A bill meant to create economic growth and jobs beyond the central Puget Sound region found overwhelming support in the Legislature this year, with Democrats and Republicans joining to approve tax incentives meant to spur development in rural Washington.
Yet Gov. Jay Inslee was unimpressed by this rare bit of bipartisanship. He partially rejected the legislation. Adding insult to injury, the governor split the difference in his favor, keeping the part of the proposal that may benefit one of his pet projects.
The governor’s fast and loose antics upended a strong bipartisan effort by lawmakers and leaves smaller communities without a tool that the Seattle area already benefits from. Further, the veto results in a negative revenue impact for the state. The new tax-deferral program for manufacturing is expected to cost the state general fund $2.6 million per year by 2027 while the rejected offset would have saved the state $2.7 million.
The shortsighted rejection is ripe for an override.
Senate Bill 5901 establishes a tax-deferral program for manufacturing and research and development investment projects in counties with a population under 650,000.
Sponsored by Sen. Emily Randall, D-Bremerton, it also would have expanded the warehouse sales and use tax exemption to include qualified warehouses, grain elevators and distribution centers, while limiting the maximum amount of exempted taxes to $400,000.
Tax deferral programs of this kind already exist in King County. Deferred taxes do not have to be paid if project conditions, such as timely completion, are met. Ideally, any loss in tax revenue is offset by gains in new growth.
Inslee’s veto targeted the expanded warehouse exemption as well as the cap.
“The governor’s decision to partially veto SB 5901 — to strike a line that would save our neighbors money and broaden access to a tax exemption for small businesses — is a shortsighted attempt to apply a Seattle-centric, one-size-fits-all policy to our whole state,” Randall said in a statement.
Initially Inslee intended to veto the entire legislation, according to a prepared written explanation that was discarded, when he changed his mind.
“I recognize that manufacturing and warehousing are important components of the state’s rural economy, but the tax incentives in this bill are overly broad,” he wrote, taking issue with the program’s inclusion of 36 of the state’s 39 counties.
The governor pulled back because the larger tax deferral incentive may benefit an unnamed project he is trying to bring to Washington.
“There was a provision in there that could be important to a high-tech manufacturer in the clean-energy space,” Inslee explained, as reported by Times reporter Joseph O’Sullivan. “It’s very important to get that company to Washington state.”
Inslee is within his rights to issue a partial rejection — unlike in recent line-item vetoes, this is not a case where the state Supreme Court would likely find he has overstepped. However, if the principle is the thing, as purported by his initial impulse, his backtracking belies that notion.
The measure also passed both chambers with a “veto-proof” majority. If lawmakers are serious about the power they wield in the name of their constituents, then legislative leadership should stand up and override the governor.
In the meantime, the veto reinforces the feeling, shared by many Washingtonians outside the Seattle area, that their concerns are often last on the list. That may be an overstatement, but what Inslee made clear in his selective rejection is that his interests come first.