By Mark Harmsworth / For The Herald
Boeing’s recent announcement that it would move the assembly of the 787 Dreamliner out of Everett and consolidate operations in South Carolina is an indication of Washington’s failing business climate.
Unfortunately, this isn’t the first business to move out, and it won’t be the last.
Boeing’s decision follows the relocation of their corporate headquarters to Chicago in 2001, and the recent move by Seattle-based Amazon to move more of its employees out of Seattle to other cities in the state. Thankfully, in Amazon’s case, the move is just across the lake to Bellevue, but the jobs giant also decided to put its second headquarters out of state, to Crystal City, Virginia.
It’s not just the well-known companies that are leaving. Smead Capital, a billion-dollar investment firm, is moving from Seattle to Phoenix, Ariz. The Seattle Downtown Association reports some 100 business have closed just in the downtown area, citing high taxes and a lack of public safety.
All these relocations are a result of businesses escaping an environment that is hostile to operating in Washington state.
After several years of threatening to impose an employee head-tax and battling with Amazon, the Seattle City Council finally imposed a new “head tax” earlier this year. Almost without protest, Amazon quietly began looking outside of Seattle to locate its next business expansion. Turns out, Virginia is the winner in Seattle’s political fights.
Many in government don’t understand this concept. If you push a business to a point where it can no longer do business in your municipality or state, it will simply move somewhere else.
This new payroll tax in Seattle is unlikely to cause any significant short-term loss in tax revenue for the city. In fact, this tax will bring in new revenue, but not for long. As businesses look at expanding or locating in Seattle, the new head-tax will be a deterrent to opening a new office or facility inside the city limits. New jobs will be created outside the city limits and many of the existing jobs will be relocated over time.
Imagine yourself as a business owner looking for a location for expansion. The side of the street you decide to move to can quite literally cost you thousands of dollars in additional taxes. Seattle leaders will likely regret the day they created the head tax, which is effectively a “jobs tax.”
The same principle applies to the state as a whole. When faced with a choice between a state that offers low taxes and fairer regulations and a state that penalizes a business just for operating inside its borders, the business owner will certainly choose the more friendly state.
The Legislature needs to be wary of continually increasing business and operation (B&O) taxes on companies, unemployment insurance taxes, payroll taxes, additional fees and passing anti-worker rights legislation which make Washington a less competitive place to locate a business. Other states are willing to make smart policy decisions that win those jobs. Recent proposals from the legislature, including instituting an income tax on capital gains will encourage fewer businesses to locate in Washington and will induce more businesses to leave.
There is still time for Washington leaders to fix the growing business exodus by reversing punitive taxes and unnecessary and burdensome regulations, but that window of opportunity is closing fast.
Mark Harmsworth is director of the Washington Policy Center’s Center for Small Business. He represented the 44th Legislative District in the state House from 2015 to 2019.
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