Revenue Chief Touts Tax Package Mccomb Seeks Tax Cut On Manufacturing Investment

The Washington Legislature will pass a bill reducing taxes on manufacturing investment in the state this legislative session, but Len McComb is not sure the cuts will be deep enough.

McComb, director of the Washington Department of Revenue, chaired a state advisory committee that studied Washington’s standing among 12 states that most directly compete with Washington for manufacturing investment.

They found that Washington was the 10th highest among those states in terms of the tax burden it imposed on manufacturing investors.

So the revenue department proposed a series of tax exemptions that would move the state up on that list. The recommendation involved packages ranging from $390 million in reductions to a minimum $180 million.

McComb says the Legislature has adopted the minimum package, which would elevate Washington from 10th to third on the list.

“But the question is,” he said, “how much it will be reduced from there.”

Bills have passed both the House and Senate, and now face the conference committee process between the two. Because the package must be part of the state’s overall budget package, the final figure won’t be arrived at “until the very last minute.”

If the package is reduced any further, McComb says, it may be of little value at all.

“As the amount of the exemptions goes down,” he says, “the benefit to business goes down, and the benefit to getting that investment in the state of Washington goes down.

“We compromised this proposal to make it affordable in the beginning. There’s no reason to compromise it now to allow a politically popular tax cut that’s not going to have a real economic benefit.”

McComb was in town Wednesday and spoke to the Spokane Area Economic Development Council’s Manufacturer’s Network.

He said his department’s study showed that tax burdens are crucial elements in companies’ decisions about where to locate manufacturing operations once they have narrowed the choice to two or three possibilities.

“Only California and Florida have a higher tax burden on manufacturing investment,” McComb said.

And what concerns companies most, he said, is taxation of a company’s initial investment.

So the proposed legislation exempts taxation on the purchase and replacement of machinery and equipment.

Because the state has a budget surplus at this point, McComb said, a variety of tax relief proposals are being offered in the Legislature. But of all the proposals, only the manufacturing tax incentive plan directly rewards investment.

“This is not trickle-down economics,” he said. “We’ve proposing an incentive to people and firms who are prepared to invest in this state. They don’t get it if they don’t invest. And we all benefit from that investment.”

The other proposals, he said, have the opposite effect.

“You get the property tax break whether you do anything or not,” he explained. “You get the B&O rollback regardless of what you do.”

The package amounts to giving up a little bit of your immediate state income for a much higher return in the long run, he said.

“Manufacturing plays a vital role in every economy,” McComb said. “Our data shows that the No. 1 thing that correlates to the economic growth of manufacturing is the growth of the general economy.”