Psst, hey friend, want to run for office? Yes, you.
Reblogged from Official Reuven Carlyle Blog:
Sen. Magnuson and 15-year-old page Reuven Carlyle in 1980
The defining political event of my life was the opportunity to serve as Sen. Warren G. Magnuson’s last congressional page. What I learned from Magnuson was the core human value of mentorship that flowed through his soul. Carrying the distinguished badge as one of Magnuson’s “bumblebees” is something that I treasure and that changed the very course of my life.
Retooling the high tech R&D tax credit: Investing in higher ed together
As an active entrepreneur in the wireless, software and clean energy sectors–in a career touching seven early stage companies funded primarily by start up private equity–I am fiercely proud of our state’s innovation economy. Now that I serve as a part-time citizen legislator as well, I unapologetically advocate for helping our state’s software, biotechnology, biomedical, wireless, hardware, web and content communities thrive. These industries are a major fuel of our state’s economic engine within the global economy.
After months of behind the scenes negotiations with key legislators, industry representatives, students and university leaders, this week the House Ways & Means Committee will consider my legislation SHB 2532 to reauthorize and reform the high tech R&D tax credit, a popular benefit for companies engaged in advanced computing, advanced materials, biotechnology, electronic device technology, and environmental technology.
The Seattle Times editorial board embraced the policy proposal here. Students at the University of Washington and elsewhere have been passionate advocates for the reform.
Since the program was created in 1994 thousands of companies have realized hundreds of millions in value from this tax credit. In previous years, the tax credit was easily justified in order to encourage research and development that is so easily relocated around the globe.
Today, however, as the tax credit is slated to expire in 2015, and our state struggles through the Great Recession, our world has dramatically changed and it’s time to rethink the role, value and design of the high tech R&D tax credit. But this is not merely about tax policy, it is about the value of investing in higher education together. That is my real goal in introducing SHB 2532.
My core objective is to maintain the program–rather than see it expire completely for all companies on January 1, 2015–for early stage, small and medium sized technology companies and ask larger companies to contribute a large portion of the value of the tax credit. The investment of those dollars goes directly to an incremental investment in the University of Washington, Washington State University, Western Washington University and our other top-tier STEM programs.
Proponents of the bill are trying to help our state take a radical step forward in our investment in STEM education to produce not only more mechanical, software and electrical engineers, but more scientists, researchers, math teachers and so much more.
In 2010, 552 high technology companies received $44 million in business and occupation (B&O) credits against their research and development investments. The estimated income levels of the companies taking the tax benefit: 146 had less than $500,000 per year in revenues; 45 had between $500K and $1M in revenue; 128 were between $1M and $5M; 71 were between $5M-$10M; 68 were between $10M-$25M; 30 were between $25M-$50M; 25 were between $50M-$100M; 39 had revenues over $100 million.
The top 16 companies by amount taken for the tax credit in 2010:
BATTELLE MEMORIAL INSTITUTE: $2 million
MICROSOFT CORPORATION: $2 million
CH2M HILL PLATEAU REMEDIATION COMPANY: $2 million
BUNGIE, LLC: $711,000
SCHWEITZER ENGINEERING LABRATORIES: $504,000
SHARP LABORATORIES OF AMERICA, INC.: $499,000
PHILIPS ULTASOUND, INC.: $454,000
SNBL, USA, LTD.: $443,000
REAL NETWORKS, INC.: $401,000
COVANCE GENOMICS LABORATORIES, LLC: $380,000
SONOSITE, INC.: $348,000
INSITU, INC.: $339,000
RESEARCH IN MOTION, INC.: $305,000
GOOGLE, INC: $280,000
PHYSIO CONTROL MANUFACTURING INC.: $266,000
YAHOO, INC.: $260,000
Under the bill, companies with revenues up to $25 million per year would see no change in the value, mechanics or level of the tax credit. Companies between $25 million and $50 million would retain 30% of the current value of the tax credit; companies between $50 million and $100 million would retain the equivalent of 20% of the current value of the credit; companies with revenues over $100 million would retain 10% of the current value. Thus, for example, Microsoft would be eligible for a total value of $200,000 instead of $2 million based upon their R&D for the year.
The tax credit would be reauthorized for an additional 10 years under the bill and the complex reporting requirements would be simplified.
Another key provision ensures that the dollars secured by resizing the tax credit will be controlled by the newly established Opportunity Scholarship Board, a private sector, non profit with members recently appointed by the Governor that is currently tasked with building a public and private partnership to raise funds for higher education scholarships.
There is strong ‘non supplant’ language to ensure that the Legislature continues to invest in these STEM programs within higher education in the regular budget AND that these dollars are used by the universities for incremental STEM degree production rather than diluted into administrative or other non academic purposes.
The estimated $26 million per biennium that could be raised from this reform could be a major, bold step forward for our state’s universities and colleges. It is in no way intended to off-set the Legislature’s horrific systematic disinvestment in higher education. But it is a step forward and it is a measured approach by asking the private sector to join in funding our higher education system in a more direct way.
While some companies and organizations effected by this proposal have, after sincere analysis and study, elected to oppose this legislation, others–most notably Microsoft–have engaged in an extremely thoughtful and rigorous public policy dialogue and have chosen to formally endorse the bill.
One of the ‘teachable moments’ for me in this negotiation process has been the recognition of how much work it is–and how uncomfortable it can be–to question our own comfortable assumptions. Some of my friends in the high tech community are surprised or worse by my sponsorship of this bill.
I ask those friends to look deeper.
From a systems perspective of the need for bold change in our state, just as we need teachers to question the status quo of education because they know the inside deal, and we need nurses and physicians to question the status quo of health care, we also need high tech executives to lead on big issues impacting the high tech community.
Ultimately, that is the beauty, value and integrity that our founder’s envisioned with a part-time citizen legislature.
I am grateful for the depth of assessment and policy debate on both sides, and I appreciate those organizations that have courageously decided to stand together to invest precious dollars into STEM education in our state.
We are so much more than what we’ve become.
Your partner in service,
Reuven.
DISCLOSURE: 1) I have received campaign contributions from a number of the companies and organizations listed in this post. 2) I have previously held economic interests in companies that have utilized the high tech R&D tax credit. 3) I may have financial interests in some of the companies listed or impacted by the R&D through ownership of equities or mutual funds.
New video update about 2012 legislative session
Here’s a new video update:
In the coming days I’ll be sending out e-newsletters and other information about the activities of the 2012 legislative session.
It’s an honor to represent you in Olympia. If you have comments, concerns, thoughts, or specific issues that inspire you please reach out. I can be reached most effectively via email at reuven.carlyle@leg.wa.gov
Your partner in service,
Reuven.
Finding grace in the daily grind.
Watterson (my hero)
The emotional whirlwind that is daily life during the intense legislative session rarely warrants publicly complaining. It’s like a faux pax political malpractice step to complain about “the help” to those who don’t have any help. After all, I knocked on nearly 15,000 doors for the priviledge of entering public service, so complaining would be bad form anyway.
Still, none of this social dynamic negates the fact that it is a roller coaster of energy, anxiety, stress, anger, joy and excitement–all bound together in 60 straight 12-14 hour work days. We are now more than half way through the session and nerves are beginning to fray.
One of the downsides of the intense level of public, minute-by-minute scheduled engagement is that we often make mistakes. A legislator might act impatiently with a lobbyist, constituent, staff, advocate or fellow legislator not because she or he is unappreciative but because it is the 11th meeting of the day.
In three years in Olympia I have been unable to hide my lack of intellectual interest in governance questions. Which agency has what authority, control or perceived accountability. Board X merges with commission Y so long as agency Z receives credit. Blah, blah, blah. I can’t hide my disinterest in who gets to have a plant in their office, a title, a corner office.
Inside Olympia battles over governance are not only boring to me, they are in my view a distraction from larger systems issues about real people living real lives that cry out for attention. My rationale is that I want to open the doors of education to kids, to empower citizens to engage in their democracy, to improve health care, to clean our environment and so much more. I don’t want to sit in a 2 hour hearing listening to the bureaucracy justifying their own existence.
And yet I’ve also learned firsthand that the vision of big issues frequently confronts the tactical reality of day-to-day governance.
I was disappointed in myself today because I was less than gracious and even rude to a state employee. I threw a rhetorical elbow at a mid level bureaucrat who was naturally and not inappropriately defending an agency’s territory, budget and authority against a perceived threat in the form of a bill to change the governance structure. I was frustrated by what I too quickly judged as government babble.
The institution of government is no different than any entity. It exists to self perpetuate. When a person’s role, team or agency–and by extension the jobs of those who do the work–are perceived to be under threat, the defensive mechanisms rise up instantly and fiercely.
Today I was reminded why I rarely engage in issues of inside Olympia governance. First I’m not very good at it. Second I find myself impatient beyond what is appropriate. Third, I often fail to express my views with the grace and dignity that I strive everyday to exhibit in my life.
That was the low point of my day.
The high point was that I helped negotiate a major deal with House Republicans to close the first mortgage interest tax exemption for large, multinational banks that will raise $18 million this year and much more in future biennia.
Your partner in service,
Reuven.
Ps. To the state employee whose throat I jumped down today: I apologize and ask for your forgiveness.
The blessings of marriage equality
As a young man fresh out of college I had the honor of working briefly in the Washington State House of Representatives as a writer. My first assignment was to support Rep. Cal Anderson, the young legislator from Seattle’s 43rd Legislative District–and the first openly gay member of the Legislature. I learned so much from Rep. Anderson and I so profoundly value the experience on a personal and professional level.
This week the Legislature adopted groundbreaking legislation to grant equality in the right to marry.
At the end of the day, it was deeply emotional to come home for the evening to Seattle from Olympia to enjoy a wonderful dinner with my wife Wendy and our four children, and to tell them that I had a small part in making history by voting for the bill. And then to reflect upon the ability of LGBT couples to enjoy the same warmth, love and support of marriage that I treasure.
I do not minimize the impact of this issue on those who are moved to oppose the decision because of religious conviction, moral perceptions or public policy implications. I have tried hard to respond to emails, calls and messages with quiet humility and genuine respect for that perspective.
It is a reflection of the integrity of our system of government that good people of different views can engage together in a vibrant dialogue about our community’s values and future.
Equality in the right to marry lifts us up and frees our souls as a moral and just society.
The march of history bends toward justice.
Your partner in service,
Reuven.
Let’s roll: “An Act concerning tax expenditure reform to provide transparency and accountability in fiscal matters.”
In the three years that I have served in Olympia I have attempted to bring what I consider transparent financial management, analytical objectivity and fiduciary oversight of the public’s tax dollar. If nothing else I have tried extremely hard–as a citizen legislator and businessperson–to elevate the dialogue and educate the public about both sides of the ledger.
After three years it is particularly obvious that a key area calls out for a rigorous, financially objective, effective examination: The hundreds of valuable tax exemptions, credits and preferential rates we have created over the past 80 years.
Our lack of oversight and courageous honesty in examining our state’s hundreds of sales, B&O and property tax exemptions is, simply, fiscally irresponsible regardless of one’s politics or intentions.
I am not, of course, arguing that all 567 exemptions, credits and preferential rates are structurally broken or inherently corrupt. I am arguing that our lack of intellectual rigor in examining whether they actually work is irresponsible. Tax exemptions and credits should be forced–every 10 years at least–to prove that they actually work. Today, they face no such scrutiny.
Thus, this week I introduced a major tax exemption bill, House Bill 2762, with the forceful support of Rep. Glenn Anderson (R-Fall City) and many others, in an effort to seriously examine our state’s paralyzed tax structure.
With the passage of I-1053, we have by any standard created an economically inefficient model by which our tax policy is effectively locked in perpetuity. But this does not mean we should retreat from protecting the public’s interest by pretending otherwise.
It is undemocratic and foolish that while it takes a simple majority to establish a tax exemption or credit, it requires a 2/3 majority to end, resize and even slightly modify one. No intelligent business executive on the planet would institute such a poorly designed policy, and I feel a public obligation to challenge the wisdom of this irresponsible structure.
I feel an obligation to attempt in my small way to educate the public to the destructive force of the small print of I-1053. I don’t accept that even one in ten voters who favored I-1053 believed then or now that it makes sense to lock our current tax exemptions into law effectively forever. It’s irresponsible, inflexible and goes counter the very notion of wisely managing the public’s resources.
HB 2762, “An Act concerning tax expenditure reform to provide transparency and accountability in fiscal matters,” is not a modest approach.
This bill is designed to place an expiration date—in buckets over the course of 10 years—on all sales and B&O tax credits and exemptions with the following exceptions: 1) those constitutionally and contractually included, 2) those with an existing date of any sort are left untouched (such as Boeing’s 2024 expiration date), 3) sales tax on food and prescription drugs and a small handful of others.
The Seattle Times has recently editorially embraced this general idea because, I believe, it is philosophically consistent to require all tax exemptions to prove that they actually work. Exemptions and credits should be required at least every 10 years to show a return on investment, a financial metric based upon sound data and clear criteria. They should expire, in my view, and be forced to prove to future legislatures that they actually achieve their objectives for taxpayers.
There are many tax exemptions and credits that I myself will clamor to reauthorize. Many of them work well and can easily prove their effectiveness given our B&O and sales tax dependencies. But others have grown stale with the insulting idea that they work yet cannot produce even so much as a face-saving argument or data set. Occasionally the blind ambition of the tax exemption’s proponents go no further than the companies or organizations that benefit from the credit.
It is not liberal or conservative to require tax exemptions to face renewal, it is simply a fiscally responsible move. It is not a back-handed attempt to raise taxes as evidenced by the provision that implements this new policy in 2017. It is sound fiscal management that graces both the halls of prestigious public policy schools as well as business schools.
The default policy of our state should be that tax exemptions and credits, like we currently require for spending on any program or project, must be able to objectively prove efficacy and financial return on investment. Without a requirement that tax exemptions and credits expire every 10 years or so, taxpayers are assured only that special interests declare victory once and the battle is over—virtually forever.
One key goal of this bill is to empower the Joint Legislative Audit and Review Committee and the Citizen’s Commission for Performance Measurement of Tax Preferences to succeed. The well-designed process can work but only if their recommendations are used as the foundation of action. Today, many of their best ideas and suggestions are left to the dusty shelf of political inaction. I seek to create the expectation that their recommendations will lead much of the decision making in this area. Today, while their work is highly regarded, it is effectively impotent due to our inability to execute upon recommendations.
In this bill, I purposely begin the implementation in 2015 in order to add weight to my argument that this is not a short-term tactical way to raise taxes. This is structural, long-term reform that is responsible and practical.
Rep. Glenn Anderson, a thoughtful iconoclast who comes to the Legislature with a legitimate knowledge of business and is not driven by ideological rigidity, is lead co-sponsor. I appreciate his willingness to elevate the dialogue in our state about these profoundly important public issues, and to help lead the discussion.
There are those who will laugh at the idea of even embarking on an effort to secure 2/3 majority vote for a major tax bill. I readily acknowledge the difficulty and the poor prospects in the Legislature. But I am unwilling to cease from my belief that your citizen legislature can rise above ideology and return to fiscally responsible management of the public’s dollar.
We are so much more than what we’ve become.
Your partner in service,
Reuven.
Few projects have provided a sense of quiet personal meaning and value as efforts to help thrust open the doors of next generation educational access for students in K-12 and higher education through the use of Open Educational Resources.
I have blogged about this issue many times here and here.
I have introduced two major bills this year, HB 2336 and HB 2337, to bring open educational resources to K-12 and to create a bold policy by which the ‘default’ of access to educational materials in higher education is ‘open’ rather than today’s ‘closed.’ I believe both represent important steps forward not as exclusive answers but as representatives of our state’s willingness to embrace this initiative.
The public has an innate sense of fairness and today’s textbooks have crossed the line of economic and academic market failure on virtually every account. A $8 billion industry fueled primarily by tax dollars and student funds calls out for major systems reform on every level.
The state of Washington spends at least $125 million a biennium on textbooks in K-12 alone, while college students pay hundreds of millions more. Still, textbooks are just the most obvious challenge.
The Washington State Board for Community and Technical Colleges has shown that open educational resources are possible logistically and operationally. These bills strive to move forward with the natural next step. While there are numerous legitimate technical and operational concerns among higher education officials about academic interests, and negotiations continue in earnest to find a win-win, the larger value proposition is difficult to deny.
I value the knowledgable view of academic leaders in our state and I am striving to learn from them how we can build a better model using open educational resources together. We have a long way to go together.
As California and other states embrace this same cause as well, my hope is that Washington can continue our march of progress.
This journey, as well as that of my California colleague Senate President pro Tempore Darrell Steinberg’s efforts, show that state governments will lead where larger markets have unquestionably failed. President Obama has recently elevated the issue of the high cost of textbooks, but state governments continue to be the primary customer and we must be so much more intelligent about our purchases and expectations. For too long state and local governments have failed the public by accepting an old, broken system but we can begin anew.
Educational materials created and funded by tax dollars should be openly licensed and available to the public who paid the bill. And everyone else.
Your partner in service,
Reuven.
