“Keep it simple.” This old saying is more than a bumper sticker slogan, it’s a principle that is especially important when it comes to taxes and regulations.
Washington employers have been working for decades to simplify our state’s tax and regulatory policies. Currently, employers must work their way through a maze of complex, overlapping and often contradictory regulations and tax rules that differ from one city to the next, one county to the next.
It’s like playing a game that has 50 different sets of rules.
Wrestling with those costly and cumbersome requirements means employers — particularly small employers — spend time and money on paperwork that could be better spent creating jobs.
That’s why Gov. Gregoire is supporting tax simplification legislation. The governor wants to make it easier for all businesses, especially small businesses, to calculate and pay their Business and Occupation (B&O) taxes.
B&O taxes are assessed on a business’ gross income, regardless of profit. The state imposes a B&O tax, but local jurisdictions do as well. The amount of the local B&O taxes, as well as how they’re calculated, varies from one jurisdiction to the next.
Gregoire describes the situation this way: “For Washington businesses, especially small business owners who operate with little help, paying state and local B&O taxes is at best complicated and at worse a nightmare.”
Under the governor’s proposal, the state of Washington would be the single collector of all local and state B&O taxes, and the state would rebate to each local jurisdiction their share of the tax — similar to how the state currently handles state and local sales taxes.
The governor also wants to create a central state website where people could apply for or renew state and local business licenses, eliminating the need for similar websites currently operated in more than 50 cities around the state.
“It will save businesses money and aggravation, reduce state and local government red tape and make Washington a friendlier place to set up a business,” notes Gregoire.
But some of the state’s largest cities are pushing back against the governor’s proposal, saying they’ll lose millions if tax simplification becomes law.
Seattle authorities say the city could lose between $23 million and $44 million a year. Tacoma officials estimate their city will lose $4 to $7 million a year. Critics say cities will lose out on millions in tax penalties and interest — money that would now go to the state — and city officials fear that state auditors will not be as aggressive in pursuing tax cheats.
Seattle, Bellevue, Tacoma, Everett and Bellingham say they’re already working on a plan to simplify local tax payments, and lawmakers should wait to see how their project works before passing the governor’s plan.
Gregoire rejects the cities’ criticisms. Noting that the state currently collects and rebates local sales taxes, the governor said, “These horror stories of how they’re losing money? No they’re not. We will give it back. I think it’s the right thing to do for the small businesses of the state of Washington.”
Gregoire points out that 95 percent of Washington employers are small businesses with fewer than 50 workers. “If we can make it easier and cheaper for them to do business,” explained the governor, “they can afford to add more employees.”
“If we ever need a reform that helps business,” says Gregoire, “this is it.”
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