Talking about a tax increase for businesses might seem irrelevant to you if you are not a business owner. Not so.
Tax increases can have unintended consequences that outweigh the benefits. The 20-percent increase to the business and occupations tax that takes effect Jan. 1 is no exception.
If businesses have to take a bigger chunk out of their revenue to pay a larger tax burden, other things they would have spent that money on are no longer affordable. Think of your retirement, for example.
Don Mellott, BRCA Design, said that his firm recently increased the amount it contributes to employee 401k retirement plans, which, in turn, has inspired employees to increase their contributions as well. However, an increase in the business tax means the company likely won’t keep up those larger contributions, which could diminish the morale that led to higher employee contributions too.
This means employees will feel the sting of this tax now because pay raises might be less and benefits might be reduced, but also later when they retire and are on a fixed income.
The state could also feel the pinch. Michael Fast, MRF Construction, explains that the state could be biting off its nose to spite its face. In an effort to get additional revenue through the business tax increase, the tax could actually undermine the proceeds the state gets from taxes it collects from home building. He argues that the reason state government has had record revenue the past few years is because of Washington’s home-construction boom. And, that it it is stifled, it will jeopardize that same revenue growth and the state services that depend on it.
Join me next week as I share more about the effects of the increase in taxes on different home building, employees and the middle class.
Sen. Steve O’Ban
Independent contractors and freelancers beware
Last year, several proposed bills attempted to reclassify hair stylists and cosmetologists that worked as independent contractors. The bills tried to force certain constraints on how they do business, ignoring their choice to rent booth space, and hurting their ability to earn enough to make a living. You might remember some of the news coverage.
Just recently in California, a bill was proposed that would cripple freelance writers’ ability to contract out.
This year in Washington, we’re seeing bills emerge that attempt to place similar constraints on a much larger group of independent contractors, and you just might be affected. I’ll update you more as these bills get introduced and make their way through the legislative process.
But if your job is on the list of contractors affected, and you’re an independent contractor, you could be subject to the restrictions in the new legislation and will want to watch this issue very closely. And don’t forget to take my survey so I can find out more about how this issue impacts you.
For a list of affected professions, click here.