Tax break proposed for manufacturers, but it needs a sponsor

EVERETT — Wanted: state lawmakers willing to spark “tangible, economic recovery.” Must introduce legislation.

Lisa Lefeber, CEO of the Port of Everett, hopes to kickstart the manufacturing sector with a new tax incentive. Now she needs legislators to sponsor a measure.

Her proposal: Give manufacturers a 50% discount on the state business-and-occupation tax if they open new facilities or expand an existing operation.

At stake: the potential loss of 43,000 manufacturing jobs across the state, said Lefeber, citing a recent economic forecast.

“This is a tool to help any business, big and small, invest in our state and create jobs to get us out of the situation we’re in,” Lefeber said.

Tying the tax break to new production facilities would mean current state, city or county budgets wouldn’t be affected, Lefeber said.

Existing manufacturers with no expansion plans would pay the current B&O tax rate.

The Snohomish County Council and county Executive Dave Somers have endorsed the proposal and signed a letter of support, addressed to lawmakers.

“While the economic recovery will take years, this incentive is one way to entice manufacturing companies to come, or expand, their businesses here in Washington state and boost our economy,” the letter says.

The county’s manufacturing sector is a major economic driver. About 20% of the total number of the county’s total jobs are in manufacturing industries. That’s proportionally higher than any other county in the state and above the national average, according to county data.

In the Everett-Mukilteo-Tulalip area, county council District 2, manufacturing accounted for 37% of all jobs. In council District 1, which includes the Cascade Industrial Center in Arlington and Marysville, 15% of the district’s jobs were related to manufacturing, according to a county report.

The county’s manufacturing sector was hit hard last year. Its workers filed the largest number of initial unemployment claims out of all large industries, the report said.

If a 40% or 50% tax break sounds familiar, it should.

Until this spring, certain aerospace manufacturers, including Boeing, could deduct 40% from the total annual B&O tax owed the state. Lawmakers suspended the incentive last spring at Boeing’s request to resolve a trade dispute between the United States and the European Union, home to rival jet maker Airbus.

The preferential tax rate was authorized by lawmakers in 2003 to ensure that the Boeing 787 was produced in Everett. Ten years later, in 2013, the Legislature extended the tax break through 2040 in an effort to entice Boeing to build the 777X in Everett. The preferential tax break saved the Chicago-based airplane maker about $100 million each year.

Under this new proposal, aerospace manufacturers would also be eligible for the deduction, but only if they added a new factory or expanded an existing operation.

This wouldn’t be the first time leaders have sought to give manufacturers a break on the B&O tax.

In 2017, the Legislature passed a bill extending the 40% aerospace discount to the manufacturing sector.

However, Gov. Jay Inslee vetoed the measure, calling it “grossly unfair to taxpayers.” The vetoed bill would have lowered the manufacturers’ rate from 0.484% to 0.2904%.

“It doesn’t have to be a 50% tax break, it could be 40% and sunset in 2030 or 2040,” Lefeber said. “This isn’t set in stone, but let’s start the discussion.”

Janice Podsada; jpodsada@heraldnet.com; 425-339-3097; Twitter: JanicePods