Locke Warns Against Tax Reductions ‘Economic Euphoria Won’t Last Forever,’ He Tells Business Group

Democratic Gov. Gary Locke, warning that “today’s economic euphoria won’t last forever,” urged the Republican Legislature on Thursday to avoid the “short-term thrill of politically popular tax reductions.”

Without giving a specific target, the governor asked that lawmakers salt away a large chunk of the projected $823 million state surplus for use in coming years when the economy takes a dip.

He didn’t draw the line at selected, relatively small tax breaks, indicating he may have some of his own proposals to offer. Earlier this year, lawmakers approved nearly $400 million in assorted tax cuts, including a $195 million property tax cut that requires voter approval in November.

The governor’s words of caution received a somber reception at the annual convention of the state’s business movers and shakers. Business leaders and most economists have been relentlessly upbeat about the booming state economy, which is outstripping the national pace.

But a year after he got in hot water with business for an unguarded promise to do labor’s bidding, the governor drew standing ovations and sustained applause at the annual Association of Washington Business convention for his support of business tax cuts and efforts to improve public schools and colleges, plus his agenda to streamline government and rein in regulators.

A year ago, at his first gubernatorial debate with Republican candidate Ellen Craswell, Locke was roundly criticized for comments to a labor gathering that he would veto any bills unpopular with that group.

Locke later set a record for using his veto pen, including 14 full or partial vetoes of bills sought by the Association of Washington Business. Those included regulatory reform, selected tax cuts, a health-care measure and one dealing with workers’ compensation.

Right after this year’s 105-day legislative session, the Washington State Labor Council called Locke the “last line of defense for working people” and praised his defense against the GOP Legislature’s “onslaught.”

But business got most of what it wanted signed by the governor, including business tax cuts and a ban on taxing intangibles, including trademarks, Association of Washington Business chief Don Brunell said in an interview.

Brunell said Locke’s report card “really is a mixed bag, as it is with a lot of governors. We were really disappointed with some of his vetoes, but he signed a number of things that were really important to business and he has had an open door. Overall, our business climate is improving.”

Although the Boeing-led economic surge is producing tax revenue faster than the state can legally spend it, Locke said Thursday what goes up must come down. Beginning in about three years, Boeing will “start ramping down again” in its work force and a general economic downturn is likely, he said.

“While our economy has become more recession-resistant, it is not recession-proof,” he said.

Locke said his advisers, including economists and business leaders, have been unanimous in urging the state to “put as much away for … the inevitable rainy day and avoid across-the-board, feel-good tax cuts.”