By Tom Zamzow AGC President
Last week AGC’s Board of Trustees considered two initiatives that will be on the November ballot both of which could have big implications for contractors. The Board voted to remain neutral on I-1082 regarding workers’ comp and to oppose I-1098 the income tax initiative.
With regard to I-1082 the Board and AGC in general undertook a careful process of deliberation as the initiative at first blush seems very positive as it opens up the workers’ compensation system to private competition. However some of the details were problematic.
As contractors we all support competition. A change in the law to allow for third-party providers is something that AGC has long supported. And as an industry that on a daily basis wrestles with L&I as the sole provider of this product the instinct to try almost anything else is strong. There are significant “upsides” with I-1082.
But this is offset by major downsides: I-1082 requires employers to pick up the share of premiums currently paid by employees – an immediate 25 percent cost increase for employers during the biggest economic downturn in decades. This is particularly burdensome because private competition wouldn’t occur for 18 months. We would have an immediate increase in our workers’ compensation cost which would take years to recoup once private competition comes into effect. Plus there is uncertainty with the initiative’s requirement that we convert from an hours-based premium to payroll-based premium.
I-1082 does not reform the workers’ comp system. All of the laws regulations and court decisions that have made WA State a high-benefit high-cost state with never-ending claims are still on the books. Private insurers would infuse competition and therefore some efficiency but the new competitors would still be selling a high-cost product.
The board determined that with I-1082’s balance of plusses and minuses the association would remain neutral.
Initiative I-1098 however has few positives to balance its many negatives and the board voted to oppose it. I-1098 would impose the state’s first income tax on higher income taxpayers. Even though the initiative provides modest cuts to property and B&O taxes overall it amounts to an $11.16 billion tax increase over five years. The income tax hits business as well as income derived from S corporations LLCs or partnerships is taxable even if it is not distributed to the taxpayer.
An accompanying article in this issue of AGC Works provides more details about I-1098; this info from a Seattle Times’ editorial sums it up well: “By 2014 the state income tax created by I-1098 would be collecting more than $3 billion a year. Property taxes would be cut by $403 million and business taxes by $261 million. These are not the opponents figures. They are the states. And what they mean is that for every dollar of state income tax collected the state expects to hand back 13 cents to property owners and 9 cents to business owners.”
Click here for the “Vote No on I-1098” website.
In closing I want to thank all the AGC members who contributed to the great discussion on these initiatives particularly the more complex I-1082.