When will businesses seek a better deal?
September 26, 2008 · Updated 11:30 AM
Is Washington truly friendly to businesses?
Depends on whom you ask.
Some reports say Washington has a favorable business climate, yet other measures show our state isn’t anywhere near the top end of business-friendly states.
Which are correct? There is no definitive answer, but examining the criteria used by the different reports might shed some light on this controversial subject.
The good news is that none show Washington at or near the bottom in overall business friendliness.
But several troubling statistics exist.
You may have heard that Forbes Magazine ranked Washington as the fifth-best state for business.
Forbes is a respected national business magazine.
Washington’s leaders should be proud of the good press.
Does Forbes saying we’re number five truly make it so? Is the debate about our business friendliness over?
Let’s take a closer look at Forbes’ criteria.
Washington ranked particularly well (fourth) in Forbes’ “labor rank,” a criteria measuring educational attainment, net migration and population growth.
We ranked fourth in the “growth prospects” category, a criteria that judges the prospects of individual income growth and business startups.
For years Washington has been ranked as a state with a high startup rate, but we’ve also been ranked as a state with one of the highest business failure rates.
Forbes ranked us fifth in the “regulatory environment” category, something hundreds of small-business owners might object to.
Where we didn’t score particularly well was in the “business costs” (33rd), “economic” climate (16th) and “quality of life” (32nd) categories.
I’m curious as to how we can rate so well overall and yet be ranked so low in categories that include the cost of actually running a business.
Forbes isn’t the only national study to rank Washington particularly friendly to business.
The Small Business and Entrepreneurship Council ranked Washington the fourth best state in tax systems for small businesses.
That sounds like even better news right? But wait a minute.
The council had 16 different sets of criteria including personal income tax, corporate income tax, AMT taxes, property taxes, gas tax and so on.
What is notable about the council’s ranking system is that out of the 16 measures, Washington only registers in eight of them.
Washington has no personal income tax, corporate income tax and several of the other taxes that states were ranked by, and therefore Washington has an artificially high ranking.
Washington ranked perilously low in the categories for which there is data.
We came in 25th in property taxes, second-to-last in sales, gross and excise taxes (includes our B&O tax), 43rd in unemployment taxes, 46th in gas taxes, and our state’s estate tax was not ranked using a comparison of percentages among other states but only by the fact that it exists.
That Washington received the highest marks among taxes we do not have, and mid-to-worst among taxes we do have, should be kept at the forefront of the discussion.
Despite the tax and regulatory burdens faced by entrepreneurs in this state, thousands of businesses open each year.
But the pool of people willing to risk their livelihoods and their capital is finite — at some point the cost of doing business will become prohibitive.
At what point does the business community look for better, cheaper options and friendlier states?
Carl Gipson is director for
small business and technology
at the Washington Policy Center.