We cannot tax our way into job creation
In 1993, voters approved Initiative 601 which set a limit on spending, and put strong limitations on tax and fee increases. From 2005 through 2009, if I-601 had been followed, our budget shortfall would have been $3 billion less. In 2007, voters again confirmed it should be difficult for the Legislature to raise taxes by passing Initiative 960. Recently, the Legislature voted to suspend I-960. Here's why I believe this approach encumbers job growth.
From January 2008 through December 2009, approximately 164,000 private-sector jobs were lost in our state. In the same time period, 11,200 government positions were added to its payroll. In December, 4,371 people in Spokane's 6th District were looking for jobs. As a state, we're at our highest unemployment rate since 1994, currently 9.5 percent, but is expected to peak at 9.8 percent next quarter.
Increased taxes are a short term perceived fix to a long term problem. Our state cannot tax its way out of a recession; doing so will further encumber economic vitality and much-needed job growth. Historically, increasing taxes has been proven to prolong recessions. In spite of this, additional taxes are being considered in the Legislature on everything from candy, to cigarettes, to street lights and maintenance. Additionally, Senate Bill 6130, signed by the governor today, suspends the two-thirds majority vote of the Legislature to increase taxes. As a business owner in Spokane, I have experienced firsthand how taxes encumber job growth, not accelerate it. I believe increased taxes are not the solution, and I'll explain why below, then offer my solution.
Even one more small tax may be the straw that breaks the camel's back for many working families, especially the working poor. People are hurting. According to the Wall Street Journal, two-thirds of the economy is predicated on consumer spending. Moreover, additional taxes slow and often cease consumer spending. Therefore, taking more money from people's pockets will only serve to prolong the current recession.
Last summer, I met a woman named Kathy on her doorstep who quickly identified herself as one of the working poor. When asked what I can do for the working poor, she said, “Please don't raise my taxes.” She further explained she and many of her friends work two jobs to make ends meet. When taxes are raised, hours often get reduced, yet the cost of milk and eggs increase. According to a study done by the Washington Research Council (WRC), “14,759 jobs would be lost with a $1 billion sales tax increase.” If these taxes were raised, Kathy and her friends would likely lose at least their second jobs and perhaps ultimately be unemployed.
Employers are struggling to keep their doors open and retain good-paying jobs with benefits for people like Kathy. Projected additional revenue from tax increases may not be realized because a stressed business may either close, or move out of state. Government should make it easier to start a business, not hinder the free market. According to the same WRC study, “15,072 more jobs would be lost if lawmakers increase the state business and occupation tax (B&O) by $1 billion.” If these tax increases were to actualize, businesses would fail, more people would be out of work, and the economy would continue to lag.
Here's my solution. Use performance reviews of government programs predicated on an outcome-based model to help reveal which government programs continue to serve our communities while revealing programs which are no longer effective. If a government program is not meeting people's needs, other options can be explored.
Also, revenue can be generated in two ways: raising taxes or fostering job growth in the private sector. Instead of developing a budget and then trying to increase revenue, the state should craft a budget that matches existing revenue, as required by I-601. The state must balance the budget with jobs in mind. I prefer a government which empowers job growth in the private sector resulting in the needed revenue to support education and critical social services which serve as the thread that holds together the fabric of our communities. It's never been more important than now to let employers know we want them to thrive.
I received an email from a constituent stating, “It's commonly said the difference between a politician and a statesman is that a politician governs for today, while the statesman governs for tomorrow.” Instead of asking how we can pull more money out of the economy today, as a community, let's ask how we create jobs for tomorrow. Suspending I-960 and increasing taxes today will only prolong our recession, costing our state much-needed revenue, but more important, it will cost valuable jobs for today and tomorrow's working families. We must balance this budget with jobs in mind.
Rep. Kevin Parker is a Republican from Spokane. He serves as assistant ranking member of the House Finance Committee. He runs a small business with his wife in Spokane and teaches in the business school at Whitworth University.
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