The Washington state Legislature should decide the extent to which continuing a pledge for up to $8.7 billion in tax credits to Boeing Co. should be pegged to its employment levels, an advisory panel said Oct. 9.
The Citizen Commission for Performance Measurement of Tax Preferences meeting came after years of scrutiny over whether Boeing deserves the package of perks.
The Washington Legislature in 2013 passed the expanded tax package with the goal of encouraging the company to maintain and grow jobs in the state’s aerospace industry. Boeing fulfilled its promise that it would build a carbon-fiber wing factory and would assemble the new 777x aircraft in Washington. But from 2013 through 2018, Boeing employment in Washington fell by 12,100.
Lawmakers “must be very cautious in how it interprets and responds to employment changes” in evaluating the efficiency of the tax preferences, the commission said. Other factors, like automation and business cycles, could impact employment levels.
The commission also said that the aerospace sector provides above-average investment spending, wages and benefits, and workforce training, none of which are captured by analyzing changes in employment. Boeing remains the state’s largest private-sector employer with a workforce of 69,380 statewide.
There have been several bills introduced to claw back the incentives to the company, but none have gained traction. Boeing will continue to see such tax benefits to 2040 barring a change of heart by lawmakers.
Boeing declined to comment on the commission’s decision.
Tracking the Dollars
The latest push for a legislative solution comes after release of a legislative analysis last summer questioning the current arrangement.
The report by the legislative auditor of the Joint Legislative Audit and Review Committee (JLARC) said lawmakers “should clarify its expectations for the level of aerospace industry employment.” The auditor added that inclusion of a metric such as baseline level of employment would allow for a more thorough analysis of the tax breaks.
Boeing spokesman Paul Bergman told Bloomberg Tax in an Oct. 8 email that “by any objective measure, Washington’s aerospace tax incentives are working as intended. As JLARC notes in its report, aerospace employment in Washington is up 38% since the incentives were enacted in 2003. These are good jobs with average wages over $100,000 and benefits that exceed those provided by other industries.”
An estimated $569 million in tax breaks will accrue to aerospace sector companies in Washington in the 2021-23 biennium, with the overwhelming majority of that going to Boeing, according to the JLARC report.
A Boeing filing to the Washington Department of Revenue in 2018 shows the company received $212 million in various Business & Occupation tax preferences and $18 in sales & use tax preferences. Boeing said in an Oct. 9 email that it invested $14 billion in Washington that year, including $8.5 billion in payroll.
“When Boeing was given these incentives without any performance metrics, the company just took that as another stream of revenue,” said Ray Goforth, executive director of the Society of Professional Engineering Employees in Aerospace, the union representing the company’s engineers.
Gov. Jay Inslee (D) was a key force behind passage of the tax breaks in 2013 as Boeing deliberated on on where it would complete key elements of its 777X program, including a carbon-fiber plant and assembly of the commercial aircraft.
The governor has apparently had a change of heart. During his recent presidential campaign, he likened Boeing’s actions surrounding the tax break to a mugging at gunpoint.
“If you’ve ever been mugged, you know what it feels like,” Inslee said during a March 18 appearance with TV host Trevor Noah. “Well I was not happy about the Boeing situation. Because what happens is these corporations put a gun to your ribs and said you’re going to lose 20,000 jobs unless you get a tax break. That is why I am so adamant to stop that kind of behavior.”
Inslee staffers are still discussing components of his budget and policy proposals, which he will roll out in December, his acting communications director, Tara Lee said in an Oct. 8 email.
But even if a claw-back bill is introduced, it will face headwinds.
Sen. Majority Whip Mark Mullet (D)—a rare moderate in a caucus filled with progressive members—would oppose it, he said.
Mullet, who previously opposed bills to claw back the tax credits, cited the recent crashes of two 737 Max aircraft as further reason “the timing could not be worse to go after Boeing.”
“I’m cautiously optimistic that our caucus would not decide to go after Boeing at this time given all the heads winds they have coming from other areas,” he said. “This is a time for their local and state government to be showing support, not being adversarial.”