Want to save small businesses? Fix WA's tax code

Tourists walk around the area of the Pike Place Market in Seattle, United States, 30 August 2017. (Photo by Alexandra Schuler/AP Images)

Living in and around Seattle has become a lot more expensive in recent years. As the cost of living has skyrocketed, many people — especially those in low-wage jobs — are being left behind.

One group of workers who help make our home the unique and beautiful place it is — small business owners — are facing their own challenges in our expensive region. While every Seattleite has a favorite neighborhood coffee shop, food truck or local artisan product, it can be easy to forget that many of those businesses started on a shoestring by owners struggling to make ends meet. Statewide, the median income for self-employed individuals at incorporated businesses was $50,668 in 2016 — and, in general, small business owners’ income growth continues to lag behind overall income growth in our state.

As costs continue to rise, it has become harder and harder to start or maintain a small business, especially for women, people of color and immigrant entrepreneurs who often lack access to the same social networks, capital and other resources as their competitors.

Thankfully, we have an opportunity to improve the economic well-being and prospects of small business owners through our tax code. A bill in the state Legislature would provide a targeted sales tax rebate for low- and middle-income households, including those of aspiring entrepreneurs. It is called the Working Families Tax Credit, and is based on the federal Earned Income Tax Credit program, which has a long track record of strengthening local economies and helping low-income individuals and families better meet their needs..  

The Working Families Tax Credit would work along similar lines as the federal EITC. If you are working in Washington state and earning low wages, you would receive a credit on your sales taxes. Under the bill moving in the Legislature, the average cost-of-living boost that Washingtonians would see is $500, with a maximum credit of about $1,300. For an aspiring entrepreneur or someone just getting a business off the ground, that kind of cash infusion can be a critical lifeline to invest in inventory or pay down debt.

Starting a business is an incredibly daunting task, especially without formal business training or access to “a family and friends” round of financing. Microentrepreneurs need every available dollar to invest in and grow their businesses, and we believe the Working Families Tax Credit is a great idea because it would provide targeted support for those in the most need.

We are excited that Senate Democratic leaders recently included this policy in their recent Fix Our Tax Code plan, Senate Bill 5961. We hope the final state budget will include the Working Families Tax Credit and that it will keep earlier recommendations to ensure the credit extends eligibility to immigrant workers, family caregivers and low-income college students. Many of these groups can and do achieve economic mobility through small business development when given the chance.

In her testimony to the House Finance Committee in February, Rep. Debra Entenman, D-Kent, the sponsor of the Working Families Tax Credit House bill, described the tough choices that low- and moderate-income families must make between immediate needs and investing in their futures. Stories about these tough choices resonate in our community of entrepreneurs — and although $350 might not sound like a lot, we know it would make a big difference for micro and small business owners in our community.

As our city and our state thrive, we must take every opportunity to invest in those seeking economic mobility and financial security. That is why we are part of a large coalition of nonprofit and pro-worker organizations statewide calling on the Legislature to pass and fund the Working Families Tax Credit this session. An investment in small business will allow workers and small business owners to invest in themselves, helping our economy and our communities thrive.

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About the Authors & Contributors

Will von Geldern

Will von Geldern is Director of Advocacy and Communications at Ventures, a local nonprofit organization that supports entrepreneurs with limited resources. Nebreda has been working with Ventures since 2018 to grow her business.