Tax Reax: Business responds to proposed capital gains tax, increased tax rates; progress on tax relief for manufacturers

Responses to the governor’s proposed $3.7 billion in new taxes have been swift and thoughtful. As we’ve written, Washington business taxes remain well above the U.S. average. (A thorough interstate comparison of state and local taxes by the Washington Research Council provides more detail.)

The Association of Washington Business (AWB) has produced an informative video featuring small business owners expressing concerns with the capital gains tax. The short video is worth your time. Also, AWB reports on legislative testimony regarding the tax.

“That’s my retirement,” said Wayne Lunday, who spoke on behalf of the National Association of Insurance and Financial Advisors. “That’s the retirement of all of the NAIFA members that are out there building those small agencies and small businesses. And it’s going to devastate them if they have to write a check for 9 percent of what their business is worth to the governor.”

GeekWire reports on the tech industry’s response to the tax plans.

Michael Schutzler, CEO of the Washington Technology Industry Association, said he’s concerned that the tax changes send the wrong message to entrepreneurs, encouraging them to build their companies elsewhere.

“That’s the signal it sends,” he said. “Please go start your company somewhere else. The State of Washington will simply tax you.”

Washington is one of nine states without a capital gains tax and Schutzler worries that adding one, on top of the federal capital gains tax, will discourage startup activity.

There is some good news regarding proposed tax legislation. AWB reports a bill has been introduced to provide manufacturing tax relief.

House Bill 1348, introduced by Reps. Mike Chapman, D-Port Angeles, and Jacquelin Maycumber, R-Republic, would create a standardized business and occupation (B&O) tax rate for most manufacturers, amounting to a 40 percent reduction in the B&O tax for thousands of employers.

“The vast majority of manufacturers are small businesses, including many family firms,” said Clay Hill, AWB’s government affairs director for tax and fiscal policy. “These are the people that create jobs and invest in our communities, and yet we know that manufacturing is the only sector that’s lost jobs since 2000.”

The legislation would set the B&O tax rate for most manufacturers at 0.2904 percent, which is the same rate paid by the aerospace and timber processing industries.

…The bill had yet to be assigned to a committee as of Wednesday afternoon. Hill said he hopes it will receive a hearing in the House Finance Committee chaired by Rep. Gael Tarleton, D-Ballard.

Stay tuned.