A recent commentary and a letter in The Herald in opposition to the proposed income tax (Initiative 1098) have implied that passage of this tax would cause hurtful job cuts.
The argument is that if business owners have to pay the tax, they will have less money to spend on hiring employees. I am not an economist, but I think this is misleading, since employee salaries are a business expense, and businesses do not pay income tax on business expenses.
Employers will not be able to cut their income taxes by eliminating employees, unless they cut their profits by doing so, and that would serve no useful purpose. Employers do, however, pay the B&O tax on business expenses, since no deductions are allowed in calculating the B&O tax. It seems to me that Initiative 1098, by cutting the B&O tax, will free up some dollars to hire more employees.
Job losses will only result if the tax causes employers to move out of state to avoid having to pay the income tax. Yes, a few businesses may move out of state, but so what? If we can keep Washington a great place to live, there will be others to take their place. If you followed the logic of 1098 opponents, the wealthy would pay no taxes at all, and we’d all live in paradise. Don’t you believe it.
Mark C. Valentine