Lawmakers may put conditions on aerospace tax breaks

OLYMPIA — Aerospace companies that save millions of dollars through tax breaks — or billions in the case of the Boeing Co. — could face new rules if they want to keep them.

A group of House Democrats are pushing to set a minimum wage of more than $20 an hour for veteran employees of those firms and to shrink the tax break for the Boeing Co. if the firm cuts its job force too much.

On Monday, a public hearing is planned on House Bill 1786 that would require firms receiving a tax incentive to pay their veteran employees roughly $53,000 a year — nearly $25 an hour — or lose their state tax breaks.

The bill, sponsored by Rep. Mia Gregerson, D-SeaTac, could cause havoc for aerospace suppliers that employ many people for less than $15 an hour.

A second bill, which could become public this week, will target Boeing. As drawn up, the company would have its tax break reduced if it trims its workforce in the state by a certain number of jobs. Rep. June Robinson, D-Everett, is expected to be the prime sponsor.

These bills, which have been in the works for months, are the latest salvos in an ongoing debate on whether the state should claw back some of its generous tax incentives if aerospace companies don’t create and retain good paying jobs.

Unions representing Machinists and engineers, and their supporters in the Legislature, say the state gave Boeing too good a deal when it extended tax breaks in 2013 to secure the 777X program in Everett. Those tax breaks could save the aerospace giant as much as $8.7 billion in taxes through 2040, yet the firm can still ship jobs out of state.

“If Washington companies are getting a tax incentive, Washington state taxpayers should be able to expect it will grow good paying aerospace jobs,” said Jon Holden, president of International Association of Machinists Local 751. “We’re subsidizing those companies. Why are we subsidizing those companies that are paying their people under $12 an hour?”

Rep. Mike Sells, D-Everett, is chairman of the House Labor Committee where HB 1786 will be considered Monday. He also is a co-sponsor of the bill.

Sells, a retired Snohomish County Labor Council leader, said Monday’s hearing is an opportunity to bring the issue and arguments in front of the public.

“People are saying, rightly or wrongly, ‘What are we doing here?’ ” Sells said. “Is (the bill) the best vehicle to deal with it? I don’t know but it deserves discussion.”

Opponents pointed out that the unions in 2013 supported extending the tax breaks. They think the Machinists’ motivation is to get back at Boeing, which pressured the local into approving a contract extension that included elimination of their pension.

“I think this is a few disgruntled union officials being poor sportsmen because of the contract,” said Linda Lanham, executive director of Aerospace Futures Alliance. “This is not just about Boeing. They’re attacking the smaller businesses in the supply chain.”

House Bill 1786 would set a wage standard that must be met by aerospace firms receiving or seeking one of two incentives offered by the state — a preferential business and occupation tax rate and a tax credit for development of commercial aerospace products.

Each September, the companies would report the annual earnings of each employee who has been with the firm for three or more consecutive years. As written, the bill covers all jobs including assemblers and engineers, executives and janitors.

Under the bill, each of those employees must be paid at least the state median wage for a one-earner family as reported in the American Community Survey by the U.S. Census Bureau. That wage is currently $52,384 a year.

This mandate is phased in over three years. Starting in 2016, workers must be paid at least 80 percent of this year’s median wage or $41,900, which works out to $20 an hour for a full-time worker. Workers must make 90 percent of the median in 2017 and 100 percent by the start of 2018.

If one employee does not earn the standard in any year, the company loses its entire tax break, according to the bill. A firm can get it back the following year if it complies.

Rep. Matt Manweller, R-Ellensburg, the ranking Republican on the House Labor Committee, said the bill is a “massive change in public policy” and goes too far in its demand.

“Mandating what a private business is paying in wages is an inappropriate role of government,” he said.

Other critics predicted suppliers who could not meet the wage standard would forgo the tax break and likely look to relocate. They also argue that passing this bill, or others like it, would break promises made by the state to Boeing that helped secure the 777X project in Everett.

Everett Mayor Ray Stephanson said he couldn’t comment on the specifics of either bill yet, because he has not seen them. If lawmakers impose new conditions on receipt of the tax breaks, it could quiet the interest of any firms eyeing a move to the city or state, he said.

“I think the risk is this: What kind of message does it send to other companies that you’re recruiting to your state?” he said.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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