Taxing independent contractors a new low for Olympia
Winston Churchill once said, “We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
While true, perhaps another axiom playing out in Olympia this session would be, “Never underestimate the creativity and deviousness of those who devise schemes to increase your taxes.”
Despite record revenue collections, there are some in Olympia who want more; more taxes for more spending on more programs.
One particular tactic has gained substantial attention. A Democrat state senator introduced Senate Bill 5326, which would do away with rental booth agreements for small business entrepreneurs like hairdressers and stylists. The rationale, I suppose (if there is one), is that more people need to pay into, and be protected by, the state's unemployment insurance programs.
However, it appears this is really an effort to increase state tax collections through business and occupation (B&O) taxes.
If you are a hairdresser who rents a chair or a booth as an independent contractor, you most likely pay little to no B&O tax. An independent contractor who makes less than $56,000 per year pays no B&O taxes. If they make between $56,000 and $112,000 per year, they pay B&O taxes at a reduced rate.
If these hairdressers and stylists were forced to join a larger company or salon as an employee, all of that economic activity would be taxed at substantially higher B&O tax rates, thus increasing state coffers even more. But at what cost?
The hairdressers and stylists I spoke with talked about needing flexibility in their schedules to work around family, school, sports, childcare, or a spouse's work schedule. Forcing them to work for a large salon would be ruinous, not only for their flexible schedules, but most said they would take a huge pay cut, and some said they'd go out of business entirely.
There was so much uproar about this legislation, that Olympia was swarmed – and rightfully so – by hairdressers and stylists from around the state. So many people signed up to testify on this bill, that the committee stopped keeping track once it reached a thousand!
At about the same time that SB 5326 was being amended in committee to take out the most onerous section, two more bills were introduced dealing with independent contractors: SB 5513 and HB 1515.
These bills are still a work in progress, but what is painfully obvious is that there is a concerted effort to go after independent contractors and sole proprietors. We're talking about truck drivers, delivery drivers, certain custodial services, home health care workers, construction workers, many in the hospitality industry and more.
Because the sponsors of these bills have failed to adequately explain why they are necessary, we are left to ponder about the motivation behind this attack on small business entrepreneurs.
Is it in response to the recent Supreme Court Janus decision that affected public union membership? Is it to increase state tax collections by working around existing law? Is it to punish motivated, self-starters who are trying to capture their version of the American Dream?
Whatever the reason, please know that I, and my House Republican colleagues in Olympia, stand with the small business entrepreneurs. We will fight against any legislation that hurts their economic opportunity.
Because, if there's one old saying we should all adhere to, it's “Don't tick off your hair stylist!”
(Rep. Joe Schmick, R-Colfax, represents the 9th Legislative District and serves on the House Appropriations Committee.)