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February 26, 2018

Support for manufacturers likely an end-game issue for 2018 legislative session

By: Jason Hagey   Comments: 0

Senate lawmakers signaled that they may be looking for a way to help the Washington manufacturers this session, despite failing to include a business and occupation (B&O) tax rate reduction as part of their budget.

During a hearing last week on Senate Bill 6481, Sen. David Frockt, D-Seattle, asked AWB’s Clay Hill to offer his opinion about which would provide more help to manufacturers — that bill, which would expand a program that provides a sales tax deferral for construction of expansion of a manufacturing facility, or a B&O rate reduction.

“I’m interested to know your take on which would be, from your perspective, better for job growth,” Frockt said, adding later, “Let’s assume you can’t do both.”

SB 6481, prime-sponsored by Sen. Sharon Brown, R-Kennewick, is squarely aimed at helping manufacturers, but differs in approach to the B&O rate reduction that House budget writers included in their proposed 2018 supplemental budget.

It would expand a 2015 pilot project that allows manufacturers to defer for five years the sales tax for construction of buildings, machinery or equipment. After five years, recipients must begin repaying the deferred amount over a 10-year period. The deferred tax payments would be deposited into a the Invest in Washington Account and used to support customized job training programs and other workforce development efforts.

By contrast, the House budget includes a reduction in the B&O tax rate for manufacturers that would apply to all manufacturers, not just those that are building new or expanded facilities. Well, not quite all. The House plan currently excludes manufacturers in nine counties from receiving the benefit.

Hill declined to state a preference between the two options, telling lawmakers that AWB hasn’t been preparing for an “either-or,” but rather for a “both-and.”

You want manufacturers to be as competitive as possible by having a low cost-structure, Hill said, but you also want them to invest and expand in areas where it’s most advantageous.

Hill concluded by reminding lawmakers that no other sector of the economy has struggled like manufacturing over the previous two decades.

“Why aren’t we growing here in manufacturing?” Hill asked. “Certainly, we can do more.”

With just more than a week remaining in the legislative session, it’s not clear whether lawmakers will approve legislation this year to support Washington’s entire manufacturing sector.

But based on the questioning from Frockt and others, it appears the issue will be part of the end-game debate.