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Personal reflections on Mike Lowry, passionate believer in people

Personal reflections on Mike Lowry, passionate believer in people
It would be laughable, in this era of unbridgeable political divides, to envision an elected official who nurtured his image as "liberal Democrat" while priding himself on being "the congressman from Boeing." But that was Mike Lowry, the former governor who died early Monday after suffering a stroke.

Because of our 50-year friendship, beginning when he headed the staff of the State Senate Ways & Means Committee and I was the Capital reporter for UPI, this Harp will be more of a personal reflection on Lowry than a catalogue of who he was and what he did.

He was this state's epitome of the progressive politician for 40 years. He believed in the environment and cared deeply about the needs of farm workers, causes he was still involved with at the time of his death at the age of 78.

Lowry was an urban politician proud of his rural roots, growing up in the Palouse community of St. John, and his education at Washington State University.

It was in his desire to get things done for job-creating big business that he was unusual for a Democrat. He brought his political power to work on behalf of Boeing and other large companies because he felt it was the state's role to help companies that provided high-paying jobs.

Thus while being viewed by small business as the enemy, he was generally held in high regard by big business, including Boeing, which quietly supported him in his successful bid for governor in 1992.

It was soon after the election that Lowry called me to meet for breakfast to talk about possible candidates to head the state department of trade and economic development . I thought it would be cool to meet with the governor-elect at the WAC, maybe Rainier Club or even the Four Seasons.
 
Then I learned that his favorite breakfast spot was the Denny's on I-405 north of Renton. Nothing too fancy for Lowry and thus it became the place we met regularly over the years.

Lowry wanted to know what I thought of Mike Fitzgerald as a potential director of the agency. Because Fitzgerald was a friend and a fellow Montanan who got his economic development start working personally, right out of college, for the governor, I said "he'd be great."

Fitzgerald, now president and CEO of the Denver South Economic Development Partnership, worked directly for or with nine governors during his years in economic development and told me in a telephone conversation this week: "I have never worked for anyone who loved their state more than he loved Washington state and its citizens."

"He understood and could articulate the role of the triple bottom line of successfully balancing the economy, the social agenda and environmental considerations," Fitzgerald said, noting that Lowry "was personally involved in Washington landing two of the biggest tech-industry coups in the country at that time."

He was referring to Lowry ensuring the state took the steps necessary, including things like new freeway interchanges and face to face meetings, to land Taiwan Semiconductor in Clark County and an Intel plant in southern Pierce County.

The antipathy of small business, particularly small-business organizations, was cemented from the outset of Lowry's single term as the state's chief executive (he didn't seek a second term partly because of the publicity that surrounded a sexual harassment action by a former press aide, which was settled).

That antipathy was particularly true after he guided legislative enactment of a statewide system of health insurance with premiums based on ability to pay, a law that put a lot of cost pressure on small businesses.

It was the anger of small business toward Lowry over the healthcare law, in addition to is his guiding the 1993 Legislature to double the business & occupation tax for service businesses, that led to my most amusing memory of him. I had sought his partnership with The Puget Sound Business Journal to put on a Governor's Conference on Small Business.

He agreed but as small business antagonism toward Lowry intensified, I grew concerned about the kind of animosity he might face when he appeared at the conference. So I met with him the afternoon before to express my concern and urge him, when he opened the conference the following morning, to just thank the business people for being on hand and wait until the end of the day to make positive comments about things he was doing for business.

"Good advice," he said as we sat in his office going over the agenda. So I was stunned when he opened the conference doing exactly what I had advised him against.

As a result he was pummeled throughout the day by negative comments about him, directly or by innuendo, from the array of speakers from the various sessions.

I was worried when he left quickly without attending the closing-session cocktail party. And more so the next day when I received an anxious call from the person in his office assigned to work with me on the conference.

"I am very worried because he called his entire staff together this morning, expressed his anger and said 'I am going to find out who was responsible for the embarrassment I suffered,'" the staff member told me.

I contacted Lowry and asked if we could meet in his Seattle office to review the conference.

As we sat down facing each other, I said: "Governor, I get the impression you are unhappy about the conference. If there was a problem, there are only two people who could be responsible. You are looking at one, and you see the other one in the mirror."

He flipped his arm up as one of those ear-to-ear smiles spread across his face and he said: "I don't have time to worry about yesterday's irritations, so don't sweat it."

Don Brunell, retired president of Association of Washington Business who often crossed swords with Lowry and other Democratic governors on business issues, told me not holding a grudge was a Lowry trademark.

Brunell offered the comment: "Lowry never personalized anything. He could blow his stack at you one day and be genuinely smiling the next."

Lowry served 10 years as the state's 7th district congressman and twice ran for the U.S. Senate, losing to Dan Evans in a special election in 1983, and to Slade Gorton in 1988. before returning to the political wars to run for governor in 1992. He won, defeating state Attorney General Ken Eikenberry to win his lone term.

After his '88 loss to Gorton, he returned to Washington state along with Dan Evans, who had decided not to seek re-election, and the two joined together to initiate the Washington Wildlife and Recreation Coalition (WWRC).

"Since we came from very different political backgrounds we were soon dubbed the 'Odd Couple,' Evans recalled in an email to me. "I think we both enjoyed the title and both have seen a huge result from that small beginning."

"We were competitors, but far more importantly were colleagues, partners and good friends," Evans added.

Brunell praised Lowry as an elected official with integrity. "While most of them promised not to raise taxes and sometimes wound up doing so, Lowry said he would only raise taxes as a last resort." He did raise the B&O tax dramatically in 1993 but cut back on half the increase two years later.

Said Evans: There was never any question what Mike believed and he worked tirelessly on issues, always with peace, people and progress in mind. We lost a first rate political leader, a passionate believer in people, and I lost a good friend."

Fitzgerald said Lowry's favorite personal saying, repeated half a dozen times in private meetings with him, was from Thomas Jefferson, who talked of a goal of seeking to create "an aristocracy of achievement arising out of a democracy of opportunity."
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Oregon ballot measure would dramatically boost business taxes

Just as the races for state and national offices in the November General Election may demonstrate that anger can trump reason, voters in Oregon will be faced with deciding a ballot measure that will test whether anger at big business over things like soaring executive compensation exceeds logic.

At issue is IP28 (Initiative Petition), which targets Oregon's biggest corporations — roughly 1,000 by the state's estimates, or about 4 percent of businesses. Those with $25 million in Oregon sales would pay a minimum $30,000 tax, plus 2.5 percent on anything above that threshold.

In essence, it would be a tax on gross receipts, like Washington’s business & occupation tax, generating an estimated $6 billion in new revenue. Except in Oregon it would be in addition to the tax on personal and corporate income and would boost corporate tax collections more than five-fold.

As my friend Don Brunell put it in his latest column, which alerted me to the fact the measure had been cleared for the November ballot by collecting the required 130,000 signatures, “Washington’s next economic development plan may be written by Oregon voters next November.”

His point was that “Oregon voters need to remember that Washington and California have heavy concentrations of large businesses and stand to benefit from passage of IP28 and that while all parts of Washington would gain, the corridor between Vancouver and Longview could be the biggest winner.”

Brunell, retired president of Association of Washington Business, in his more than a quarter century at the helm of the state’s largest business association saw all the off-the-wall ideas for taxing business. But it’s as a longtime observer that he shakes his head at this proposal, noting the tax scheme “would transform Oregon from one of the nation’s lowest business-tax-burden states to one of the nation’s highest.”

Organizations that purchase products and services from those major businesses would undoubtedly see their costs increase and thus would need to increase their price for items resold to Oregon consumers. In response to this, businesses purchasing goods in Oregon may opt to leave the state or relocate some or all of their facilities to avoid the increased cost of doing business in that state.

IP28 is sponsored by Better Oregon, a labor union coalition led by the Oregon Education Association, and targets “big business”.  Proponents claim it would tap a tiny portion of Oregon businesses while bringing a huge revenue boost to cash-strapped public education, health care and senior services.

The non-partisan Legislative Revenue Office, in evaluating similar proposals to IP28, has forecast job losses should a gross receipt tax pass.

Former Washington Gov. Mike Lowry, who despite being perhaps Washington’s most liberal governor carried an understanding of the importance of nurturing big businesses as the creators of better-paying jobs, offered his classic belly laugh when I called him for his thoughts on the initiative.

“We always looked to Oregon for progressive ideas but this would represent the total opposite,” Lowry said. “The gross-receipts tax is about the worst tax there is.”

Amusingly, Lowry understood how to use the tax as a whip. In his first year in office he sought to have the Democrat-controlled legislature extend Washington’s sales tax to service businesses like law and accounting firms, which used their lobbying clout to beat back the effort.

But they paid a price by having the lawmakers impose the highest b&o tax rate on services, a payback in the form of a 2.5 percent rate, which though now reduced to 1.5 percent remains the state’s highest rate, reserved for service businesses and professional gambling.

Most gross receipts tax rates around the country are relatively low when compared with the Oregon proposal’s 2.5 percent rate. In Washington, it ranges from 0.138 percent to the aforementioned 1.5 percent. Thus if the measure were to pass, the tax burden of operating in Oregon would increase dramatically when compared with other states.

Proponents argue that “IP28 would modestly raise the effective tax rate of large corporations and use the added revenue to fund Oregon's crippled public school system, provide services to seniors, and extend health care coverage to 18,000-plus children.”

Problem is if it comes to be marketed to voters as “the big-business tax,” the result could be that anger overrides common sense for voters, among whom would be many that would face loss of their jobs if the analysis of business reaction proves true.

The ballot proposal comes as raising taxes on wealthy individuals and large corporations is at the forefront of a national debate — especially among Democratic progressives, including much of Oregon's electorate— about how to close the gap of economic disparities between rich and poor in the post-Great Recession era.

And if there is a doubt that anger at big business underlies the measure, and leaves concern about the logic voters will bring when they mark their ballots, supporters point to the current difference between growth in corporate profits vs. growth in family income in Oregon. They say it’s time big business takes on its fair share of the tax burden to help pay for education and social services.

Business people in Southwest Washington are not only looking to gain business if the measure is approved, they are having some amusement thinking about it.

When I talked with longtime Vancouver businessman Michael Worthy about it, he chuckled and offered that the two-state effort to agree on financing a new I-5 bridge across the Columbia could be solved by letting firms that would want to move operations out of Oregon might want to pay for improved transportation they’d need.

And when I asked Brunell why he thinks intelligent voters would go for a tax that would likely impact them, and perhaps their jobs, he replied: “I suspect, knowing Oregon a little better by living down here in Vancouver, there is a reason for the bumper sticker: ‘Keep Portland Weird.’” 

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State's Business & Occupation tax could get a look from Legislature as new-revenue source

The fact that it will take a two-thirds vote to get any new-tax measure through the state Senate this year could prompt lawmakers to take their first serious look in years at potential new dollars from the business and occupation (B&O) tax, the state's primary source of revenue from business.  

And if that happens, not only might some lawmakers be surprised at the disparity scattered among the nearly 30 categories of the B&O Tax -- Washington's unusual tax on gross receipts -- but it would also emphasize how out of sync the imposition of that tax is with the current-session's legislative mantra of "fairness."

After all, we have House Democratic Leader Ross Hunter, D-Medina, on the record with "when we are done, our tax system should move toward fairness." So lawmakers could decide there's some logical opportunity for new revenue from some of these categories while getting credit for looking to create fairness

Seeking revenue-producing changes in the B&O could be an attraction because

apparently the GOP Senate rule on two-thirds for any new tax allowed continuation of a simple majority for tinkering with existing taxes. 

 

This column's focus on the B&O tax is a topic that came to mind for me as a consultant who, with attorneys and accountants, pays a B&O tax under the "services" category, of .015 percent, basically $15,000 on $1 million of gross revenue, while our clients pay a tax of maybe $2,500, as the manufacturers' .00275 percent rate would impose. As publisher of Puget Sound Business Journal, I paid $3,500 for each $1 million of revenue.

An honest look at a tax structure where an attorney, accountant or consultant could pay a rate two or three times as high as a client they are advising might well provide additional tax revenue as part of creating tax fairness for all businesses.

But across the state tax spectrum, the fairness issue should also be weighed against the reality of why some tax breaks legitimately came about. Thus lawmakers need to evaluate, and perhaps restore at least some of the 20-year-old high-tech B&O tax credit, a tax break for five categories of tech business that expired as of January 1 this year.

It would be a mistake for the lawmakers to succumb to the temptation to merely pocket the nearly $50 million in revenue that the tax break cost the state, rather than seek to evaluate the changing value of the tax break to some of the five tech sectors to which it applied.

The challenge for legislators in evaluating either the B&O tax disparity or the tax break for high tech is in being able to understand the difference between tax breaks important to the economy and tax breaks that are merely the result of good lobbying.

And the manner in which the tax credit came about for high-tech research and development for advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology is an example of what was once viewed as an important-to-the-economy tax break.

The tax breaks for high-tech companies, both B&O and sales tax credits, were created by a Democratic legislature responding to the goal of creating jobs that came from a Democratic governor, Mike Lowry.

 

 "We were coming out of what was, at that time, the state's worst recession and we needed to attract industries that would produce good-paying jobs," Lowry recalled of the proposal he came up with and pressed through the 1994 Legislature as a way to lure new business to Washington.

 

And for Democratic lawmakers who have since sometimes come to refer to such tax breaks as "tax loopholes," Lowry still responds with his view that they are "incentives" that have permitted high-tech companies to avoid paying state sales tax on new facilities, including equipment.

 

"We were absolutely correct to come up with policies to lure companies to the state that would create high-paying jobs that were basically the jobs of the future," Lowry said.

 

And among those "jobs of the future" that still deserve nurturing is the biotech category, an industry that by all rights should be a third-leg of this state's economic stalwarts but that has lagged for several reasons. Removing the tax incentives on new facilities and equipment would be one more reason.

 

So back to the B&O tax, which actually came into existence in 1933 after the state Supreme Court threw out the income tax that lawmakers had passed in an effort to find new sources of revenue for a financially struggling state. The '33 Legislature adopted the gross receipts tax as a temporary, stop-gap move to balance the state budget.  

But the temporary, as in most legislative "temporary" moves, became permanent, though the rationale for creating B&O special treatment for one industry over another is lost in the antiquity of legislative deal making. But once that bridge was crossed, crafted from some handshake deal between one or more lawmakers and a lobbyist or two, the following special deals were somewhat like kisses: once the first one is bestowed in a relationship, the rest come much more easily.

Now, in a sense, some lawmakers are toying with what would likely be considered a form of tax on income with Democrats expressing an interest in taxing capital gains, saying it would make the state's tax system less regressive, and more fair (that word again).

Sen. Andy Hill, the Republican who chairs the Senate Ways and Means Committee as is thus the upper chamber's chief budget writer, has put down the capital gains idea, branding the phrase "regressive tax code" as a code-word for getting an income tax.

 

Voters have consistently rejected the idea of a state income tax, but it doesn't take too clever a legislative mind to realize that, even though any tax increase would almost certainly be sent to the voters, there might be a significantly different view of state residents about taxing capital gains than for taxing their own income.

 

And savvy lawmakers have a sense that a far more liberal State Supreme Court faced today with the question of whether a state income tax was unconstitutional or not, might well have a different answer than the one 82 years ago.

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Once-obscure political race in Moses Lake takes on new import for area's economy

The political struggle in Moses Lake over the cost and management of its irrigation district is a microcosm of the conflict going on in cities, towns and taxing districts across the country between supporters of growth and progress, and those who seek to constrain government and contain spending

 

But because major companies have begun to focus attention on the area due to things like transportation access, cheap electric rates and low property costs, economic development opportunities are now on the minds of community leaders. Thus the obscure political contest has taken on new importance for the region's 45,000 residents.

 

The climax of the battle for the political affections of the owners of the 9,000 parcels of property in the Moses Lake Irrigation and Reclamation District has become, for the past couple of years, the ironically timed Christmas-season election for a seat on the district's three-member board.

 

The annual mid-December election had drawn little attention, despite the importance of the district's work in the clean-up of the 6,500-acre lake, until a year ago when two prominent local political types ran against each other to claim an open seat.

 

Ron Covey, 64, Moses Lake city councilman for 14 years, including six as mayor, sought to fill the seat to ensure continuation of the district's dredging and environmental clean-up, and the $1 per $1,000 property tax to fund the irrigation district's $1.5 million annual budget. Covey is also the current president of the Grant County Economic Development Council.

 

Mick Hansen, 71, a former Democratic state representative whose uncle and aunt were both state senators from the region, sought the board seat, arguing that the property-tax could be cut in half and questioned the importance of some of the clean-up projects.

 

The outcome of the race was important to the future of the district because if Covey won, as he did, barely, in a race where the approximately 11,000 votes cast represented a turnout about 10 times the norm, it would ensure a 2-1 majority supportive of current district funding and direction.

 

The election-night results gave Covey a 61-39 percent edge. But that majority had shrunk to 2 percent by the time absentee ballots, assumed to have been largely retirees wintering elsewhere or elderly residents, were counted.

 

A Hansen victory would have created a board majority focused on a hard look at both the board's direction and the operations of its full-time director, hired in 2007, and the staff.

Hansen is running again this year, challenging an incumbent board member.

 

The evidence of no love lost between Covey and Hansen was Columbia Basin Herald business reporter Lynne Lynch's quote of Covey during an appearance in last year's race, when he said he would not "cut the budget and gut the lake." He also suggested Hansen would bring "arrogant, ill-conceived good ole boy ideas."

 

The district's activities focus on the environmental challenges the lake has faced. More than 50,000 cubic yards of sediment accumulation annually have clogged channels on the lake, degraded water quality and led to excess plant growth, which district clean-up and dredging efforts have sought to counteract.

 

Now Moses Lake and surrounding Grant County have begun to attract economic-development attention from after almost half a century of struggling to survive and grow following the early '60s closure of Larson Air Force Base, which had been the justification for the community's existence.

 

And that increased attention has brought considerable focus on the lake itself as part of the appeal of the area to real and prospective new residents and businesses.

 

The new-found attention has included BMW, lured to Moses Lake by low-cost and sustainable power, to create a new plant in a joint venture with SGL Automotive Carbon Fibers where parts for the automaker's new high-tech electric car will be manufactured. Plus nearby Quincy has attracted datacenter developments, including Microsoft's new, fully modular center, as well as other like Yahoo and Sabey Corp.

 

Inexpensive power is a key lure. But former Washington Gov. Mike Lowry, who has both business and non-profit involvements in the Moses Lake area, sees "a lot of positive business factors at work" in the area,

 

"From foreign-trade zone, to all modes of transportation, and low electric rates, relatively low property costs, good workforce and good regulatory climate in the local government, there's real economy-development appeal at work there," Lowry said, adding that the lake itself is a vital aspect of the region's appeal.

 

Pat Jones, new executive director of the Port of Moses Lake, puts it this way: "The lake is an important part of the community at a lot of different levels."

 

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Mike Lowry, who created now-debated tech tax breaks, offers another side to debate

The tax breaks for high-tech companies that are now seen by some as depriving the state of millions of dollars at a time of dire budgetary challenges were a proud accomplishment of his administration, says former Gov. Mike Lowry, noting they were created to lure new business to Washington.

 

 "We were coming out of what was, at that time, the state's worst recession and we needed to attract industries that would produce good-paying jobs," Lowry recalled of the proposal he came up with and pressed through the 1994 Legislature.

 

 
 

The focus of the current criticism, and Lowry's comments during a recent interview, are what the critics refer to as "tax loopholes" and he calls "incentives" that have permitted high-tech companies to avoid paying state sales tax on new facilities, including equipment.

 

"We were absolutely correct to come up with policies to lure companies to the state that would create high-paying jobs that were basically the jobs of the future," Lowry said.

 

"We kept encountering companies that said they had looked at and then rejected this state as a place for new facilities," Lowry recalled. "The incentives allowed us to move into one of the most competitive positions among states."

 

One of the state's key competitors in the hunt for new high-teach companies was neighboring Oregon, which had and has no sales tax, and that put this state at a dramatic disadvantage.

 

Soon after enactment of the sales-tax exemption legislation, Washington State won a major victory when Taiwan Semiconductor announced it would be locating in Clark County rather than in Oregon. "The largest one-time capital investment ever in this state," Lowry said. Other wins were a Sharp Electronics facility and an Intel plant in southern Pierce County

 

A $132 million tax break for Microsoft, due primarily to its construction of data centers in Quincy in Grant Country, has raised some eyebrows among those viewing the state's list of the dollar impact of such tax preferences.

 

While he is convinced about the importance to the state of having created the sales-tax exemptions, he is equally convinced that they need to be reviewed periodically to ensure they are doing what was intended.

 

"Those tax breaks shouldn't just continue automatically," Lowry said. "Each piece of tax-incentive legislation needs to be looked at individually from time to time for possible sunset (termination). Each must be justified on the basis of expansion of jobs."

 

In fact, in the intervening period since Lowry's program in 1994, sales tax exemptions, and exemptions from the state's business & occupation tax have proliferated and been extended to logical industries like aerospace manufacturing, biotech and medical-device manufacturers.

 

Other also logical exemptions are for manufacturing in rural counties and manufacturers of timber and wood products, though some of the exemptions may cause more head-scratching, like fruit and vegetable processors, dairy and seafood processors and cold-storage warehouses.

 

The State Department of Revenue's most recent figures on the tax exemptions, for 2009, indicate 278,000 jobs were credited to the tax incentives, which cost the state $236 million, $109 million of which was claimed by high-tech firms while $80 million in reduced state and local tax receipts was for rural manufacturers.

 

Mike Fitzgerald, who was a key member of Lowry's team as director of Community, Trade and Economic Development and who has held held similar positions in three other states and may  be one of the nation's most experienced economic-development experts, reserves special praise for Lowry. Fitzgerald credits Lowry with really understanding the way the game had to be played to bring jobs to the state.

 

"He would bring his entire cabinet together and tell us that we were not to violate any environmental considerations, but otherwise we each had a role to play in working together to go after these companies," Fitzgerald recalled in a visit about a year ago. "Under Lowry, we recruited or were in competition for more big business than maybe under any other governor."

 

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