OLYMPIA — The veto pen struck again.
For the past few years, Gov. Jay Inslee has irked his fellow Democrats with some of his vetoes, prompting outcries and even lawsuits from legislative leaders for his more creative applications of executive authority.
This week, the governor kept it simple, issuing a standard partial veto of Senate Bill 5901, intended to spur economic development through tax incentives.
Nonetheless, Inslee’s veto prompted bursts of frustration yet again from Democratic lawmakers — and showed just how central tax preferences are to Washington politics and policy.
In SB 5901, Democrats thought they had a good idea to spur investment in rural Washington: a new sales and use tax deferral program to boost the construction of some large warehouse projects across most of Washington’s 39 counties.
Currently, tax deferral programs of this type only exist in King County, according to a fiscal analysis of the legislation.
Sponsored by Sen. Emily Randall, D-Bremerton, SB 5901 also capped the sales tax exemptions for the construction or expansion of warehouses or grain elevators to
$400,000, according to a legislative analysis.
The bill passed the Legislature with bipartisan majorities and was co-sponsored by moderate and progressive Democrats, a conservative Republican and Senate Majority Leader Andy Billig, D-Spokane.
But on Thursday, Inslee rejected a swath of the bill, including parts that expanded the sales tax deferral on large projects across much of the state, and the $400,000 cap.
“I could not justify thinking that it was a good investment for Washingtonians to subsidize warehouse owners, when every time I turn around I see a new warehouse,” Inslee said in a question-and-answer session with reporters.
The governor had actually intended to go even further and veto the entire bill, and even prepared the explanation of the full veto. But shortly before Thursday’s bill signing, the governor’s office decided to keep part of the legislation.
The reason? Because part of the legislation might benefit a clean-energy project the governor is seeking to lure to Washington.
“There was a provision in there that could be important to a high-tech manufacturer in the clean-energy space,” Inslee said, when asked about the change to a partial veto.
“It’s very important to get that company to Washington state, and it would be a very large entity and would help in our clean energy, as well,” he added.
The state is actively trying to recruit that company, according to Inslee spokesperson Jaime Smith. Asked about which company the state is trying to lure, Smith referred questions to the state Department of Commerce.
In an email, spokesperson Penny Thomas wrote that, “as you can imagine, throughout an active recruitment project we are not at liberty to share many specific details, especially the company identity.”
The veto prompted frustration from Randall, who is expected to have one of the most competitive Senate races this fall.
“Now, with this partial veto, SB 5901’s impact will not expand beyond the biggest warehouses in King County, and the smaller facilities and businesses — like those that might grow and scale at the Port of Bremerton’s industrial park — will not see the benefits of this tax exemption,” Randall said in prepared remarks. “I am extremely disappointed in the governor’s decision to ignore the needs of our more rural local economies.”
In a statement, Billig said he was disappointed and called the veto “misguided.”
“The portion of the bill that he vetoed would have saved the state millions of dollars by narrowing a tax exemption used by the largest warehouse developers and, at the same time, provided more opportunity for smaller businesses to benefit from the tax exemption,” he said in prepared remarks.