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Critics Say Gov. Inslee Caved to Unions in Vetoing Tax Cut for Manufacturers

Inslee vetoed bi-partisan plan that would have helped over 10,000 manufacturers (Getty Images)
Inslee vetoed bi-partisan plan that would have helped over 10,000 manufacturers (Getty Images)

Although he denies it, critics, especially on the GOP side, are saying Governor Inslee caved into special interests and labor unions when he vetoed part of a bill that would give the same Business and Occupation tax rate as Boeing.

Many are wondering why Inslee vetoed part of Senate Bill 5977 (SB5977) which would have lowered the B&O tax by nearly 40% for the roughly 10,000 companies in the state who manufacture goods. These range from computer and software parts, to the many manufacturers in the Tri-Cities who build a wide variety of products. Boeing and other aerospace companies were given that rate in 2003, and it was extended in 2013. But the reason Boeing ended up cutting jobs is because of it’s battles with labor unions. That’s why despite the tax break, Boeing went to South Carolina and other states less influenced by unions.

Inslee claims  because the bill was passed late at night, after months, days and hours of compromise by Democratic and Republican leaders, it wasn’t ‘transparent.’  He also claimed it was unfair to taxpayers, saying while the state was raising real estate taxes, these companies basically should not get a break.

GOP leaders say Inslee completely missed the point, in that lowering tax rates for manufacturers leads to growth and strength of their firms, and more jobs. Centralia GOP Senator John Braun says the state has lost nearly 50,000 manufacturing jobs since 2000, and these losses don’t include the aerospace industry (Boeing) according to the Seattle Times.

Labor unions were against the tax break, claiming tax break recipients “were not held accountable for creating or maintain good jobs”. That statement came from Jeff Johnson of the Washington State Labor Council.  Translated, that means they are against jobs that are non-union, jobs created in smaller non-union companies that don’t benefit union workers.

Inslee also claimed he was not fully informed of the plan, but leaders on both sides say the bi-partisan plan was presented to him, and he was given regular updates. GOP and even some Democrats who agreed with the plan say Inslee acted in bad faith.

What also spurred him to veto the provision was a letter from 23 Democrats who opposed the tax cut, and they urged him to strike it down.

According to the Tax Foundation and other sources, WA has one of the most regressive tax structures of any state in the nation.

In case you wondered exactly what the Business And Occupation tax is, from the Washington State Department of Revenue:

“What is the business and occupation (B&O) tax?

The state B&O tax is a gross receipts tax. It is measured on the value of products, gross proceeds of sale, or gross income of the business.

 Washington’s B&O tax is calculated on the gross income from activities. This means there are no deductions from the B&O tax for labor, materials, taxes, or other costs of doing business.”

 

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