Article by Erik Smith. Published on Wednesday, February 17, 2010 EST.
By the Editors/ Washington State Wire
Even as Boeing made its announcement that it was building the new production line in South Carolina, state and local politicians expressed surprise. The surprise was empty. Boeing and other manufacturers have been pointing out for several years the problems in this state that undermine competitiveness.
Yes, one can find business-climate surveys to suit any political persuasion, but look at the serious surveys or simply look at the facts and the message is clear: Washington State has certain advantages but the cost of doing business and business friendliness are not two of them!
CNBC and Site Selection Magazine Agree: Washington Not “Business Friendly”
If you really want to understand business climates, check with the corporate executives who make the decisions and where the growth is really taking place. Site Selection magazine came out with its annual rankings in November 2009 – no surprise here, Washington was not in the top 25 business climates (in a wonderful political move they do not rank any state below the top 25). By the way, South Carolina was 6th.
A more detailed survey is done by CNBC. In July 2009, overall they ranked Washington State as the 16th best business climate because of strong showings relating to the Quality of Life 11th, Technology & Innovation 6th, and Access to Capital 5th. But when it came to Cost of Business 32th, Cost of Living 34th, Workforce 35th, and Business Friendliness 37th, Washington State did poorly.
According to the Washington State Department of Revenue Washington total state and local taxes are above average per capita, 11th in 2007, but average as a percentage of personal income, 26th. However, what makes Washington different is that it raises a larger share of these taxes from businesses than just about any other manufacturing state. In its most recent February 2009 analysis the Council on State Taxation found Washington State raised 51.3% from business compared with 40.7% in California, 38.2% in Oregon, and 43.3% in South Carolina.
Payroll Taxes Very High
When it comes to payroll taxes the facts are even more brutal. According to the U.S. Department of Labor UI employer tax rates in Washington State have consistently been in the top five nationally – over three times states like Texas, Arizona and Florida.
And workers’ compensation costs, although varying between industries, are some of the highest in the country – not surprising given the fact that Washington state has the second-highest level of benefits in the country and troubling cost trends. Even the governor’s requested Aerospace Industry Competitiveness Study, prepared by Deloitte Consulting, found “Employers in Washington pay for one of the most expensive Workers’ Compensation systems in the country.” Other studies might come to other conclusions but ignore the fact that even the Department of Labor & Industries acknowledges that current rates are almost 25% too low to break even.
Finally, ambiguous employment and land use regulations keep litigation rates high.
Obviously Washington will continue to be attractive to some industries, particularly those who benefit from the lack of any corporate or personal income tax. And even when it comes to workers’ compensation, some industries do better because of the State’s unique classification system and hours-based premium calculation.
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