IN the mid-’90s, state leaders recognized that diversifying our economy meant more Washingtonians would have good jobs. Traditional industries such as forest products and aerospace were undergoing significant changes and could not carry our entire economic future on their backs anymore.
State legislators saw the potential of the technology industry, then a relative infant here, and created strategic tax incentives to encourage its growth. Today, critics want to eliminate these incentive programs that have paid off dramatically in jobs, economic activity and tax revenues.
Results from the incentive programs have been spectacular. Our economy has been transformed, with tech now the state’s major economic driver. The Washington Research Council reports that technology-related employment increased 119 percent over the past two decades, while the underlying state economy grew only 14 percent. The IT sector created two-thirds of Washington’s job growth and more than half of employee-compensation growth over that time. It now represents 27 percent of all jobs in the state.
In addition to spurring phenomenal job growth, tech tax incentives have paid off handsomely for taxpayers. Industry expansion has meant more tech tax dollars: $2.9 billion in 2011. That’s up 318 percent, four times the state’s overall revenue growth.
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Lawmakers’ foresight in diversifying the economy also helped Washington weather the recession better than many states. The technology sector has provided job and income stability while traditional economic sectors stagnated — or worse.
But today, critics ignore these results and want to get rid of the incentives.
These incentives do not place an undue burden on the state budget. Despite current struggles to balance the budget and maintain state services, general-fund spending has steadily increased from around $16 billion to $31 billion since the incentives were enacted. But even as the tech industry generated billions more in taxes, legislators have not invested those resources to make Washington a better home for job-creating technology companies.
Highly skilled employees are important for all employers, but they’re the lifeblood of high-tech. Nevertheless, legislators prioritized other services over our education system. Since the 1993-95 biennium, K-12’s share of the budget has shrunk from 47 to 44 percent, while higher education has dropped from 11 to 9 percent.
Recognizing our economy’s reliance on innovation, the Student Achievement Council estimates that Washington must produce an additional 10,000 bachelor’s and 9,000 graduate degrees in STEM (science, technology, engineering and math) fields, per year, to meet employer needs. Yet today, less than one-third of qualified applicants can be accepted as computer-science majors at the University of Washington due to capacity constraints.
We must make higher-education funding a priority; emphasize STEM-degree programs within that funding; and ensure that students from all income levels have access to postsecondary education.
We must ensure that kids graduate high school prepared for the additional education or training they’ll need to get good, family-wage jobs. That means stronger STEM programs and making the foundational skill of computer science available to every high-school student.
Unless Washington invests more to help local students compete for tech jobs, these great opportunities will go to those from out of state. Or worse, tech companies may be forced to expand elsewhere to find the employees they need.
The state also should renew its commitment to nurturing and encouraging innovation and entrepreneurship. Other states have funds dedicated to capitalizing promising startups, generously subsidize research and development, and offer more-aggressive tax incentives.
Washington’s modest mix of sales-tax deferrals and business-tax credits on high-tech R&D have paid huge dividends in the form of more jobs, more economic activity and increased tax revenues, but they are scheduled to expire in 2015.
Lawmakers considering extension of these incentives must ask important questions: Does Washington need more high-skilled, high-wage jobs? Are we willing to provide incentives to companies creating these jobs? Will we invest more tech industry tax revenues in the educational programs needed for its continued success? Or will we turn our backs on the substantial benefits these programs hold for our state?
The answer should be clear.
Susan Sigl, left, is the president and CEO of the Washington Technology Industry Association. Bryan Mistele is the co-founder, president and CEO of traffic information provider INRIX.