NCPA - National Center for Policy Analysis


January 12, 2010

As legislators wrestle with Washington state's budget shortfall, it's important that they recognize the effects of tax hikes on job preservation and creation, says Dr. Kriss Sjoblom, an economist with the Washington Research Council.

According to the Council's new study, "The Economic Impact of Hiking Taxes to Close the Budget Gap":

  • Increasing the state Business and Occupation tax (B&O) by $1 billion would eliminate up to 15,072 jobs.
  • A $2.6 billion B&O tax increase would cost 38,968 Washingtonian's their jobs.

Raising the B&O tax on businesses, some of which are struggling and are not making a profit, would have serious ramifications not only on businesses but also workers, says Carl Gipson, Small Business Director for the Washington Policy Center (WPC).  Thousands of jobs are at stake with this decision.   Burdening small businesses with higher taxes today will lead to fewer jobs and lower economic output tomorrow.  For example:

  • A $1 billion sales tax increase would eliminate 14,759 jobs.
  • A $2.6 billion sales tax increase would eliminate 38,024 jobs.

Washingtonians are already struggling in the worst economy since the 1930s.  Lawmakers should not try to make balancing the budget easier by making people's lives harder, says Paul Guppy, the WPC's Vice President for Research.

The study shows job losses could be mitigated depending on how lawmakers chose to spend the new tax revenue.

To put Washington state on firm fiscal footing, any budget adopted must not raise taxes during a recession, or result in a projected deficit in the next biennium, says Jason Mercier, Government Reform Director for WPC.  This will mean that some of the programs we've grown accustomed to during good times must be eliminated.  Taking more money from businesses and cutting people's take-home pay through higher taxes is not the solution.

Source: "Tax Increases Will Cost Even More Washingtonians Their Jobs," Washington Policy Center, January 11, 2010.

For study: 


Browse more articles on Tax and Spending Issues