The words – “I think we suck” – were barely out of Alan Mulally’s mouth when the debate began.
What is the state of Washington’s business climate? And after two years of studies, debate, bills and ballot measures, has nothing improved?
The conservative Evergreen Freedom Foundation quickly posted the quote on its Web site, alongside data showing how the state’s tax burden compares to others nationwide.
On the other side, Washington State Labor Council president David Groves turned around with a fast, angry denial, suggesting that the business climate in Washington is far better than most will admit because “the good news could hurt short-term corporate lobbying goals in Olympia.”
Mulally himself tried to back away from the broadside. The Boeing Commercial Airplanes chief followed it by saying that he is “a lot more encouraged after the last two years … that we’re actually going to do something.”
Still, economists said they were surprised by the comments.
“I’m not sure where the charge it sucks still comes from,” said Paul Sommers, the director of the Evans School of Public Affairs at the University of Washington.
A lot of it simply is perception, others added.
“The story I try to tell people,” said Hart Hodges, director of Western Washington University’s Center for Economic and Business Research, “is ‘You tell me the picture you want to paint, and I’ll supply the numbers.’”
By some measures, Mulally clearly is correct.
Washington’s workers compensation costs were the fourth highest among the 50 states and the District of Columbia, according to 2002 figures sited in a recent report by the Small Business Survival Committee, a national pro-business advocacy group.
The state’s unemployment taxes were ninth highest, the committee reported, and the combination of the state’s business and occupation tax and state and local sales taxes created a business tax burden second only to Hawaii.
But while those factors increase the cost of doing business here, some other important ones lower it.
Washington is one of only four states that doesn’t levy a corporate income tax, the committee noted. Washington’s property taxes are right smack in the middle of the pack. Washington doesn’t have personal income or capital gains taxes, making it a more-friendly place for entrepreneurs.
And while many complain about the state’s sprawling bureaucracy and its attendant red tape, it actually is relatively lean, the committee reported. Washington has 5.13 full-time state employees for every 100 residents – the eighth-lowest ratio in the nation.
Factor in health care and power costs that are below the national norm, and Washington actually has one of the nation’s better business climates, the committee determined. It ranked the state eighth best nationwide.
The Legislature in recent years has been quite responsive to business interests, according to an analysis conducted by the Snohomish County Economic Development Council.
Gov. Gary Locke’s Washington Competitiveness Council – a group of business executives that includes Mulally – developed a list of 99 recommendations to improve the state’s business climate.
The Legislature has addressed 66 of them, the EDC found – admittedly “some more thoroughly than others.”
The elected officials tackled difficult issues such as unemployment insurance reform but made less progress on education and workforce training.
“Our work is not done,” the development council said. But overall improvements in the state’s regulatory system and business incentives mean that “Washington state is better able to compete in the world economic stage today than it has been in the past.”
Washington still needs to work on its environmental regulations, which sometimes conflict with each other, Sommers said. “You got various and sundry mandates that get passed without looking back at what’s already been passed.”
That shouldn’t mean gutting environmental controls, he said. “We all enjoy the gorgeous scenery here.”
If Mulally’s arguing that business pays too big a share of the state’s tax burden, he has a point, Sommers said.
It’s not a problem that would be easy to fix, he said. The most-logical solution would be adding a personal income tax, but Washington voters have torpedoed every attempt to impose one.
However, taxes aren’t the main factor for companies looking at new sites, Hodges said. Power costs and worker productivity are bigger, he said.
Besides, in Boeing’s case, Washington’s tax structure already was set up to accommodate jet building, said T.M. Sell, a professor of political economy at Highline Community College.
There is no sales tax on commercial jets – no small change, given that the Snohomish County sales tax on a brand-new $215 million 747 would be more than $1.9 million.
And Washington’s business and occupations tax benefits Boeing in that the company’s tax bill doesn’t go up in years when it’s more profitable.
“They’re the only kind of business to which that’s suited,” Sell said.
In general, Olympia has looked after Boeing’s interests pretty well down the years, said Sell, who wrote a book on the company and its interactions with state and local government. “Everything they’ve asked for, they’ve gotten something in response.”
Given that, Sell said he takes issue with Boeing’s criticism of the business climate in Washington.
“If they’re going to leave, they should just go and stop bad-mouthing us,” Sell said. “Not everything is great about doing business here, but not everything is awful.”
Hodges agreed. His research shows many Western Washington businesses are profitable and poised to expand here, even as icons such as Boeing struggle.
“We can be competitive,” he said. “I think we are.”
Reporter Bryan Corliss: 425-339-3454 or corliss@heraldnet.com.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
