This state's suffocating B&O (on gross!), unemployment, and now death taxes are business killers. All these aggregate rankings factor in 'quality of life' and 'technology', two components we excel in, to counteract horrible tax and regulatory policy ratings.
She does not cite the 'ranked second' reference, best I could find is 9th, or 16th, or worse, depending upon methodology.
Posted by yaddacubed at March 10, 2010 09:29 AMHey Chris, how does Idaho's corporate tax compare with Washington's B&O tax? Talk about 'unfair'!
Posted by danno at March 10, 2010 09:34 AMBusiness will work around higher taxes; business needs STABILITY in the rules and taxation, which Washington simply doesn't have, nor ever will have by design.
For example, consider the resale certificate. Anyone who sells anything in the State is aware of this form. It allows you to buy wholesale product and not pay sales tax, so that only the final transaction is taxed. However, acceptance of those forms is at the will and sole-discretion of the State, and if the State decides the form was fraudulently filled out, the SELLER gets to pay the taxes, not the buyer who provided the bad form.
So you can accept such forms and hope things don't go awry, or not accept resale certs and lose business because your product costs 8-10% more.
L&I or UI increases? Random and capricious, as far as I can tell. B&O classification? Heck, I got a signed letter from the DOR when setting up my business with an official judgment that I was a manufacturer (we designed, built, and sold our product). Seven years later the new DOR regulations decided that the value was added not at manufacturing but at designing meaning I owed 5 years (statute of limitations) of B&O taxes as a service - not manufacturing - company.
Rezoning? My cabinet maker originally was zoned commercial, but over time the neighborhood around him built up (McMansions) and he was grandfathered in to a now residential zone. And he was prohibited by the State from expanding his operations (a 12,000 square foot shop on 3 acres of land), so he decided to retire early and liquidate his equipment rather than handing it down to his son (who could not buy the business because it would be rezoned on sale), putting me and dozens of other clients in a bind.
Hey, have ONE good month and you're now on a monthly B&O and taxation report schedule, even if your annual receipts would only justify annual or quarterly. Good luck getting the lower frequency of reporting - once you move up, you're up. Tough.
Sales tax? Washington is higher. Income tax? Yeah, ID has an income tax - which, of course, is deductible dollar-for-dollar from Federal income tax meaning you pay the same dollars just to two masters.
And let's not forget the biggest issue: minimum wage. We're the highest in the nation, meaning that - for a manufacturer paying L&I and UI rates as a manufacturer - a completely entry-level minimum-wage worker is going to cost you somewhere beyond $12.00 per hour.
And let's not forget the State's role in destroying our health insurance market, the minimum required coverages, the lack of competition (thank you Deborah Senn!), etc...
Posted by Shanghai Dan at March 10, 2010 09:56 AM
I did...:) I come back to Edmonds to visit family and friends and to act as a "hub" for visiting US clients around the nation. I'll send you photos from my rubber tree farm in Thailand (I'll be there in a week), or my apartment in Shanghai if you like.
I used to have a manufacturing business in Lynnwood, WA (Alderwood Business Park, behind the Sugar Shack cafe) and after getting jerked around hard for a year, I shut down, found jobs for my employees, and moved overseas.
I know more than a few that have done the same thing... Either relocating to other States or other nations. Small business is considered a nuisance by the State, and small business is leaving.
Posted by Shanghai Dan at March 10, 2010 10:22 AMDan just told you that it's happening. And hell, look at Boeing.
Some other statistics that the U.S. News and World Report study skipped over in the SBEC report:
-Washington ranked 44th in "State Rankings of Adjusted Unemployment Taxes"
-We ranked 45th in "State Rankings of Number of Health Insurance Mandates"
-Washington ranked 49th in "State Rankings of Workers' Compensation Benefits Per $100 of Covered Wages"
-45th in "State Rankings of State Gas Taxes"
-40th in "State Rankings of Per Capita State and Local Government Expenditures 2005-2006"
-39th in "State Rankings of Highway Cost Effectiveness, 2006"
The point people seem to be missing is that this state needs to attract new businesses in order to grow its economy and dig out of the hole we're currently in.
So my question is, "Why would any business choose to relocate here with a government that has proven itself hell bent on beating up businesses for tax revenue?"
Posted by Smoley at March 10, 2010 01:26 PMNow you have to request a special reseller permit from the state. It is the responsibility of the vendor to go online and verify those certificates.
Royal pain in the wazoo.
Posted by Vince at March 10, 2010 02:12 PMSo..for the vast majority of us worker bees, Washginton is way lower in taxes.
For small business owners, unless you're in a very low margin business (seethelight, your math shows a 7.5% margin...seems very low). And even in your example, I'm sure you are incorporated? and you pay yourself a salary? One would assume a decent one? Not having to pay that 7.6% tax on your income would certainly be nice, no?
Remember, Idaho will tax not only your corporate profits, but also your income.
Typical businesses make around a 10% profit on receipts; some make considerably less (grocery and other commodity sales) some make a little higher (certain high-tech fields). If you're making about the average return on receipts, then a B&O tax of 1.5% would be equivalent to a 15% corporate tax rate.
And of course our sales tax is considerably higher, and income tax paid to a State is deductible from federal income tax, making it "null" in terms of actual tax dollars out of pocket.
Posted by Shanghai Dan at March 10, 2010 09:04 PMAlso, note that you CAN deduct sales tax from federal income tax...
Posted by Proteus at March 11, 2010 11:11 AMWhat am I missing here? Is this board just full of multimillionaires?
Posted by Proteus at March 11, 2010 11:25 AMPretty much every business in the State of Washington pays B&O tax. And if you earn a typical 10% your company pays more with B&O than you would with corporate tax.
As far as the sales tax deduction, assume you have 1 exemption and you earned $40,000, with an AGI of $20,000. You get to deduct $550 from your Federal Tax. But if you paid that 7.6% State income tax you would get to deduct $1520 in State income taxes AND that $550 in sales tax deductions, for a total reduction in your tax load of $1520.
Big difference, eh?
Posted by Shanghai Dan at March 11, 2010 08:38 PMThat may be, not living in such a State I'm not sure. But if it's either/or, then you're better off with an income tax than a sales tax - greater deduction for a lower overall tax load!
Posted by Shanghai Dan at March 12, 2010 03:43 PMExample:
Married professional couple making $200k AGI (taxable income, after deductions)
Fica+Social+Medicare=~30% = $60k
Idaho state income tax = 7.6% = $15k.
WA sales tax (deductable, per IRS table) = 3389
Idaho sales tax (deductable, per IRS table) = 2196
Not sure how the ridiculous Idaho income tax counters the $1k difference in sales tax....
Posted by Proteus at March 13, 2010 05:58 AM