Acknowledging the widespread dislike of the state’s onerous business-and-occupation (B&O) tax Gov. Chris Gregoire recently said, “If you want to come forward with an alternative to the B&O tax system in the state of Washington, the welcome mat is out from me.”

Thank you, governor, for the invitation.

To answer the call for alternatives, we utilized economic modeling to determine the impacts of various replacement taxes, including the potential creation of an income tax. Usually alternatives to the B&O focus on creating an income tax instead.

In fact, one initiative campaign this year attempts to sell the public on the creation of a graduated income tax by offering small businesses some relief from the B&O tax.

Not surprisingly, an income tax modeled the worst, causing the most job loss and economic distortion.

With other options showing minimal job or economic impact, we turned our attention to meaningful reform based on sound principles of taxation.

These principles include tax code building blocks such as simplicity, accountability, economic neutrality, competitiveness, balance and reliability.

The result is a proposed constitutionally defined Single Business Tax or a gross-receipts-margins tax that would be:

• revenue neutral;

• treat all business owners equally by using one flat rate;

• eliminate loopholes and special treatment; and,

• simplify administration of the tax to reduce compliance costs for business.

Here is how the Single Business Tax would work. A business owner would choose one of three ways to calculate taxable receipts, selecting the one that results in the lowest tax burden. Calculating the taxable margins could be based on:

• total gross receipts minus labor costs; or,

• total gross receipts minus all production costs except labor; or,

• 60 percent of total gross receipts.

The business owner would then multiply the taxable receipts by the Single Business Tax rate.

The final amount owed for each taxing jurisdiction would be sent to the state in one payment and then distributed by the state to different local governments.

This proposal would result in radical simplification of current business taxes.

It would eliminate the confusing multiple rates on business activities, and repeal the special-interest tax credits and exemptions for some industries that have built up over the years.

The Single Business Tax would need to be phased in over several years to allow employers and public officials time to adjust to the new system.

Our goal is to create a simple, fair business tax that avoids the economic harm of imposing an income tax on businesses or individuals.

The Single Business Tax would allow policymakers to improve the business climate while collecting needed revenue for government.

By embracing solid tax principles and meaningful reform — both in the short term and the long term — we can encourage future economic growth.

We hope our proposed Single Business Tax will restart the conversation about alternatives to the burdensome B&O tax and how to create a saner tax for our state’s businesses, while providing the funding needed to pay for core functions of government.

Jason Mercier is director of the Center for Government Reform and Carl Gipson is director of the Center for Small Business at Washington Policy Center.