During the final three days of the 105-day legislative session in April, more than $2 billion in new and higher taxes were approved by majority Democrats. These included new and increased business and occupation taxes on more than 90,000 employers and certain banks, a graduated real estate excise tax on both residential and commercial sales, a higher tax on oil and ending the sales tax exemption for Oregonians and changing it into an annual remittance program.
Because Oregon is so close to Southwest Washington’s 17th Legislative District, which I represent, I’ve been concerned about how these tax increases affect us locally, especially our smaller businesses operating on razor-thin margins. This summer, I talked with business owners throughout the district and heard something unexpected. Yes, the tax increases are increasingly burdensome. However, many said the biggest obstacle they struggle against is the ever-changing and growing amount of regulations added to their plates every year.
Surprising, but as I investigated further, it makes sense. Consider this: Washington has 23,715 pages of administrative code, written and adopted by state agencies – nearly 8,000 pages of which have been added since 2001. They are lengthy, confusing and sometimes conflicting, yet the state says everyone, including employers, are responsible for knowing and following these rules.
The Revised Code of Washington – laws created by the state Legislature – total 14,021 pages. These laws increase every time the Legislature completes a session. During the 2019 session, 2,278 bills were introduced and 204 became law.
Some larger employers have hired compliance officers to keep up with the changes and ensure they are following current laws and state administrative code. However, that’s impossible for smaller mom and pop businesses who do not have the resources of a larger company and find themselves buried in tax reporting paperwork and evolving regulatory requirements.
One business owner recently told me he has taken on more of the administrative aspects of the business just to ensure compliance. This should never be. An owner should be able to focus on what they do best – growing the business.
In 2018 I introduced House Bill 2351, which would have reduced business and occupation tax filing frequency and tax reporting administrative paperwork for small business owners. I couldn’t even get a hearing on the bill, so, unfortunately, these bureaucratic requirements continue. Now add the new Washington state tax increases. It’s no wonder businesses are considering a move to Oregon or Idaho!
Most recently, the Department of Labor and Industries proposed a new exempt overtime threshold that would reach $79,872 by 2026. This “super minimum wage” is more than three times the current exemption threshold and would be permanently set at 2.5 times the minimum wage. This could force thousands of salaried employees to be converted into hourly workers as small businesses struggle to survive.
Regulatory reform rarely gains a high profile at the state Capitol, primarily given the current makeup of the Legislature and because it is so difficult to remove or change a regulation once it’s placed on the law books. In fact, the last major effort in the state Legislature to slow the growth of regulations was 26 years ago. However, employers tell me overregulation is killing them and it is time to seriously re-examine the endless rule-making process in Washington.
Why should we care? Because every struggling employer creates a job in our state that pays the wages to support our families. The compounding effect of new taxes and regulations in Washington makes it increasingly difficult for small businesses to survive and nearly impossible for new businesses to gain a foothold in our state. Oregon is just across the river and Idaho is not that far away.
If you operate a business in Washington state, I’d like to hear your views. What is the biggest government-related obstacle getting in your way, preventing your expansion, or making you consider other venues besides Washington? What can our state do to help foster new economic development, new businesses and new family-supporting jobs?
Rep. Vicki Kraft, R-Vancouver, represents the 17th Legislative District and is the ranking Republican of the House Local Government Committee. She has also been a small business owner. She can be reached at email@example.com or through her website: representativevickikraft.com.