Washington State is Fifth Best for Small Business, Says TheStreet

Governor Gregoire has not had a lot of good news to report recently, so the exclamation mark after her latest tweet is probably heartfelt.

I suppose it’s sexier to note the state’s #5 ranking by Jim Cramer’s TheStreet, but it’s worth clarifying that “TheStreet is highlighting the five best and worst states for small businesses as compiled by the Small Business & Entrepreneur Council as part of its annual Small Business Survival Index, released in December.” (The full index pdf is here.)

TheStreet boils the SBE survival index down for you. On the pro-business side, Washington has no “taxes for personal income, individual income, corporate income and corporate capital gains. It also boasts low electric utility costs….” On the burdensome side, we have high unemployment taxes and extremely high consumption-based taxes, and small businesses also have to cope with health insurance mandates and a high minimum wage. 

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They also approve of Gov. Gregoire’s executive order from last October, in which she called for departments and agencies to make it easier for small businesses to do business:

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In her executive order, Gregoire directs the Department of Labor and Industries, the Department of Revenue and the Employment Security Department to review current practices, tax and rate structures with the goal of reducing state imposed costs for small businesses. The order also tasks DOR to work in consultation with small businesses, local governments and other stakeholders to evaluate ways to reduce the complexity of the state’s sales tax system.

A commenter at TheStreet couldn’t believe the ranking: 

This is total bunk. Washington state has a B and O tax that is equal to twice the average corporate income tax and is figured on the gross instead of the net. In effect we have the highest corporate income tax rate in the nation(roughly 16% Average) This is always overlooked and makes Washington look far better than it is. 

But a quick call to the SBE’s Raymond Keating confirmed that Washington’s loathed B&O tax was included in their calculations, as part of consumption-based taxes. “That’s why you scored so poorly on that part,” said Keating. In the break-out ratings of “State and Local Sales, Gross Receipts and Excise Taxes,” Washington is only bested (worsted?) by Hawaii. Even with that handicap, Washington powers into the top five overall, behind Wyoming, Texas, Nevada, and…in the top spot: South Dakota.