Welch: Latest state tax proposals threaten jobs and economy

By Todd Welch / Herald Columnist

Imagine a government so uninspired and devoid of ambition that — instead of fostering economic growth — it chooses to squeeze its citizens dry.

That’s the reality unfolding in Washington state, and Snohomish County is feeling the brunt of it. Rather than creating a business-friendly environment that fuels prosperity and pride, our elected officials are resorting to the same old playbook: fear mongering, tax hikes and empty promises. Instead of rolling up their sleeves and pursuing real solutions, they’re banking on billions in new property, payroll and business taxes to cover for their lack of vision. It’s a lazy shortcut, and it’s suffocating the very people they claim to serve.

Let’s talk numbers, because they’re staggering. The latest tax proposal from Senate Democrats isn’t just an increase; it’s an avalanche. Property taxes, already a sore point for homeowners, are back with a vengeance. No longer will they be capped at inflation rates of around 3 percent. Instead, officials are pushing for a formula tied to inflation plus population growth, with no upper limit. If this law had been in effect since 2010, the average annual tax hike would have been 4.5 percent. Compound that over a decade, and you have a nightmare scenario where Snohomish County families and businesses would have seen their property taxes balloon beyond affordability.

Then there’s the proposed payroll tax, a $6.6 billion hammer aimed at businesses paying wages above the Social Security cap. This cap, currently set at $168,600 for 2024, is the maximum amount of earnings subject to Social Security payroll taxes. The proposed 5 percent payroll tax applies to companies with total payroll expenses exceeding $7 million, which includes many large employers in King and Snohomish counties, such as technology firms, financial institutions, aerospace companies, research organizations, and primary health care providers.

While these employers are based in King County, many of their workers live in Snohomish County, meaning the burden of higher payroll taxes will ripple through our local economy. When businesses absorb these additional costs, they often pass them on to consumers in the form of higher prices. Worse, some may cut jobs, reduce wages or relocate to states with more business-friendly tax policies, further weakening our region’s economic stability.

Then there’s the business and occupation tax (B&O), a uniquely burdensome levy that Washington imposes on businesses. Unlike a corporate income tax, which taxes profits, the B&O tax is assessed on a company’s gross receipts, meaning businesses pay taxes on total revenue before accounting for expenses. This creates a disproportionately heavy burden on low-margin industries such as retail, manufacturing and food service. Instead of encouraging growth and investment, the B&O tax penalizes businesses for simply existing, making it harder for small enterprises to survive and thrive in Washington.

This isn’t leadership, it’s inertia. It’s fear mongering disguised as fiscal responsibility. The message is clear: “Pay up, or the whole system collapses.” But here’s the truth; there’s a better way. Economic growth, driven by innovative policy and an ambitious 4 percent GDP target, can lift everyone.

Gross domestic product (GDP) represents the total value of all goods and services produced within a region, serving as a key indicator of a country’s economic health. A strong, growing GDP reflects increased productivity, job creation, and higher wages; factors that directly improve quality of life. When GDP growth is stifled by excessive taxation and regulation, businesses struggle, job opportunities shrink and wages stagnate. States such as Texas and Florida have recognized this by adopting policies that encourage investment and innovation. Their economies outpace ours, and their citizens feel it; not just in their wallets, but in their sense of opportunity and optimism.

Washington state, despite its natural beauty, strategic location and history of innovation, is losing its competitive edge due to these heavy-handed tax policies. Boeing, a longtime pillar of the state’s economy, has already relocated its headquarters out of Washington. Other companies, particularly in the tech and manufacturing sectors, are increasingly considering states with more favorable business climates. This trend should be a wake-up call for lawmakers. Instead of clinging to outdated taxation models, Washington should focus on policy reforms that make it an attractive place to do business, invest and build a future.

So why aren’t Washington’s leaders pursuing this path? Because it’s hard work. It requires cutting through red tape, lowering taxes and listening to market experts rather than adhering to the same academic and governmental echo chambers. It’s far easier to propose a new tax and call it a solution. But that laziness comes at a cost. When businesses in Everett consider relocating, when small shops in Snohomish close under the weight of B&O increases, and when homeowners are forced to sell because they can’t keep up with property taxes, we all lose.

The data speaks for itself. Washington businesses already pay over $10,000 per employee in state taxes; 23 percent more than the national average of $8,200 per employee. Meanwhile, our economic growth lags that of states that have adopted policies promoting innovation and investment. We could aim higher. A 4 percent GDP growth target isn’t just ambitious, it’s achievable with exemplary leadership. It could revitalize Snohomish County and beyond, making our region a beacon of opportunity rather than a cautionary tale of over-taxation.

But it starts with us. Last year, public outrage led to the defeat of a smaller property tax hike. This year’s proposal is even more aggressive, counting on voter apathy. Don’t let it slide.

We need leaders who see public revenue as a byproduct of success, not a weapon wielded against it. Imagine a Snohomish County where entrepreneurs thrive, businesses expand, and families aren’t priced out of their homes.

That’s the pride and prosperity we’re missing. No amount of fear mongering can replace it. It’s time to break free from the tax trap and demand authentic leadership. Our future depends on it.

Todd Welch is a columnist for The Herald, addressing local and state issues. He lives in Everett.