A state income tax would stymie local business

A former legislator, who supported earlier income taxes, laments the way a combination of targeted new income taxes and political logjams would affect his family business.
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A former legislator, who supported earlier income taxes, laments the way a combination of targeted new income taxes and political logjams would affect his family business.

In the early 1970s I was in the Washington legislature, a Republican from Seattle's 43rd district, and voted for an income tax twice. In these cases the "reform" was more comprehensive, and the income tax would have been applied to the majority of the taxpaying population.

Today, income taxes are being targeted at a very small segment of the population. Democrats call them the "rich"; Republicans call them "investors." Clinton raised taxes on 5 percent of earners (which Bush reversed); Obama has promised that only those earning over $250,000 will pay any additional taxes. The I-1098 tax initiative is directed at a fraction (about 3 percent) of residents, while Oregon's recent tax increases are levied on the few.

Star Rentals, my family business, 110 years old with 227 employees, is taxed on our personal rates as we are closely held. Between 2008 and 2012 we expect the income-related taxes on our business to increase from 35 percent to over 50 percent of net income. We invest over $400,000 per job, and most of what we "make" is reinvested. We will be able to create far fewer jobs as the government continues to expand and collects taxes from fewer and fewer taxpayers.

Our business is locally owned and has a strong balance sheet. We provide stable jobs and opportunities for growth in careers. Our competitors are national and financed with debt. Our competitive business outlook has never been better. Yet with the focused increases in income and estate taxes, it is increasingly unlikely that our fourth-generation business will make it to the fifth generation.

More than at any time in my career, structural risk is increasing and the potential of return is decreasing. The unfunded public-sector liabilities at all levels are stupefying, yet the tax base is narrowing to deal with this vast obligation. All government spending has a fierce constituency to protect its interest, and there seems never to be a significant restructuring. Money that would be used to invest in future business activity, such as infrastructure, is being taken to spend on yesterday's political promises.

Businesses are reluctant to make large investments in such a climate of tax and regulatory uncertainty. At present there is no political consensus on how to address the crises of unemployment and deficits. On economic policy, the gap between our political parties seems larger than ever. Stability and renewal cannot be achieved if we constantly lurch between policy extremes.

In Washington state, with Boeing slowly moving out and Microsoft now a mature company, we are operating on hope but ignoring fundamentals. An income tax would raise some money and satisfy some powerful constituencies, but that is money taken out of the private economy. My company is an example of how there would be many fewer jobs created as a result. This income tax would suppress business investment in the near term and delay the time when we reset our systems for future economic renewal.


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