Washington State Makes the Right Fiscal Choices for Business… But First, an Interesting Story

By Rick Mayer,

Harry Randall Truman was the owner of the Mt. Saint Helens Lodge in Spirit Lake, Washington. Harry, 83 years old, was known for swearing and for drinking lots of whiskey. He had 16 cats and a 1956 pink Cadillac. His lodge was located in the foothills of Mt. Saint Helens, in the Cascade Mountain Range. The mountain above him had sat as a dormant volcano since the 1840s, but in late 1979 scientists began to detect seismic activity. In early 1980, earthquakes of ever-increasing magnitude began to occur. Scientists issued warnings, and the governor even ordered all residents to evacuate the mountain immediately. But skeptical Harry refused to go, time and time again.”I talk to the mountain and it talks to me”, he once said. Unfortunately for Harry, on May 18, 1980, he apparently wasn’t listening. Mt. Saint Helens exploded, spewing ash ten miles into the atmosphere. Ash eventually rained down on eight states!  Needless to say, Harry’s lodge was leveled, as was Harry and enough timber to build 300,000 two-bedroom homes. So, why do I tell this story? Because it shows the importance of making sound choices, and as far as economic growth goes, the State of Washington has historically made them.

Unlike many other states with different ideas on how to address their fiscal burdens, Washington State’s economic choices, some made long ago, are now paying off in a big way. Based on IRS records, during the period from 1995 through 2010, the State of Washington gained over $9.9 billion dollars in migrated adjusted gross income (AGI) revenue from states like California, Oregon, Illinois, New York, and Alaska . This ranks Washington 4th in the nation for the highest AGI growth, behind only Florida, Texas, and Nevada. The state also gained nearly 170,000 new residents during this same period.

Washington is one of nine states that does not collect any state income tax revenues. In 1929, a state income tax was actually proposed. The measure passed in the state Senate, but died in the House Rules Committee. It was eventually determined to be a violation of the Washington State Constitution.

The state also collects no corporate income taxes or franchise taxes. As a result, many significantly sized employers are located within the state, including Boeing, software developers Microsoft and Nintendo, as well as online retailers Amazon.com and Expedia.com. In addition to them, the lumber and wood product giant Weyerhaeuser also calls Washington home. Washington State ranks 6th nationally on the Tax Foundation.org 2013 State Business Tax Climate Index.

So where does Washington get its revenues? Like most other states without personal income tax, corporate tax, or franchise tax, the majority of its revenues are obtained through consumption taxes. For example:

• Washington is slightly more dependent on charges for services than the U.S. average. Charges are levied on items such as janitorial services, snow removal, and painting.

• Washington depends more heavily on excise taxes, including the general sales & use tax, selective sales taxes, property taxes and the gross receipts tax (business & occupation tax).

Once again, representatives of low-income constituents find this tax model oppressive, while proponents find it to be a fair means of levying taxes. The success of the model speaks for itself.

So if you ever have the opportunity to visit the state of Washington on business or vacation, you absolutely should. It is an incredibly scenic state. A sportsman’s paradise. But when you go, bring along the family, all of your worldly possessions, and lot of luggage. You just may want to stay.