Real jobs created by small businesses will lead Washington out of recession

Governor Gregoire kicked off 2012 with a strong statement about the importance of the state’s small businesses in creating the jobs that will turn the state’s economy around: “…If we can make it easier and cheaper for them [small business owners] to do business, they can afford to add more employees. This is the key to our economic recovery…”

You might notice the Governor did not say jobs created by government are the key to economic recovery. Yet that is precisely what is proposed in several “jobs” bills being considered by the legislature. In an effort to stimulate the economy and reduce the high unemployment rate, the bills would use tax dollars to try to get people working. Financed primarily by revenue bonds (that is, more public debt), these bills together would spend well over $1 billion to create make-work jobs, like weatherizing public buildings and improving fish passages.

The inherent flaw in these proposals is government cannot create the real jobs that will spur economic recovery. Government has no money of its own—the state would simply be shifting money it takes from working taxpayers to those who are unemployed, not creating true economic growth. The private sector, small businesses specifically, must create those jobs for the state to have any hope of pulling out of the recession. History shows that the entrepreneurs who run small businesses, not government bureaucrats, know how to be the catalyst for economic growth and revitalization.

Rather than use tax dollars to “create” jobs, Washington Policy Center recommends that lawmakers provide meaningful relief to small business owners. Reducing the cost of doing business for the state’s small businesses would encourage entrepreneurs to expand their existing businesses, and invest in new projects and businesses, putting more people to work.

Ironically, while the legislature contemplates spending $1 billion to “create” jobs, this session lawmakers rejected several common-sense bills that would have provided relief for small business owners. Most prominent was the failure of legislation requested by Governor Gregoire (SB 6176 and HB 2490) that would have simplified the collection of Business & Occupation taxes.

Currently 39 cities impose and collect their own municipal B&O taxes. Small businesses operating in more than one municipality say keeping track of and paying the individual B&O taxes is confusing and burdensome. Centralizing the administration and collection of these B&O taxes by the state, as is currently done with local sales and use taxes, would cut administration costs without reducing local revenues. Although the governor asked the Legislature to pass the bills, and the business community overwhelmingly supported the proposal, the legislation failed to even make it to the House or Senate floor for a vote.

Rather than reducing the burden on our state’s job creators with this simple fix, which would allow employers to spend less time doing paperwork and more time growing their business and creating jobs, lawmakers are considering generating new public debt to create temporary jobs.

Washington state is already heavily in debt. Taxpayers must spend nearly $2 billion in the 2011-2013 biennium budget just servicing the outstanding public debt, comprising 6.1 percent of the state’s General Fund budget.

Increasing the state’s debt is contrary to the urgent goal of reducing public spending to create a sustainable budget.

The role of government is not to create jobs, and Olympia’s efforts to do so will not promote real economic recovery. Lawmakers should instead focus on policy reforms that will improve the small business climate, and foster an environment in which private entrepreneurs can do what they do best—create jobs and get Washington working again.

Erin Shannon is the director of the Washington Policy Center’s Center for Small Business. She will be the guest speaker during the next Camas-Washougal Chamber of Commerce luncheon on Thursday, at 11:30 a.m., at Camas Meadows.