Thursday, June 6 was “D-Day” for the tech industry in Washington.  The state House of Representatives, led by Representatives Ross Hunter, http://www.leg.wa.gov/house/representatives/Pages/hunter.aspx and Reuven Carlyle, http://www.leg.wa.gov/house/representatives/Pages/carlyle.aspx, took a pound of flesh from the industries that made them wealthy.

They led the charge to pass HB 2034, http://apps.leg.wa.gov/billinfo/summary.aspx?bill=2034, which secured 52 votes in a late night session to avoid public scrutiny of raising taxes on the state most dynamic industries.

Sections 109 and 110 of EHB 2034 repeal the two tax incentives for R&D that are widely used by the state’s software, computing, biotech/life sciences, medical device and advanced materials industries.  IT, software, mobile, biotech and advanced devices and manufacturing are the state’s growing and best paying industries.  The software, IT and mobile industries that WTIA represents grew 25,000 jobs between 2005 and 2011 and an additional 2000+ jobs in 2012.  These industries pay an average of $100,000 per year, most with good benefits—just the types of jobs that lawmakers love to brag about.

These industries have used the B&O credit and sales tax deferral for R&D successfully to grow jobs and perform R&D in Washington.  Washington state is 5^th in the nation in R&D expenditures per employee and among the top states in patents granted.

But Reps. Hunter and Carlyle have decided to turn their backs on these industries, claiming these incentives “don’t work”.  They cite faulty studies and pick the facts they want to use and ignore the fact that good jobs will be lost and that Washington will lose out on future growth as companies/entities looking for both talent and reliable business costs will look elsewhere.  Washington based companies will now have an incentive to grow in those other states and regions that are aggressively courting them.

Admittedly, Reps. Hunter and Carlyle are trying to steer this money into the right areas—namely expansion of computer science and engineering at UW, WSU and WWU, all of whom have solid CS and engineering programs.

But by raising taxes on tech companies and worsening the business climate for tech in Washington, they put the state at risk for losing ground to competitor regions, like Georgia, Colorado, Texas, Virginia and Massachusetts.  Even financial basket case California has maintained its R&D credit.  Not to mention aggressive competitors from British Columbia, Ontario, Malaysia and Northern Ireland.  They are not trading off financial incentives for talent development—they are doing both.  Which is what Washington should be doing as well.  It has been obvious for years that more computer science graduates were needed to fill a growing tech industry. But now the industry is being told the we have to pay for them.

This is in stark contrast to the treatment of aerospace, where legislators are practically falling over each other to help out.  Aerospace needs engineers and workers and has many of the same traits as the other tech industries.  Lawmakers and the governor have appropriated millions for STEM related aerospace programs, for more aerospace engineers but there is no mention of asking them to “give up” their tax incentives.  In fact, the public does not even know what the aerospace tax breaks cost us.  They are not disclosed.  But you can find out exactly who takes advantage of the B&O credit and sales tax deferral for R&D. 

https://fortress.wa.gov/dor/efile/Content/DoingBusiness/MyAccount/TaxIncentivePublicDisclosure/SurveyPublicDisclosure.aspx?TaxYear=2011 Check this link to see which companies/entities use the R&D incentives.

WTIA will be working to stop this bad idea in the state Senate before the legislature finishes its budget and adjourns for the year.

If you are concerned about this and want to contact your legislator, go here: http://www.capwiz.com/techvoice/wa/home/ for a prewritten but editable message asking state lawmakers to preserve R&D credits.  Please do this today; time is of the essence.