Pacific Northwest federal legislators and their peers should consider carefully a call to safeguard  economic development tools with a trio of tax-code revisions that could aid expansion and create more jobs. 

Greater Spokane Incorporated has joined the U.S. Chamber of Commerce and a broad coalition of business interests in advocating for measures that would foster innovation and provide a level of stability for U.S. companies. 

Some regional business advocates say the change that would have the greatest benefit for Inland Northwest companies is an immediate deduction of research-and-development expenses. 

For decades, companies have been able to deduct research-and-development expenses immediately. Starting last year, however, businesses now have to amortize and deduct those expenses over a number of years. 

According to the U.S. Chamber, the fear is that the loss of the immediate deduction will lead to a reduction in research and a decrease in the number of R&D jobs. 

Jake Mayson, GSI’s director of public policy, says the R&D expense deduction applies to a larger swath of Inland Northwest companies than one might think. Essentially, he says, any company that has an industrial process it’s looking to improve will be engaged in some level of R&D and will be looking to take a deduction on it. Even for a small manufacturer, he says, such costs can be in the seven figures. 

By having to spread that deduction over a number of years, rather than take it all at once, companies are paying more taxes up front, rather than being able to keep that money invested in jobs and innovation. Such an approach can shackle growth.

One could argue that a business community such as the one in Spokane, which boasts a burgeoning health sciences industry and injectable-pharmaceutical presence, stands to suffer the effects of not keeping that money in the community more profoundly than other communities. 

Other tax changes for which the local and national chambers are advocating involve a pro-growth interest deductibility standard and full deductibility of capital expenses.   

Regarding interest deductibility, federal tax code tightened last year so that a company could deduct an interest expense of up to 30% of earnings before interest and tax, rather than the previous deduction of up to 30% of earnings before interest, tax, depreciation, and amortization, commonly known as EBITDA. 

While that’s a seemingly small wrinkle in tax code, business advocates argue that it could have a profound effect on industries relevant to the Inland Northwest, including manufacturing and mining. 

Finally, full deduction of capital expenses is being phased out through 2027, largely removing an incentive that had been in place since 2017 that encouraged investment in new machinery and other goods. Removal of that incentive indirectly increases costs and could slow investment.

Broadly speaking, all of the encouraged changes would give companies more opportunity to invest money in their communities that otherwise would go to taxes. Keeping money local is something Inland Northwest elected officials should champion.