In 2016, the semiconductor manufacturing industry exported $43.1 billion worth of product, making it the third most lucrative U.S. export. A new report by the Semiconductor Industry Association (SIA) found that global sales have grown by 16.5 percent each year. State lawmakers want to keep and attract these manufactures located in southwest Washington with SB 5916, which would extend business and occupation tax and sales and use tax incentives for these employers. The bill cleared Senate Ways and Means on Tuesday, April 4 after a public hearing that same day, and has been sent to Rules.
Proponents say SB 5914 will keep the region competitive and create family-wage jobs by encouraging more manufacturers to locate to the state.
Growing U.S. Export Industry In Washington
Semiconductors are used in products ranging from medical equipment to video games. State law currently allows two tax preferences for manufacturers; a B&O tax rate of .275 percent compared to the regular .484 percent, and a sales and use tax exemption on the sale of gases and chemicals used in production. These incentives are set to expire at the end of 2018. Although the bill does not have a fiscal note, the state Department of Revenue estimates that the sale tax exemption is worth $3.2 million per biennium.
According to the bill, these incentives would be considered successful if they resulted in at least one manufacturing project added to Clark County and generated four thousand jobs, with 80 percent of workers earning $35,000 or more.
SB 5916’s primary sponsor is State Sen. Ann Rivers (R-18). Cosponsors are State Sens. Annette Cleveland (D-49) and Lynda Wilson (R-17).
Encouraging Economic Growth In Clark County
Rivers told colleagues April 4 that with the tax incentives “we’ve been able to attract many phenomenal businesses, and now our task is to make sure that we attract more, but keep our good business community right here at home employing Washington residents and contributing to the corporate community that we have in southwestern Washington.”
The incentives would add to Washington’s ideal location on the West Coast as a major trade port. That’s according to Max Ault, Vice President of the Columbia River Economic Development Council based in Clark County. The county has seven primary semiconductor manufacturers.
He told the committee at the April 4 public hearing that “for decades, a cornerstone of southwest Washington’s economy has been semiconductor manufacturing industry, with a significant capital investment these companies have made in their facilities over the years in our community. They resulted in thousands of both middle and high skilled jobs, high wage jobs, along with increasingly close collaboration with our education and workforce partners.”
“Without requiring any new investment from the state, these incentives can produce a significant positive fiscal impact through the economic benefits generated for local jurisdictions and the state from corresponding supported projects,” he added. “These tax incentives would play a pivotal role in these companies’ decisions on whether to relocate or expand in Clark county and the state of Washington. To put this potential in perspective, these projects collectively would result in thousands of new family wage jobs.”
Doubts Over Tax Incentive Effectiveness
However, not all committee members such as State Sen. Reuben Carlyle (D-36) were convinced of the bill’s effectiveness. He told Ault that “the audit committee did an examination of this, and they found employment is down since 2006 by 11.5 percent in this sector. What’s been the corresponding growth in Clark County. Is that sort of down statewide and up in Clark County?”
Ault replied that “we’ve got a number of very long-term foundational preexisting relationships with the semiconductor industry in Clark County. We’ve seen a big uptick in terms of interest.”
“Because of the 20 plus year span of operations…the industry sort of sees it as an area ripe for growth, especially with regard to the location on the West Coast with our trade partners,” he added.
Carlyle also questioned the need for several tax incentives included in the bill that the Joint Legislative Audit and Review Committee had concluded weren’t utilized.
Ault said “there are ongoing projects that we’re working that that do have an interest in the preferences that are provided currently.”
An amendment later proposed by Carlyle would have removed those incentives from the bill, but failed to garner the necessary votes.
Rivers said, “We have one new business coming in who would benefit from the six exemptions, and we’d like to give every tool in the toolbox that we can to remain attractive to these businesses who would seek to site here in Washington state.”