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;; 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

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