Times Watchdog | Boeing saved $305 million in state taxes last year thanks to aerospace tax incentives granted by lawmakers to keep the company building jets here. Union leaders point out the savings came even as the company cut jobs.
Boeing saved $305 million in state taxes last year, thanks to Washington’s suite of aerospace tax incentives granted by lawmakers to keep the company building jets here.
The company disclosed the savings before a required filing next week with the state Department of Revenue.
It’s the first time Boeing’s annual benefit from the state tax breaks has been released. The disclosure came after The Seattle Times successfully reversed an initial ruling by state tax officials that the information would not be made public for a decade.
In a news release, Boeing said the tax breaks are a good deal for Washington, highlighting more than $13 billion the company spent here in 2015 — the bulk of it on payroll, supplier purchases and capital investments.
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“This is a good news story,” Bill McSherry, Boeing’s vice president for government relations and global corporate citizenship, said in the news release. “The more Boeing invests in Washington, the higher the stated value of the incentives.”
But the disclosure comes amid criticism of Boeing’s cuts to its Washington workforce since the state approved a record-setting extension of aerospace tax breaks a few years ago.
Since that tax-incentive package was passed by lawmakers in November 2013, the company has shed more than 5,600 workers in the state, moving thousands of engineering jobs to lower-cost regions. More cuts are planned this year by the company, which has cited competitive pressure to reduce costs.
“That’s Boeing’s thank you to Washington,” said Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace (SPEEA), the union representing Boeing engineers.
Union leaders have pushed state lawmakers to add new restrictions to the tax incentives, requiring the company to maintain certain levels of middle-class jobs in the state.
“We still do support the tax incentives, but only if it means that we maintain and grow aerospace jobs in Washington,” said Larry Brown, legislative director for District 751 of the International Association of Machinists (IAM).
Boeing reported 77,671 employees in Washington state as of the end of March. That’s down from 83,295 at the start of November 2013 but up from about 54,000 in November 2003.
State Sen. Reuven Carlyle, D-Seattle, pushed for the tax-break transparency provision, approved in 2013, that requires savings from new or extended tax breaks claimed by companies to be disclosed.
Previously such company-specific information has usually been deemed confidential.
Carlyle said opening up the data on tax breaks is crucial for the public and policymakers to make informed decisions.
In Boeing’s case, Carlyle said, he believes the tax incentives have proved justified.
“We all feel frustration with short-term layoffs,” he said. But taking a “long view,” landing the 777X and the carbon-fiber industry here “is the future of aviation” and “makes that package worthwhile.”
The aerospace tax incentives claimed by Boeing were first approved by the Legislature in 2003. In 2013, Gov. Jay Inslee and state lawmakers agreed to extend the breaks to 2040 in exchange for the 777X work.
That extension was estimated to be worth $8.7 billion over 16 years — making it reportedly the largest ever granted by a state. Boeing noted the incentives apply to more than 470 companies in Washington state.
While Boeing’s tax payments to the state are not subject to disclosure, the company in the past has cited state estimates that the aerospace tax incentives will pay for themselves by generating $21.3 billion in state and local tax revenue over 16 years.
Inslee and most lawmakers have been reluctant to reopen the tax-break deal, saying Boeing has lived up to its promise to build the 777X and its composite wing in Washington.
In an email Friday, Inslee spokeswoman Jaime Smith said “growing our aerospace industry is a goal we all share, but some measure of future job accountability is worth considering.”
Among the specific state tax savings claimed by Boeing in 2015:
• $106 million saved in business and occupation (B&O) taxes due to what the company said was a “record number of airplanes delivered in Washington” and built largely by Machinists union employees.
• $106 million saved though a B&O tax credit for design and development work.
• $51 million saved in sales taxes on construction materials.
Boeing’s full 2015 filing will be made to the state Department of Revenue by next week.
The company was also expected to file similar tax-savings information for 2014, but that data was not available as of Friday, said Kim Schmanke, a Revenue department spokeswoman.