If taxpayers knew they could make an investment that would help spur the growth of Washington’s technology sector, generate thousands of high-paying technology jobs and pay itself off many times over, most would do so in a heartbeat.
In fact, taxpayers have already been making this investment for two decades, and have received tremendous returns on their investment along the way. The tech sector has added more than 106,000 direct jobs since 1990, created $21.8 billion of income from technology employment and contributed nearly $3 billion in business-and-occupation and sales taxes to the state.
We should continue with these effective investments — especially as other states aggressively compete for our region’s high-paying technology jobs. That’s why we strongly support HB 2685 and its Senate companion, SB 6430, sponsored by state Sen. Marko Liias, D-Mukilteo, to extend our state’s research-and-development (R&D) tax incentive program that is about to expire.
Twenty years ago, Washington state’s economy was primarily driven by aerospace and natural resources. Bill Gates had not yet written his “Internet tidal wave” memo to his Microsoft colleagues. Jeff Bezos was in the process of incorporating Amazon.com. There were no obvious reasons to expect the life-sciences sector here to grow from an attractive idea into job-creating reality.
A bipartisan group of legislators came together to enact modest tax incentives to encourage R&D investments in our state. They recognized the need to diversify our economy and concluded that the technology sector had the greatest potential to provide the quality jobs to do so.
These incentives were specifically structured to allow small, medium and large employers all to qualify, with smaller firms receiving a proportionally larger benefit for their R&D investments.
A startup firm with little revenue might offset its entire B&O tax liability, while larger, more established companies qualifying for the maximum credit would still pay taxes that were many times the total credit.
The programs have worked just as planned, with spectacular results. The technology industry is driving the Washington economy, growing much faster than our underlying employment base.
In 1990, the technology sector employed a little more than 93,000 people, but by 2011, technology companies accounted for more than 200,000 jobs in our state.
Over those two decades, technology jobs increased by 114 percent while the rest of the state’s employment grew by a much smaller 32 percent. In addition, Washington is now in the top five states for patents granted, up from 20th place.
The resulting research and development has generated incredible societal benefits, as Washington researchers have helped pioneer new health-care treatments and fundamentally changed the way all of us work, communicate and entertain ourselves.
The incentive programs have also paid off handsomely for Washington taxpayers. The tech industry generates nearly $3 billion in sales and B&O taxes each year — which is nearly three times the total tax credits and deferrals received by tech employers in the 20-year history of the R&D incentive programs.
Washington boasts one of the most research-driven economies in the country. But if these incentives are allowed to sunset next year as scheduled, Washington would become one of only eight states not to offer this type of incentive to spur job creation in technology.
Other states are aggressively pursuing the good, family-wage jobs provided by innovative, progressive employers in the information-technology and life-sciences industries.
A note to the critics: These incentives are not corporate giveaways. They are thoughtful tools with a successful track record of retaining and creating high-paying jobs for Washington residents.
Washington’s R&D incentives help create great jobs, generate economic activity and increase tax revenues. They should be extended.
Ed Murray, mayor of Seattle, previously represented Seattle’s 43rd Legislative District in the state Senate. State Rep. Eric Pettigrew, the prime sponsor of HB 2685, represents Seattle’s 37th Legislative District.