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Governor Lauded By Business At Bill-Signing, But Clouds Near

Basking in the applause of business and government leaders, Gov. Mike Lowry on Thursday signed into law a major tax break for manufacturers.

But there were already signs the cheers will fade if Lowry carries out implied threats to veto some of the other tax reductions passed by the 1995 Legislature on grounds they would hurt state services.

At a ceremony here packed with business leaders and lobbyists, and state and local government officials, Lowry signed into law a measure he and others said would make Washington a more competitive place for manufacturers to locate and expand.

The measure, effective July 1, will exempt from state and local sales taxes all new and replacement machinery and equipment used directly in manufacturing.

The break also extends to the portion of a co-generation project that is used to generate electricity for on-site consumption.

The governor signed the measure in a ceremony at the Red Lion Inn at the Quay on the same day that SEH America announced plans to pour another $610 million into expanding its Vancouver plant, where silicon wafers for computer semiconductors are made.

“We take passage of this measure as a direct invitation to expand our business in Vancouver,” said Isao Iwashita, president of the Tokyo-based company.

The company already had announced a $100 million expansion at the plant, which employs about 1,200 people, but put off further enlargement to see if the tax cut would become law.

The cut, estimated to cost the treasury about $148.5 million in the approaching two-year budget cycle starting July 1, is part of a $501 million package of tax reductions passed by the Legislature.

The tax break for manufacturers was proposed by Lowry and supported by the Republican House and Democratic Senate almost from the start.

But passage of big cuts in property and business and occupation taxes was shoved through by the House after rancorous negotiations with the Senate. Lowry has indicated he will veto at least some of those cuts late next week on grounds the revenue loss would harm the state’s ability to pay obligations such as public school costs and social services.

Lowry said he was worried about an unfolding economic slowdown and looming cuts in federal outlays to the states. He said it might be imprudent to slash taxes by so much in such a climate.

In a flurry of press releases, Republicans and business lobbyists on Thursday urged Lowry not to veto the other tax cuts, saying the state could afford them and would benefit from increased economic activity the reductions would stimulate.

“If the governor’s economic advisers are correct, we have reason to be concerned about a slowdown in the economy,” said House Speaker Clyde Ballard, R-East Wenatchee.