Tax increases will hurt retailers

Recently, Gov. Jay Inslee proposed several tax increases to the Legislature in a time that state revenues are increasing.

That’s a combination of factors that will hurt consumers and retailers.

Just last month, Inslee’s chief economist, Steve Lerch, described Washington state consumer confidence as fragile. Recent payroll tax increases and rising gasoline prices do nothing to encourage companies to hire or consumers to spend, which would help the economy recover faster.

Against that backdrop, Inslee has proposed removing a tax incentive that encourages many out-of-state residents to shop in our state. The state estimates that nearly 4,500 retailers across our state would feel the impacts of this idea.

To help many of our retailers compete against states with lower or no sales taxes, Washington extends a sales tax exemption to residents of six states and four Canadian provinces and territories. The incentive encourages shoppers, including those from Oregon where there are no sales taxes, to shop in our state. Those sales create positive ripple effects of related spending at restaurants and gasoline stations and the like. More importantly, they encourage retailers in our state to hire employees and keep them employed.

In case anyone thinks the state has recovered from the recession, consider the Employment Security Department’s estimates on retail employment. There were an estimated 6,200 more people working in retail in January of 2008 than there are now. No, retailers have not yet recovered from the recession.

Now comes Inslee’s proposal to remove an incentive to shop in our state in order to raise an estimated $63.7 million in new revenues the next two years. The governor doesn’t consider wiping out a sales tax exemption a tax increase, but that’s just mincing words. Bottom line, it would add to the cost many consumers currently pay for items and that’s a disincentive to shop in our state.

Southwest Washington retailers in Vancouver were quick to shoot down Inslee’s idea. The Greater Vancouver Chamber of Commerce president said niche businesses along the Oregon border estimate they get up to 40 percent of their business from Oregon shoppers who currently qualify for the tax incentive.

Removing the exemption would hit retailers of bigger ticket items the hardest.

Kevin Safley, who owns a transmission shop in Vancouver, estimates that 30 percent of his business comes from Oregonians who save up to $400 in state sales taxes because of the exemption. If his Oregon customers stopped coming, he might have to lay off a couple of his employees or at least stop paying for their health care insurance, Safley said.

“We’re trying to grow, but we wouldn’t be able to do that if the exemption went away,” he said.

Jeff Weinstein, who owns a Vancouver mattress store, said legislators are underestimating the negative ripple effects of repealing the exemption. It might not only cause him to lose the 10 percent of his business that comes from Oregon. Vancouver retailers forced to lay off employees would be drying up potential Washington State customers as well, Weinstein said.

“It will have a negative snowball effect,” he predicted.

In his budget presentation last week, Gov. Inslee acknowledged difficulties with his proposal and adopted the phrase “we can do hard things” when talking about his tax increases. Retailers would apply that phrase differently.

Rather than discouraging shoppers and hindering economic development by threatening more retail jobs, legislators and the Governor need to face what’s hard and spend less. State forecasts call for growing state revenues, even without new taxes.

Let’s live within our means and avoid any new expenses that will hurt consumers and further threaten retailers and their employees.

Jan Teague is the president/CEO of the Washington Retail Association, which represents retailers who operate some 2,800 storefronts across the state.