Ending Boeing’s tax break could give Washington a windfall. How would it be spent?

OLYMPIA — Ending a tax preference for Boeing and other aerospace manufacturers would also mean big dollars for Washington: an estimated $363 million in new state revenue through 2023.

For perspective, that’s enough money to fund the three-year statewide plan to reduce homelessness currently proposed by Gov. Jay Inslee. Or to buy two brand-new state ferries.

That potential windfall comes after state legislators announced last week that Boeing had requested an end to a long-running tax preference. That preference has allowed Boeing and other aerospace companies to pay a lower Business & Occupation (B&O) tax rate than other manufacturing companies.

Boeing sees the move as a way to help resolve a dispute at the World Trade Organization (WTO) and avoid retaliatory trade tariffs. Those could affect not just Boeing, but also other Washington products, such as wine and shellfish.

“In the coming weeks, if Washington does not find a solution that ensures WTO compliance, tariffs will likely start later this year,” Bill McSherry, a vice president of government operations at Boeing, told lawmakers Tuesday in a public hearing on the new tax legislation.

State lawmakers aren’t yet counting on the new revenue. Senate and House Democrats didn’t factor it into the supplemental operating budget proposals they released Monday.

Republicans, however, have proposed three ideas in recent days for how to use the money.

But the legislation isn’t a guarantee to pass before the legislative session ends March 12, according to House Majority Leader Pat Sullivan, D-Covington.

Lawmakers are still debating whether and how to require that Boeing keep or create jobs in the state in the event the company gets the tax preference back in the future, he said.

“I don’t think in its current form it has the votes to pass,” said Sullivan, sponsor of House Bill 2945, one of the bills making the proposed tax changes. He added later: “I’m not interested in talking about how to spend it until we get a bill passed.”

Eliminating the tax preference would raise $134 million in revenue for the current two-year state budget cycle and $229 million for the 2021-23 budget cycle, according to a legislative analysis of House Bill 2945.

Currently, 335 companies benefit from the reduced B&O tax rate, according to the analysis.

But previous tax data show Boeing is by far the biggest beneficiary of the tax preference. In 2018, Boeing saved $100 million due to the tax break; the next biggest beneficiary that year saved about $884,000.

HB 2945 and its companion bill, SB 6690, would allow the tax break to come back in the future.

That could only happen if the United States and European Union resolve their WTO disputes over large civil airplanes in a way that explicitly allows a state tax preference, according to the proposals.

Asked about potential new revenue, Inslee spokesman Mike Faulk wrote in an email, “We think it’s too early to have a conversation on spending while the proposal itself is still being negotiated.”

House and Senate Republicans — who are in the minority in both chambers — have started proposing uses for any new tax revenue.

Sen. Curtis King, R-Yakima, has proposed using the money to address a federal court order that requires Washington to fix pipes under roadways, known as culverts, that block migrating fish like salmon from reaching spawning areas.

“It’s good for the environment, it’s good for the fish, it’s good for the orcas,” King said last week.

On Tuesday, Rep. Drew Stokesbary, R-Auburn, said he would soon sponsor legislation to use Boeing revenue to pay down Washington’s unfunded state pension obligations. Paying those obligations down more quickly would save the state money down the road, he said.

Sen. Doug Ericksen, R-Ferndale, Tuesday said that instead of eliminating the aerospace tax preference,  lawmakers should reduce the B&O tax rate for all manufacturing businesses down to the rate that Boeing currently pays.

That idea is still a tender spot for Republicans. It was included in a 2017 state budget agreement — until Inslee vetoed it.

“Think about the jobs we could create all around the state, not just in Seattle,” Ericksen said in a news release. “If it’s good for Boeing, it’s good for the state of Washington.”