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Leading Watchdog Group Says Washington State Taxes “Harmful”

Our B&O taxes among worst in nation
(Photo by Mark Wilson/Getty Images)

Washington state is one of a handful that don’t have a corporate state income tax, but a leading tax watchdog group says what we do is even WORSE.

Since the early 1930’s The Tax Foundation has kept a watchful eye on everything tax related in the United States.  This not-for-profit group has just released their report on the most and least-taxed states in the U.S. as far as corporate tax rates go.

Corporate rates are a tax businesses pay on their net profits, or the money they have left AFTER they pay all their expenses.  Pay attention to that, because in Washington state, we do the opposite.

Surprisingly, Iowa is the most-taxed state as for corporate income, at 12%.  Other high states include Pennsylvania, Illinois, and Alaska.

While some states such as Ohio, Texas, Virginia, Delaware and Washington state don’t have a corporate income tax, the Tax Foundation says what they do is more harmful to their economies.

Washington’s “pandoras box” is our Business and Occupation (B&O) tax.

According to the Foundation,  B&O taxes are among the most harmful to economic growth and prosperity.   What are they?  Gross receipt taxes.  In other words, it’s a tax on every bit of income that a business takes in, BEFORE the business pays all it’s operational bills.

Imagine you have a lemonade stand that made $500 during the three months you were open.   You had $175 dollars in expenses (those juice packets and sugar are expensive!).    So you net profit was $325.   But the government says we are going to tax you on the $500, not your net profit.  So not only do you have to pay your expenses, your tax rate is higher, because the amount being taxed…is higher.    You’re being taxed on money you don’t get to keep  – your expenses.

That’s why the Tax Foundation believes B&O tax rates need to either be replaced by a less economically harmful system, or eliminated altogether.

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