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Home / Presidents Perspective - 2004 / It's the Economy, Don't Kill It |
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It's the Economy, Don't Kill It |
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Written On: December 23, 2004 |
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Employers look back at 2004 as the year when our economy finally started to rebound. It’s been in the tank since 9-11, and job providers enter 2005 with cautious optimism – cautious because our recovery is still very fragile.
Lawmakers ought to remember President Bill Clinton’s campaign slogan from 1992: “It’s the Economy Stupid!” In 1993, Washington employers modified Clinton’s motto to read: “It’s the Economy, Don’t Kill It!” But as lawmakers drove home 11 years ago, they left employers holding the bag full of new taxes.
Could the same thing happen again?
In 1993, lawmakers faced a $1.3 billion deficit. By the end of the session, they increased taxes by $668 million. This year, the revenue shortfall is $1.6 billion and outgoing governor Gary Locke proposed $640 million in tax increases. Those taxes include a new gross receipts tax on doctors, a nickel per can tax on soda pop, a 25 percent increase in the state liquor tax, and a doubling of the state tax on wine —all to balance his budget.
In 1993, then Gov. Lowry and majority Democrats told the business community it had a choice. Either accept a new sales tax on services by lawyers, accountants, and barbers or a hike in the Business and Occupation (B&O) tax. In the end, it was a big increase in B&O taxes, as well as higher unemployment and workers’ compensation costs.
As lawmakers consider what to do this session, they should remember that our employers already pay more than 54 percent of the state and local taxes in Washington. That compares to 35 percent in Oregon and a national average of 42 percent.
That leaves Washington employers in a dilemma. If they cannot pass the tax increases on to customers through higher prices, they have to eliminate jobs, cut salaries and employee benefits or move jobs out of state to survive.
Higher taxes are not the only problem. Eleven years ago, lawmakers increased unemployment benefits to 70 percent of the average weekly wage and created a UI tax surcharge on employers in order to finance worker retraining programs. The result was employers had to pay an additional $130 million per year, making Washington the most expensive state in the nation for the average cost per worker.
In 2003, Locke and a fragile majority from both parties, realizing that the increases had damaged Washington’s competitiveness, pushed through comprehensive unemployment insurance reforms – reforms which some key Democrat legislators now want to undo.
In 1993, lawmakers caved in to pressure from unions and approved a workers’ comp benefit increase, raising benefits to 120 percent of the average state monthly wage. The result was employers shelled out another $28 million a year. To make matters worse, Washington’s Supreme Court has unilaterally expanded the payments injured workers receive. Last year, the Republican-controlled Senate attempted to strike a balance between unions and employers and reduce costs, but the Democrat controlled House blocked the legislation.
Finally, employers were flattened in 1993 by sweeping health care changes that were to be the model for Hillary Clinton’s national health care program. Only the refusal of Congress to pass a required waiver kept the program from being implemented in Washington.
However, the battle over health care continues. Some Washington legislators are expected to introduce a “play-or-pay” plan during the upcoming session which would require that employers either fund health care coverage for their workers or pay the state to do it for them. Even ultra-liberal California voters rejected this scheme.
While employers universally agree that something must be done to curb health insurance costs, lawmakers need to provide greater options through health savings accounts, requiring fewer mandated benefits, and reducing the threat of lawsuits for physicians and hospitals. At the very least, Gov. Locke’s proposal to impose a gross receipt tax on doctors is no way to reduce health care costs.
Our message to state legislators remains the same as it was 11 years ago: “It’s the Economy—Don’t Kill It!” Rather, let the economy grow so it can generate the jobs, buying power, and tax revenues that support vital social programs and create better opportunities and brighter futures for our families.
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