(The Center Square) – The National Federation of Independent Business’ latest monthly Small Business Economic Trends, or SBET, report – informally known as the Optimism Index – indicates a continuing lack of optimism in Washington state and across the nation.
The SBET report is a series of surveys and studies conducted by the NFIB Research Center that provide information on the state of small businesses in the U.S.
According to Tuesday’s report for the month of August, small business optimism has significantly decreased, with the index falling to 91.2, primarily due to concerns about high inflation and increasing cost pressures. This marks the 32nd consecutive month that the SBET has fallen below its 50-year average.
Though the SBET is a national snapshot of NFIB-member, small-business owners not broken down by state, The Center Square reached out to Patrick Connor, director of the NFIB in Washington, for his take on what the report means for the Evergreen State.
“Main Street is still suffering from high inflation that adds to their operating costs, as well as forcing many to raise prices to their customers, which is the last thing they want to do,” he said in an email. “The labor market continues to be tight. Employers are paying more, but still struggle to find people able and willing to work.”
Washington’s unemployment rate is 4.9%.
“If that wasn’t enough,” Connor said, “Olympia and Washington, D.C., continue to churn out new rules and regulations making it even more difficult and time-consuming to run your own business.”
He worries that mom-and-pop enterprises will face even more regulatory and financial hurdles in the near future.
“And, looking to next year, many small businesses are facing a huge tax hike unless Congress extends the Small Business tax deduction, which helps level the field with corporations,” Connor said. “More than 55% of our members in Washington state operate as ‘pass-through entities,’ meaning their business earnings are taxed as personal income, without the same itemized deductions and lower tax rates corporations enjoy.”
The 20% Qualified Business Income Deduction is set to expire in 2025.
It’s not all bad news, according to Connor.
“There are some rays of hope in Washington,” he said. “NFIB will be asking voters to help save Main Street by voting ‘yes’ on all four initiatives on the November ballot.”
Initiative 2117 would repeal the 2021 Washington State Climate Commitment Act, a state law that provided a cap-and-trade program designed to reduce greenhouse gas emissions by 95% by 2050.
Initiative 2066 would prohibit state and local governments from restricting access to natural gas.
“Washington’s fuel and energy costs are among the highest in the nation,” Connor said. “The threat of losing access to natural gas and propane threatens several industries, including local grocers and restaurants.”
Initiative 2109 would repeal the 7% capital gains tax imposed on sales and exchanges of long-term capital assets by individuals with capital gains over $250,000.
“The capital gains tax doesn’t apply to corporations, but a small business owner selling the firm to fund their retirement could be hit with a massive capital gains tax bill,” Connor noted.
Initiative 2124 would allow employees and self-employed workers to opt out of coverage under the WA Cares long-term care insurance program.
“And, workers living paycheck-to-paycheck are seeing part of their wages diverted to yet another state-run social insurance program that they may never use,” Connor concluded. “Voters can ease these burdens and help small businesses survive by voting ‘yes’ on all four initiatives.”
