Aerospace isn’t the only industry that benefits from state tax breaks

  • By Dan Catchpole and Jerry Cornfield Herald Writers
  • Tuesday, May 3, 2016 8:57pm
  • Local News

EVERETT — The Boeing Co. saved more than half a billion dollars on state and local taxes in Washington over the past two years.

The aerospace giant is not the only beneficiary, though. Individuals, business and other taxpayers are expected to avoid about $20 billion in taxes this year thanks to a long list of tax breaks, according to estimates by the state’s Department of Revenue. That is more than Washington actually expects to collect from taxes.

Tax breaks for businesses can be controversial, especially when local and state lawmakers struggle to shore up public budgets. Supporters often justify the incentives as giving up some tax revenue now to spur economic growth.

Aerospace is not the only industry to benefit. The agricultural, biomedical and high tech sectors are some of the biggest beneficiaries. Microsoft saved $163.7 million on its 2014 tax bill, and Amazon saved $34.9 million.

Newspapers benefit from tax breaks, too. The state expects the industry to save $1.1 million on taxes this year due to a lower business and occupation tax rate approved by lawmakers in 2009. Readers have not had to pay sales tax on newspapers since 1935. The state estimates readers will save $15.6 million this year.

Many but not all tax-break beneficiaries are required to tell the state how much they saved. Boeing’s disclosure marks the first time the state has released a firm’s savings from a slew of aerospace tax incentives passed in 2003 and extended in 2013. The state revenue department is expected to report other firms’ savings in the next few weeks, said the agency’s spokeswoman, Kim Schmanke.

Boeing’s savings shot up from nearly $217 million in 2014 to $304.8 million last year, according to information released by the state.

The company said last week that it put $13 billion into the state last year, including “hundreds of millions of dollars” for taxes.

That amount also included spending on new buildings for 777X production and assembly. The plane is Boeing’s newest airliner, and is expected to go into production in Everett in 2017.

The 777X also likely explains why Boeing saved more on its tax bill last year. The biggest increases came from tax breaks connected to construction for airplane production or research and design costs of a new airplane, according to revenue department data.

The new airplane means thousands of jobs at Boeing and suppliers in Snohomish County for years to come. The aerospace tax incentives mean Boeing will save billions of dollars at least until 2040, when they expire.

The tax savings — for Boeing and others — are not easy to stomach for Snohomish County Councilman Brian Sullivan. The County Council is expected to ask voters in August to raise the sales tax to pay for more police, prosecutors, defense attorneys and other criminal justice expenses.

Cutting some taxpayers’ bills often means collecting more from others or reducing public services.

“This is not a tax break. This is a tax shift,” Sullivan said. “It’s not just Boeing. It’s other companies, too. We have to get the money from somewhere. That means we have to make up the difference from the people we represent and the small businesses in the community.”

Sullivan backs state lawmakers’ efforts to tie Boeing’s tax credits and lower rates to keeping a minimum number of jobs in the state.

The airplane maker is a “great employer,” he said. “At the end of the day, even Boeing has to understand this puts a huge amount of pressure on our services and our ability to pay for services.”

Everett Mayor Ray Stephanson said he’s “absolutely perplexed” when he hears people talking about “how much we could do with that money” from Boeing and other companies.

“I think what people are missing here is if we didn’t have Boeing … we wouldn’t have the $13 billion investment,” he said.

“I think it’s a very good deal for the state of Washington and the city of Everett,” he said. “If we can’t be competitive, those jobs will go somewhere else. Without them, we would be a different city.”

Dan Catchpole: 425-339-3454; dcatchpole@heraldnet.com; Twitter: @dcatchpole.

2014 state and local tax incentive savings

Biggest savers among for-profit companies based on publicly disclosed data. This list could change as state officials release more information about the tax savings of aerospace companies other than Boeing.

Company Tax savings
Boeing Co. $216,963,499
Microsoft Corp. $163,673,856
Amazon $34,913,922
Portland General Electric $23,355,665
REG Grays Harbor $7,283,104
Seattle Genetics $1,684,416

Large Snohomish County employers in 2014

State and local tax-incentive savings of employers other than Boeing. This list will change as more data about aerospace tax incentives are released.

Company Location Tax savings
Seattle Genetics Bothell $1,684,416
SNBL USA Everett $1,485,981
CMC ICOS Biologics Bothell $927,036
Korry Electronics (Esterline) Everett $735,438
Fluke Electronics Everett $436,654
UniEnergy Technologies Mukilteo $406,125
Eldec (Crane Aerospace) Lynnwood $316,842
Hampton Lumber Darrington $104,268
Intermec Technologies (Honeywell) Lynnwood $91,498

Breakdown of Boeing’s savings

Incentive program 2015 2014
Aerospace computer, software and peripherals sales-and-use tax exemption $3,000,000 n/a
Aerospace manufacturers reduced business-and-occupation tax rates $106,059,430 $102,702,704
Aerospace manufacturing site sales-and-use tax exemption $51,400,000 $19,586,512
Aerospace preproduction expenditures business-and-occupation tax credit $105,677,735 $75,383,434
Aerospace property and leasehold excise taxes business-and-occupation tax credit $34,329,766 $19,290,849
Data center sales-and-use tax exemption $4,300,000 n/a
Total incentive amount claimed $304,766,932 $216,963,499

Source: State Department of Revenue

Talk to us

> Give us your news tips.

> Send us a letter to the editor.

> More Herald contact information.

More in Local News

A big decision for Boeing’s next CEO: Is it time for a new plane?

As Boeing faces increased competition from Airbus, the company is expected to appoint a new CEO by the end of the year.

A Mukilteo Speedway sign hangs at an intersection along the road in Mukilteo. (Ryan Berry / The Herald)
Mukilteo Speedway name change is off to a bumpy start

The city’s initial crack at renaming the main drag got over 1,500 responses. Most want to keep the name.

Two workers walk past a train following a press event at the Lynnwood City Center Link Station on Friday, June 7, 2024, in Lynnwood, Washington. (Ryan Berry / The Herald)
Trains up and running on Lynnwood Link — but no passengers quite yet

Officials held an event at the Lynnwood station announcing the start of “pre-revenue” service. Passengers still have to wait till August.

Nedra Vranish, left, and Karen Thordarson, right browse colorful glass flowers at Fuse4U during Sorticulture on Friday, June 7, 2024, in Everett, Washington. (Olivia Vanni / The Herald)
A promenade through Everett’s popular Sorticulture garden festival

Check out a gallery of the festival’s first day.

Left to right, Everett Pride board members Ashley Turner, Bryce Laake, and Kevin Daniels pose for a photo at South Fork Bakery in Everett, Washington on Sunday, May 26, 2024. (Annie Barker / The Herald)
Second Everett Pride aims for even bigger rainbow of festivities

Organizers estimated about 3,000 people attended the first block party in Everett. This year, they’re aiming for 10,000.

HRT Rescue Technician Andy Toyota gives the thumbs-up to crew members in the Snohomish County Volunteer Search and Rescue helicopter shortly before takeoff during an interagency training session held by Northwest Regional Aviation on Thursday, June 13, 2024, at the Arlington Airport in Arlington, Washington. (Ryan Berry / The Herald)
From around state, authorities simulate ‘terrorist attack’ in Arlington

Teams from King County, Snohomish County and elsewhere converged for a multi-faceted scenario Thursday at the Arlington Municipal Airport.

Two couples walk along Hewitt Avenue around lunchtime on Wednesday, Oct. 19, 2022 in Lynnwood, Washington. (Olivia Vanni / The Herald)
Everett businesses say it’s time the city had its own Chamber of Commerce

The state’s seventh-largest city hasn’t had a chamber since 2011. After 13 years, businesses are rallying for its return.

The I-5, Highway 529 and the BNSF railroad bridges cross over Union Slough as the main roadways for north and southbound traffic between Everett and Marysville. (Olivia Vanni / The Herald)
Highway 529 squeeze starts now between Everett, Marysville

Following a full closure for a night, starting late Sunday, Highway 529 will slim down to two lanes for months near the Snohomish River Bridge.

Marysville
5 Snohomish County sisters accused of $1M fraud scheme

For two years, the women used online return postage to get gift cards, then returning the physical items to a brick-and-mortar store, charges say.

FILE — Michael Whitaker, Administrator of the Federal Aviation Administration, testifies before the House Committee on Transportation and Infrastructure Subcommittee on Aviation on Capitol Hill in Washington, on Feb. 6, 2024. Whitaker told a Senate panel, on Thursday, June 13, 2024, that changes are being made to the agency’s oversight of Boeing, including conducting more safety inspections. (Anna Rose Layden/The New York Times)
Boeing discloses new quality problem on 787 Dreamliner jets

The issue affects jets built in South Carolina that have yet to be delivered, the company said in a statement.

Alvin Cooper (Photo provided by Marysville School District)
After allegations, Marysville schools’ HR director resigns

Last week, the district’s finance director Lisa Gonzales publicly called for the school board to put Alvin Cooper on leave, citing mismanagement.

Leslie Davis, left, and Lyndsay Lamb, twin sister stars of HGTV's "Unsellable Houses" and 2004 Snohomish High School graduates, donated a private design session to the school's auction fundraiser for their 20-year reunion. (Photo provided)
Got $2,000? Bid on face time with HGTV’s ‘Unsellable Houses’ twins

The sisters are offering up themselves in a fundraiser for their Class of 2004 Snohomish High 20-year reunion.

Support local journalism

If you value local news, make a gift now to support the trusted journalism you get in The Daily Herald. Donations processed in this system are not tax deductible.