‘Opening the books’ on Boeing tax breaks: Millions last year

EVERETT — The Boeing Co. saved $20 million on its state tax bill last year for starting construction on new buildings for its 777X jetliner in Everett.

That money is just a small slice of the overall savings Boeing had in 2014 due to state aerospace tax incentives. In all, the industry was projected to save $182.4 million that year, according to an analysis made two years ago by Washington’s Department of Revenue.

It is not possible to say how much the tax incentives hurt or benefit taxpayers, though. How much businesses benefit from most state tax incentives is not publicly disclosed.

The amount of Boeing’s sales tax savings for building construction — $19,586,512 — is due to a tax-transparency provision passed in 2013. During a special session late that year, lawmakers extended and expanded aerospace tax incentives as part of Olympia’s effort to convince Boeing to assemble the 777X here.

The projected value of the savings — $8.7 billion over a 16-year period that begins in 2024 — makes it the biggest state tax break in the nation’s history.

The amount of sales tax savings was disclosed to The Seattle Times by the Department of Revenue after a public-records request and appeal. The department did not respond to The Herald’s requests for comment on Monday.

The tax-transparency provision, championed by state Rep. Reuven Carlyle, D-Seattle, requires tax savings claimed by individual businesses to be made public within two years for any new or expanded tax break passed by lawmakers.

“It’s the beginning of a new era in opening the books,” Carlyle said.

Previously, taxpayer confidentiality laws have, with few exceptions, shielded disclosure of tax-break benefits enjoyed by companies. Instead, such information has been largely limited to estimates of how the tax breaks apply to broad categories of industry.

Under the transparency law for new tax breaks, company-specific disclosure will be the rule, instead of the exception.

That means Boeing will be far from alone in seeing its precise benefits revealed.

In coming years, tax savings claimed by aluminum smelters, farms, data centers and newspapers will be made public.

Smaller Boeing aerospace suppliers benefiting from the 2013 tax package also will be subject to disclosure.

However, the Department of Revenue told The Seattle Times that under its interpretation, some of that package’s incentives will not have to be disclosed until 2016, when they technically go into effect.

As the state’s biggest private employer, Boeing will greatly benefit from the tax breaks. In 2012, for example, it provided just over three of every four jobs directly tied to aerospace manufacturing in the state, according to a state-commissioned study.

That same year, Boeing accounted for 95 percent of the aerospace industry’s $51.2 billion sales revenue, according to the study.

At the same time, the Chicago-based company is still the state’s largest taxpayer, Boeing spokesman Paul Bergman said.

“The bottom line is that (the tax incentives are) generating a lot of money for the state and communities,” he said.

According to the state’s own projections, the tax incentives are expected to generate more than $21.3 billion in state and local tax revenue over 16 years, he said.

Of course, most people here don’t know how much Boeing pays in state taxes.

As the incoming head of the House Appropriations Committee, state Rep. Hans Dunshee, D-Snohomish, is one of about 45 lawmakers who will be able find out during the next session.

He has not seen any of that information yet, and after he does he is not allowed to share it, he said.

Every dollar counts right now. The state is facing increasing obligations to pay more money for public education, while voters have passed initiatives limiting its taxing ability, he said.

Boeing “benefits by being here, and we benefit from them being here,” Dunshee said.

Without knowing how much companies save on state taxes, “you can’t” do a cost-benefit analysis of tax incentives for any company, he said. The average taxpayer would be aghast at how much companies save on taxes, versus what the state gets in return, Dunshee said.

Some legislators, including Everett’s Rep. June Robinson, are expected to push in the upcoming legislative session a bill to tie the aerospace tax breaks to job numbers. Similar efforts stalled in previous sessions.

The Associated Press contributed. Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.