Ernst & Young’s annual report to the Council on State Taxation (COST) highlights the struggles of business owners in Washington state to meet the ever-increasing tax burden and regulations imposed by the state legislature.
Ultimately, a new regulation or tax on small business will be passed on to the consumer as a price increase on products and services.
The report shows that businesses paid $23.5 billion in total state and local taxes in fiscal year 2020. The average taxes paid to the state per employee is $8,100. Washington continues to rely on its businesses for tax revenue, with Washington businesses paying nearly half of the tax revenue collected by state and local government agencies.
Washington is ranked 9th.Th Highest in the nation on the business unfriendly list, even higher than California.
Hidden in the numbers are the costs of tax filing, state regulations, state audit costs and government small business compliance costs. Some businesses have full-time employees to handle government regulation. On top of burdensome laws and taxes such as fair sales tax, municipal capital tax and unemployment taxes, they create the illusion of compliance for small businesses that don’t have the time or revenue to devote an employee to the registration requirements.
One of the most punitive taxes hidden from consumers and baked into the cost of manufacturing or providing services is the government’s business and operations (B&O) tax. This tax represents 19.1% of the tax a business pays and is calculated on gross income, allowing no deduction for expenses. Even a business that spends money must pay B&O tax on any income.
Business tax is not a tax that someone else pays, ultimately the tax is passed on to the consumer because no business can be profitable without doing it.
Reducing regulations and taxes on business, especially small business, will reduce consumer costs and provide budget relief. This is especially needed during the ongoing inflation caused by Washington state and federal government policies.
