High Tech Tax Incentives Debated in Washington State

Are state tax breaks for high tech companies working? Should these benefits be extended to companies for longer time periods? Can the state afford to continue to provide them? These are the questions being asked in Washington state about its economic development incentives. Like in most states, the economic development debate in Washington state has grown sharply partisan.

Republicans want to make tax breaks for high-tech and biotech companies permanent despite a debate about their effectiveness and scant evidence the programs have done what the Legislature had hoped: produce jobs for Washington residents. The Republican-led Senate voted last week to renew the high-tech and bio-tech tax exemptions for another 10 years, rather than wait for a new study that could provide more details on how the programs have worked. The programs are set to expire next year.

Do I know something about these issues? Having evaluated the costs and benefits of Ohio's incentive programs in 1999, I would say the issues raised in Washington state strongly resemble those in Ohio and other states. As state finances tighten, increased pressure will be placed on economic development programs. What's the solution? First, concentrate on doing the best deals possible. Second, implement a performance monitoring and assessment program to measure the impacts of your incentives on an ongoing basis. Third, develop an equitable and targeted policy to guide the use of your incentives.

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