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Originally published Sunday, February 12, 2012 at 4:01 PM

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Convert unneeded R&D tax break into investment in STEM university majors

Time to revisit Washington's business-and-occupation tax break for companies engaged in technology-related research and development. One interesting proposal would encourage companies that don't need the break to invest the money in STEM majors at universities.

Seattle Times Editorial

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HUNDREDS of Washington companies engaged in research and development in technology-related fields pay a reduced business-and-occupation tax. This break was designed to create a healthy R&D climate in our state and spur companies to maturity.

The side benefit, of course, is the tax break supports good-paying jobs.

Most companies in the state receiving the tax reduction should retain it. It serves a useful purpose. But larger firms getting thousands or millions of dollars that do not really need an assist should join an effort to dedicate that money to a better idea: a private fund supporting new science, technology, engineering and math (STEM) slots at state colleges and universities.

Business leaders have been saying for years they face mounting retirements of engineers and need other technically oriented employees. The state is not producing enough new degrees in those areas to fill these positions. The jobs go to people educated elsewhere.

State Rep. Reuven Carlyle, D-Seattle, offers House Bill 2532 to reauthorize these tax breaks that are currently scheduled to expire in 2015 and then carefully retool them to reflect more current conditions. This is a worthwhile idea.

For example, the Department of Revenue says three companies — Microsoft, Pacific Northwest National Laboratory, which is operated by Battelle, and CH2M Hill — get up to a $2 million tax break every year. These companies do impressive work in the Northwest. But these firms do not really need state assistance.

Other companies benefiting from out-of-date policies include Google, which had a research-and-development tax break of $280,000 in 2010 and Yahoo!, with $260,000 forgiveness that same year.

Rather than put the money back into the state general fund, where it would be sucked into the vortex of the state deficit, the money would — and should — go to a private fund, the Opportunity Expansion Program. Its board is already raising private money for higher education. The group then would direct an estimated $15 million a year to colleges and universities — on a competitive basis — not for scholarships but to produce more slots for students in high-demand STEM fields.

Microsoft, for example, supports the broad idea of directing the tax break money to higher education.

But there are major kinks to work out. Will the state really see hundreds of new science and technology slots? More important, the bill seems to create a convoluted routing of funds that first sends the money to the general fund. That is unsupportable and needs to be fixed.

Work out the knots and then lawmakers should get on board. This legislation is practical and timely.

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