Requiring Greater Accountability for Boeing Tax Breaks Should Remain a Priority

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Requiring Greater Accountability for Boeing Tax Breaks Should Remain a Priority

By - April 23, 2015

Despite continuing to rake in big profits, the Boeing Company has eliminated more than 3,000 jobs in Washington state since November 2013 – when lawmakers granted the company the largest state tax subsidy in U.S. history. The tax breaks were supposed to encourage Boeing to “maintain and grow” its workforce in Washington state. Instead, thousands of workers have received pink slips or been told that they can either relocate out of the state or country or lose their jobs.

So how did this happen? It’s because Washington’s tax breaks aren’t structured in a way that encourage Boeing to create more jobs here. Other than a stipulation that some of the manufacturing facilities for its upcoming 777X jetliner must be built in Washington state, the company is essentially free to do as it pleases. Unlike other states where Boeing operates – including South Carolina, Illinois, and Missouri – our state doesn’t require the company to create or retain a single job in order to claim state tax breaks.

House Bill 2147 would change that by refocusing Boeing’s tax breaks on job creation. Although the bill may now be moving into “missed opportunity” territory as the regular session comes to a close, it’s still important to shine a light on why Washington state needs such a bill. The bill would help protect Washingtonians who work for Boeing by requiring the company to actually do its part to maintain and grow its workforce in Washington state or risk losing its tax subsidies. It ties the tax breaks directly to the number of jobs located in Washington state.

Essentially under the bill, Boeing’s tax breaks would be gradually reduced if its Washington-based workforce falls below November 2013 levels. For every 250 jobs below that baseline, its preferential business and occupation (B&O) tax rate would increase by about 2.5 percent. The preferential rate would disappear completely if Boeing employment falls 5,000 below the November 2013 baseline. The company’s tax credits would similarly be reduced as employment falls.

If the 2015 legislative sessions end without the passage of the bill, Boeing will continue to claim more than $300 million per year in preferential business tax rates, business tax credits, and sales tax breaks until 2040. That’s no matter how many (or how few) workers it employs in Washington state.

A 2014 Legislative Auditor economic analysis vividly spelled out the dangers of failing to act on this important measure. It found that in order for state aerospace tax breaks to have a net positive impact for the state economy, Boeing would need to make continuous investments in Washington state. A onetime investment in a new facility doesn’t cut it. That’s because the tax breaks for Boeing filter state money away from other investments that help build a strong state economy. They reduce the resources available for things like public schools and colleges, infrastructure, and public safety.

In other words, the tax incentive’s current structure doesn’t only mean that the company can keep reducing the size of its workforce in Washington; it also means taxpayers are subsidizing a multibillion-dollar corporation at the expense of the well-being of our communities.

We all want a thriving aerospace sector and the growth of good, living-wage jobs in our state. House Bill 2147 would help ensure that outcome by encouraging Boeing to make a firmer commitment to Washington. Although the 2015 regular legislative session is ending, policymakers could still revive this bill during the special session. It’s an important piece of legislation that would be worthy of such a bold move by our elected officials.

Click here to see the testimonies from hardworking Boeing workers who support this bill.

About the author

Andy specializes in state budget and tax policy. Since joining the Budget & Policy Center in 2009, he has served on a Legislative Task Force on Tax Preference Reform and has conducted numerous analyses of Washington state’s tax code.

Read more about Andy