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Job Creation in Washington State Begins with Unleashing the Free Market

Washington State voters have a refreshing opportunity this year, a chance to make a choice between two very different competing visions offered by the candidates running to become the next Governor.

Specifically, on the issue of how to create jobs, Rob McKenna and Jay Inslee have laid out their plans to cure the state’s unemployment problem—a front and center problem of drastically reducing the rate of joblessness that still runs above the national average for the state as a whole and is in the double digits in most of the areas outside the Greater Puget Sound basin.

Each candidate has plotted a course they claim will create jobs, but the paths they would take lead in opposite directions.

What are these opposing philosophies? Rob McKenna believes that jobs are created by the private sector, and the government’s role is to reduce the tax and regulatory hurdles that hamstring businesses that might otherwise sprint into growth and jobs. Jay Inslee believes that government creates jobs, both directly and by intervening in the private sector to encourage employers to hire in ways they would not naturally choose.

How would McKenna’s vision improve the employment picture in Washington State? By reforming the state’s business and occupation tax, unemployment insurance, and worker’s compensation, as well as pruning the thicket-like maze of regulations that make Washington State one of the most expensive places to do business, McKenna’s plan—quite simply—aims to make is easier to do business. Removing the disincentives currently associated with hiring and expansion, and lowering the cost of doing business is, in McKenna’s view, all that is needed to spur the economy into a burst of job creation. McKenna’s call to get rid of inefficient or obsolete tax credits will be balanced in the budget by a smaller, more efficient state government.

In the other world, the one envisioned by Jay Inslee, the state would encourage and manage growth only in industries of the government’s choosing (mainly high-tech and aerospace) through the use of tax credits and low-interest loans. Inslee’s decisions to support selected industries would be implemented by new agencies tasked to recruit new businesses into the state, and a business and occupation tax credit would be available to firms after new jobs are created. Inslee’s proposal for paying for the new initiatives is a combination of tax reform, eliminating exemptions and closing loopholes from the current system.

For anyone who believes in the free market, the choice is obvious. If you want more jobs, make jobs less expensive to create. Since Washington State currently discourages the hiring of new employees by having high worker’s comp premiums, unemployment taxes, health insurance mandates, a regressive business and occupation tax system and excessive regulations, to encourage companies to hire we just need the state to stop doing this.

Jay Inslee’s approach will do nothing to reduce the costs of hiring employees that come from state taxes and regulations. If anything, Inslee’s plan seems to add yet another layer of government interference.

Worse yet are Inslee’s plans to offer tax credit incentives to attract new businesses. In order to compete with other more cost-efficient business-friendly states, Washington would need to rebate far more in taxes to compensate for our already high business taxation burden. The cost of giving a tax incentive to out-of-state businesses is then transferred to all of the businesses already here, companies that will not get a “sweetheart deal.” Inslee appears to propose that these new tax credits would be offset by eliminating older tax credits; replacing old preferences with new preferences. I fail to see how jobs are created by giving money to one group of business that has to be taken from another group of businesses.

Inslee’s jobs plan illustrates the danger of putting the government in charge of picking winners and losers. (Actually, logic tells us that government almost always picks losers—winners don’t require government subsidies.) The core problem—creating jobs—is not addressed by Inslee’s plan and the end result will be a government that grows larger and more corrupt by trading influence and favors.

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[feature photo credit: coreycam]

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1 Comment

  1. RS

    We have seen how the Nation’s president has hand picked industry subsidies, and it has caused billions in waste of taxpayer dollars (Solyndra, Fisker, etc.). Let the invisible hand of the market do its job and we will see growth and prosperity. Bureaucrats cannot “entitle” people with prosperity. Capitalism > Socialism

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