Gov. Inslee vetoes reduction in manufacturing B&O tax rate. Will veto affect discussions of water rights, capital budget?

Yesterday we wrote of the potential for a gubernatorial veto of bipartisan legislation reducing the manufacturing B&O tax rate. This afternoon, the governor vetoed the section of SB 5977 that provided the manufacturing tax relief. 

The Seattle Times reports,

Gov. Jay Inslee on Friday vetoed a big tax break for manufacturers, saying it was passed in “an unaccountable manner in the dead of night.”

The tax relief was part of the end-game negotiations to reach a budget budget deal and prevent a government shutdown. The Washington Research Council has more on SB 5977. More from the Times:

But Inslee said he was not part of that pact and called the tax cut unfair at a time when lawmakers raised property taxes on middle class families.

“There was no agreement regarding this measure with either myself or anyone in my office,” Inslee said.

The top Republican budget-writer expressed his disappointment with the action,

The GOP’s chief negotiator, Sen. John Braun, R-Centralia, said in a statement Friday he was disappointed when he learned Inslee was considering a veto.

Braun said Washington has lost more than 50,000 manufacturing jobs since the turn of the century and that the governor’s staff had been involved “at every step” of budget talks.

“Negotiating a budget is already an enormously difficult process that requires working in good faith. Vetoing part of the agreement will seriously undermine our ability to govern,” Braun said.

The Times reports possible consequences for the state’s capital budget.

Inslee’s veto drew immediate rebukes from Republicans, who accused him of bad faith and said the move could jeopardize stalled bipartisan talks over the state capital budget, which funds construction projects across the state.

“There will 100% NOT be a Capitol [sic] budget unless House helps override Veto. Deal is a deal,” tweeted state Sen. Michael Baumgartner, R-Spokane, who had sponsored a bill containing the manufacturing tax cut earlier this year.

Senate Republicans have said they won’t act on the state’s capital budget until the Legislature adopts a fix to a state Supreme Court ruling – the Hirst decision – limiting water rights.  The Associated Press summarizes the impasse as it stood before the veto.

Senate Republicans say they won’t pass a capital budget without legislation aimed at overturning a recent state Supreme Court known as the Hirst decision. That ruling effectively limited the use of new domestic wells in certain rural areas when they may harm senior water rights…

The Democratic-controlled House approved a $4.2 billion capital budget on a strong bipartisan 92-1 vote early Saturday. But the Republican-controlled Senate adjourned without taking action.


The Senate four times passed a bill aimed at reversing key elements of the Hirst decision. The House didn’t act on it.

The Association of Washington Business calls a Hirst solution lawmakers’ “big unfinished business” before adjourning.