In a move certain to anger Republicans, Washington Gov. Jay Inslee on Friday vetoed a tax break for manufacturers that lawmakers passed last week as part of a budget deal to avoid a July 1 government shutdown.
“There is a fairness question here that cannot be ignored,” Inslee said in announcing his veto. He said 21 percent of the benefit would have gone to “out of state oil companies.”
The preferential tax measure would have given all manufacturing businesses in Washington the same low business and occupation tax rate that Boeing pays — 0.2904 percent down from 0.484 percent.
In a statement just prior to the veto, Senate budget chair John Braun, a Republican, said he was disappointed.
“It’s unbelievable that the governor would consider going back on a complex budget agreement that received strong bipartisan support,” Braun said. He added that Washington has lost more than 50,000 manufacturing jobs since 2000.
In a letter earlier this week, 23 House Democrats urged Inslee to veto the tax break citing a lack of transparency and the fact that businesses would be getting a tax cut at the same time many property owners would be paying more because of a new state property tax dedicated to schools.
“The politics and policy of giving the business community a massive tax cut, while hiking property taxes on middle-class individuals to fully fund public schools, is unacceptable and dangerous,” wrote the Democrats.
But Inslee was also under pressure from Republicans not to veto the tax cut.
In their own letter, a trio of Washington House Republicans warned Inslee that a veto would undermine efforts currently underway to get bipartisan agreement on a capital construction budget. They also said the veto would set a “dangerous and unacceptable precedent” that would make future negotiations impossible.
Democrats currently control the Washington House, while Republicans have the majority in the state Senate.
The Department of Revenue has estimated the value of the tax break for manufacturers at $57.4 million per year starting in 2022, according to House Democrats.
Inslee did allow other tax breaks to go into effect, including an extension of incentives for solar power, and film and TV production in Washington.
On Friday Inslee also signed separate tax legislation that will raise revenue by eliminating the sales tax exemptions for bottled water and extracted fuel. That measure also requires out-of-state internet sellers to collect sales tax from Washington customers or report those purchases to the state.