Boeing’s strategic request to shut off an annual $100 million tax break can bring a welcome cash infusion to state coffers. The Legislature would be wise to accept this unexpected revenue on terms to aid Boeing’s hard road to better days.
Boeing’s management has disappointed Washington mightily in recent years by moving thousands of jobs elsewhere and neglecting the company’s once-sterling reputation for safety. But at a moment when Boeing’s long-term standing is in question following egregious mismanagement of the 737 MAX, state government should not leverage this unusual request to extract more concessions.
The consequences of linking a potential restoration of the tax break to new jobs guarantees — as labor leaders asked — could be disastrous to the state’s business trustworthiness. Boeing has not violated the terms of the deal Gov. Jay Inslee and lawmakers extended in 2013, which include a 40% reduction to the Business and Occupation (B&O) tax for 335 aerospace companies.
Inslee needs to step up where he has remained vague. He should assert that a settled deal — even one he likened to a mugging and “corporate extortion” to a national audience during his presidential bid — must be honored. House Majority Leader Pat Sullivan, D-Covington, said the tax request needs more backing to pass. Too much is at stake to let the deal slip.
Boeing receives the vast majority of the total $116 million annual B&O tax break, but that has become a liability. The World Trade Organization found this an illegal subsidy because it hurt sales of European rival Airbus. The finding opens the door to Europe imposing retaliatory tariffs, with potential targets including Washington’s wine and agriculture sectors, according to the state Department of Commerce.
Boeing would lose billions of dollars under tariffs. The same math pencils out for smaller aerospace companies that make components for Boeing.
“The trade-off between tariffs and this tax increase, it’s just a no-brainer,” Mike Brown, CEO of Aero-Plastics Inc. of Renton, told the House Finance Committee Tuesday in support of the tax measure in House Bill 2945 and Senate Bill 6690.
But labor leaders say Boeing has forsaken the implicit promise the tax break would grow its Washington workforce. This contention has facts behind it, but — crucially — not deal-striking ones.
In 2012, before a 2013 three-day special legislative session tied $8.7 billion in tax incentives to 777X production, Boeing employed 86,480 in Washington. At the end of 2019, the Boeing payroll contained 71,829 Washington jobs. Those losses came from sectors unaddressed in the agreement. The Legislature would set a bad precedent trying to wedge them in now.
Washington’s relationships with its largest employers must be built on mutual respect and trust, rather than seizing any opportunity to shake out better terms. Truly exceptional circumstances led to this opportunity to come out ahead on state revenue while helping Boeing, which has created immense problems for itself. The deadly decision to shortcut safety measures in developing the 737 MAX reverberated throughout the corporation. Its costs so far include a grounded air fleet, stopped production lines and a change of company leadership — and the business still isn’t righted.
Lawmakers should approve the tax proposal and invest the money wisely. If the bill passes as written, the tax break could be reinstated if WTO allows it. If that provision stands, the added revenues should be devoted to one-time needs. This could mean court-ordered culvert repairs to aid spawning salmon or buying new state ferries.
The business world is inherently unpredictable, and the Boeing proposition gives state government two opportunities to account for that. First, the state must demonstrate that it stands by its agreements to provide the certainty large employers require. And lawmakers should resist temptation to fund perennial needs, such as education, with a tax bounty a WTO finding could shut off anytime.