When Idaho Gov. Butch Otter published his “Love Letter to Our Neighbors,” he touched off a political firestorm asserting his state is better for business.
Otter sensed a weakness in Oregon’s business climate after lawmakers raised taxes on businesses and the wealthy by $727 million. Nike founder Phil Knight called it “Oregon’s Assisted Suicide Law II.” Perceiving Knight might be fed up with Oregon, Otter started putting incentives together to lure Nike across the state line.
With Washington’s Legislature about to raise business taxes to balance its $2.8 billion revenue hole, Otter upped the ante by openly encouraging employers in both Oregon and Washington to move to Idaho.
We shouldn’t be surprised, because it’s happening everywhere. California, which has lost one-third of its manufacturers in the last decade, is driving businesses out with its high taxes, excessive fees and strangling regulations. It continues to be a target-rich hunting ground for out-of-state recruiters.
We live in a very competitive world, and others salivate over Washington’s employers, especially plums like Boeing, Costco, Microsoft and Starbucks. In some cases, they have successfully lured them away. The constant recruitment isn’t going to stop. After convincing Boeing to move its second 787 production line to South Carolina, the state is investing hundreds of millions in new aerospace composite technology to move more Boeing production to Charleston. Like South Carolina, Idaho is a right-to-work state where employees are not required to join unions.
Otter’s open letter is yet another wake-up call. Competitiveness is a moving target. Other states and nations will continue to enact laws and incentives to lure our businesses away. They starve for family-wage jobs and the increased tax revenues they bring with them. Today, especially in this economic climate, the competition is greater and the stakes are higher.
Washington, like other states, has its advantages as well as its drawbacks. We have a skilled, educated workforce, access to research and technology and an enviable quality of life. The problem comes when the disadvantages overshadow the advantages.
Washington is a high-cost state for businesses. We don’t have a corporate income tax, but we do have the business and occupation (B&O) tax, which is assessed on gross receipts, regardless of whether you made a profit. Now, some lawmakers are pushing for an income tax on high earners, many of whom are small-business owners. We also have a very high sales tax, which the state Senate wants to raise.
In addition, workers’ compensation costs and unemployment insurance taxes and benefits in Washington are among the highest in the nation. Nonetheless, many state legislators want to expand benefits and further increase employer costs, even as those employers struggle to survive.
Adding insult to injury, Washington lawmakers inserted language in the revised state budget that would impose an employer gag rule, something the U.S. Supreme Court invalidated two years ago.
The language prohibits private employers in certain circumstances from using state program funds “to assist, promote, or deter union organizing.” While it is narrowly written to apply to only a small class of employers, it nonetheless denies those employers their constitutional right to free speech. Depriving employers of their constitutional rights — even a little bit — is still unconstitutional. On the heels of Otter’s outreach to Washington employers, inserting that language makes Idaho’s offer look even more attractive.
In response to Otter’s letter, Gov. Gregoire pointed out that Forbes magazine ranks Washington as one of the best states for business. True, but that didn’t deter Boeing from picking South Carolina, ranked 25th by Forbes before the latest round of tax increases.
Employers look at their individual situations, the tax and regulatory burden, labor costs, labor strife, their ability to compete and whether the business environment in the state is likely to get better or worse.
Otter’s letter struck a nerve because businesses in Washington are struggling. Faced with ever higher costs and regulatory hurdles in a down economy, many employers are looking for help. If they don’t find it from the Washington Legislature, they may look elsewhere.
About the Author- Don Brunell is the president of the Association of Washington Business. Formed in 1904, the Association of Washington Business is Washington’s oldest and largest statewide business association, and includes more than 6,900 members representing 650,000 employees. AWB serves as both the state’s chamber of commerce and the manufacturing and technology association. While its membership includes major employers like Boeing, Microsoft and Weyerhaeuser, 90 percent of AWB members employ fewer than 100 people. More than half of AWB’s members employ fewer than 10. For more about AWB, visit www.awb.org.