Rural Washington would benefit from manufacturing tax relief

The Legislature took longer than anyone wanted to finish its priority project – the two-year state operating budget.

None of us wanted to see that, but good results came of that extra time: a bipartisan budget and tax plan that not only put record amounts of new dollars – $7.3 billion over four years – into K-12 education, but also gave roughly 10,000 small manufacturers across the state business and occupation (B&O) tax relief in an effort spur job creation.

In addition to the strong, bipartisan support for the budget, the tax relief negotiated as part of the $43.7 billion budget was a welcome surprise, particularly to rural communities that rely on the manufacturing sector to provide good-paying careers. It would have helped manufacturers right here in Wenatchee. Even as Seattle’s economy is red-hot, many small communities are still waiting for some sign that an economic recovery is headed their way.

But, the hope offered by the tax relief was dashed when Gov. Jay Inslee used his line-item veto to undo it.

In our view, the governor’s decision to veto part of a bill that was agreed upon in good faith by a bipartisan group of legislators, and passed with a bipartisan super-majority in both chambers, is a missed opportunity to help small- and medium-sized manufacturers in rural parts of the state that are still struggling.

Any small-town leader will tell you that the economic ripple effect of manufacturing jobs is worth the small investment in their health and growth. In fact, for every worker in manufacturing, there are another three employees hired elsewhere. And, there are a lot of counties in the state with chronic high unemployment that would welcome that kind of return on investment.

Washington’s manufacturing sector has lost more than 50,000 jobs since 2000. Much of that has to do with Washington being a high-cost state for employers with businesses paying 58 percent of all state and local taxes. Reducing the B&O tax burden for manufacturers would have provided a modest and long-term stimulus to help job creators invest in their employees and communities.

We understand that important services and other state priorities must be funded, which is why the agreement in the Legislature was balanced. Lawmakers voted to increase and create new taxes along with the targeted investment in Washington’s crucial manufacturing sector – not the big operations, but the small- and medium-sized ones across the state.

The silver lining is that the governor’s move restarted a conversation that AWB began in March at our first-ever Rural Jobs Summit on the need to expand the central Puget Sound economy to small cities and towns across the state.

Manufacturing tax relief would be a good start. On behalf of our nearly 7,000 employers, nearly 2,000 of which are manufacturers, we sent a letter to all four House and Senate leaders urging them to override the veto with the same strong, bipartisan vote with which they passed it.

There are still many steps we can take to address the uneven economy, but giving our small manufacturers a fair break is a good first step.

Kris Johnson is the president of the Association of Washington Business, the state’s chamber of commerce and manufacturing association.

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