February 23, 2009

OLYMPIA…Senate Republicans are taking direct aim at a leading cause of business failures in Washington, proposing a one-year exemption from the state business and occupation tax for all businesses new to Washington. New businesses employing fewer than 25 people would get a two-year exemption under Senate Bill 6057 and a 50 percent discount in their third year. 

“Our people need the jobs new employers can provide. And the preliminary state revenue estimate that came out last week is a stark reminder that as the private sector goes, so goes the amount of revenue for government programs and services,” said Senate Republican Leader Mike Hewitt, R-Walla Walla.  

“If the Legislature is serious about creating jobs now, while we see if the ‘green economy’ evolves and green jobs materialize, it will act on this proposal quickly,” Hewitt said. “It would position our state to attract employers fleeing California and other states where the tax and regulatory burden has become crushing.”  

The state Department of Revenue estimates 90,000 businesses will be launched in Washington the next four years – either originating here or coming from other states – and receive the one-year exemption. Of those, 40,000 would be small businesses that would not have to pay the full B&O tax until their fourth year of operation, said Sen. Joseph Zarelli, R-Ridgefield. 

Zarelli, Republican leader on the Senate Ways and Means Committee, is the prime sponsor of SB 6057. It’s the 20th bill Senate Republicans have introduced in the 2009 session that would create jobs and make living and working in Washington more affordable. 

“Government shouldn’t expect revenue collections to rebound until it gets serious about removing the obstacles that scare people away from starting businesses and cripple new employers. And the biggest obstacle to startup businesses in our state is the B&O tax, because it has to be paid right out of the till whether you turn a profit or not,” said Zarelli, who owns a small business. 

Zarelli said the B&O tax exemptions could be offset by the already-proposed repeal of the temporary sales tax exemption on the purchase of certain hybrid cars, which took effect Jan. 1.  

“Washington has a higher percentage of new businesses fail than anywhere in the nation. That needs to change if our economy is to recover,” said Zarelli. “If the choice is 58 million dollars for a tax break that lasts two years and applies only to new sales of two kinds of cars, versus 22 million dollars for an economic development tool that would create thousands of jobs and ultimately generate revenue, I can tell you which makes more sense in these difficult times.  

“If every business estimated to take advantage of this measure creates just one job, that’s 90,000 new jobs. If each new business has an average of two employees, this proposal will create 180,000 new jobs. Creating jobs is what’s going to get us out of this economic slump. The Legislature should consider and pass this measure.” 

“An exemption from the full B&O tax will encourage people to open shops or become franchisees and give hope to those who are struggling to become established. Tax relief like this may be unprecedented, but we are in an unprecedented time,” said Hewitt, a longtime small-business owner. “This bill sends a message to entrepreneurs that government is willing to take a chance if they are. Take a year or two or three, get your roots established, then you can pay the full tax. 

Other Republican measures (see the full list here) aimed at making Washington more affordable include:  

• Senate Bill 5052 – Would give employers with workers aged 19-34 access to innovative and less expensive health care plans tailored to that age group.

• SB 5409 – Would create private-sector jobs and lower government costs by creating the Washington Competition Council to identify government services that could be contracted out.

• SB 5817 – Would encourage agricultural activities by redefining property tax exemptions.

• SB 5896 – Would create the Washington Innovation Grant Authority to provide capital related to transferring research and technology to the commercial marketplace. 

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