, and so that’s less into the fiscal side of the equation,” he said. “I think it’s implicit in that if the goal is to create more equitable jobs, that’s where that nexus, you know, exists around can incentives, when targeted appropriately, help support industries in providing those jobs, I think is probably a logical kind of takeaway from this. But really this wasn’t about getting into prescriptive policies as it was really thinking about those big-level framing questions.”
Kryn Sausedo, senior project manager at ECONorthwest, chimed in as well.
“What we heard was less the burden of the amount of taxes and more of the complexity and the challenges, particularly for small, young businesses just trying to work out all the complexity of registering, paying their taxes, etc.,” he said. “So yes, it’s not just necessarily a matter of cost. It’s just a matter of opportunities to simplify as well.”
The Lieutenant Governor’s Office administered the report.
“We should not underestimate the frustration and difficulty of navigating a complex regulatory system to begin and operate a business, and the deterrent effect that has," Lt. Gov. Denny Heck said.
Tommy Gantz, Association of Washington Business’s director of government affairs on tax and fiscal policy and manufacturing, noted Frame’s language is similar to that of a December 2020 “Results of Economic Analyses” preliminary report by the Tax Structure Work Group that states on page 34 that “there is no robust relationship between taxes and economic competitiveness.”
Gantz disagreed.
“Our members have consistently strongly disagreed with these findings,” she said via email. “Over the last 4 years, the legislature has passed over 22 new taxes generating nearly 40 billion dollars over the next ten years. As a result, many of our state's businesses are struggling to understand their liability and plan for future growth because of the lack of a predictable tax environment.”
The two reports are “completely different,” she noted, “but I think that the narrative that the tax structure of Washington state does not determine where a company chooses to be – to do business – is part of that narrative that we can continue to hear that our businesses disagree with.”
Frame did conclude that the economic competitiveness report would be a good filter for evaluating proposals that come before the committee as a way to best utilize the "state’s resources because we are foregoing revenue to do incentives.”
She concluded, “And I do think there is something to be said there about the regulatory environment in starting up a business…and certainly the tax piece of that would be a part of that as well.”