Boeing says it saved $305M through state tax breaks in 2015

  • By Jerry Cornfield and Dan Catchpole Herald Writers
  • Friday, April 29, 2016 5:59pm
  • Local News

OLYMPIA — The Boeing Co. slashed its 2015 state tax bill by $305 million thanks to nearly no-strings-attached tax breaks rushed through a Legislature worried the big company would stop making big jets here.

This revelation — the first of its kind of the company — likely will reignite debate on whether Washington taxpayers gave up more than they are getting from the biggest state tax break for corporations in U.S. history.

Boeing saved big because it spent big — an estimated $13 billion in the state last year. Most of that spending was salaries and wages, purchases from local suppliers and capital investments for the new 737 MAX and 777X airplane programs, the company said in a news release Friday.

Supporters say the tax breaks, first approved in 2003, helped Boeing boost Washington’s economy, benefiting the state overall. Critics say Boeing reaped rewards while moving jobs out of state and that Olympia could better serve business — and citizens — by rebuilding roads and bridges, and investing in classrooms, rather than slashing corporate tax rates.

Either way, it is a win for transparency advocates. It is the first time taxpayers have seen how much Boeing benefited from state tax breaks for aerospace companies. While Boeing reaped the biggest reward, more than 400 aerospace companies benefit from the tax breaks.

Boeing released the amount Friday, ahead of a required filing next week with the state Department of Revenue. The agency plans to make the reported figures publicly available, as required by a 2013 law.

Boeing and the revenue department initially opposed disclosing the tax savings. Department of Revenue officials initially said that the requirement wouldn’t take effect for aerospace industry tax breaks until 2025. However, the department reversed its position after The Seattle Times appealed.

The rule requires firms to tell the state how much they save from each of the tax breaks they claim.

Boeing saved $305 million last year, including $106 million from a lower business-and-occupation tax rate, $106 million for a pre-production tax credit and $51 million from sales taxes waived for purchases of construction materials.

“This is a good news story,” Bill McSherry, Boeing Commercial Airplanes’ vice president for government relations, said in the news release. “Within the billions Boeing invested here last year are hundreds of millions of dollars in taxes paid to the state and local governments in Washington.”

The total includes $40 million in community contributions and more than $30 million in tuition for Boeing employees going to school, the company said.

Last year, Boeing delivered 718 jetliners assembled in Washington. Boeing workers also produce several components for jetliners here, such as 787 tail sections and overhead stow bins for all Boeing jets.

Washington passed the aerospace tax incentives 13 years ago as part of efforts to convince Boeing to assemble its 787 Dreamliner in Everett. The incentives were set to end in 2024. Boeing did not lose the tax breaks when it decided to open a second 787 final assembly line in South Carolina.

During an emergency session in November 2013, lawmakers extended the incentives through 2040. At the time, they worried that Boeing would go to another state to assemble its newest jetliner, the 777X. The extended tax breaks are expected to cost the state $8.7 billion in tax revenue. That would make it the biggest corporate tax break in the country’s history, according to Good Jobs First, a nonprofit research group that tracks tax incentives nationwide.

The extension tied the incentives to the 777X assembly line in Everett but did not tie them to job numbers. Since they were extended, Boeing’s Washington workforce has dropped by more than 5,600, and the company is currently cutting 4,500 jobs, most in this state.

“Boeing has a strange way of saying ‘thank you’ to Washington taxpayers,” said Bill Dugovich, spokesman for the Society of Professional Engineering Employees in Aerospace (SPEEA), which represents more than 20,000 Boeing engineers and technical workers.

SPEEA and the International Association of Machinists and Aerospace Workers (IAM), which represents more than 30,000 Boeing workers in Washington, have lobbied Olympia to add teeth to the tax breaks.

Last year, the company’s workforce here dropped by 1,520, while taxpayers effectively gave Boeing $305 million, said Jon Holden, head of the Machinist union’s District Lodge 751. “You don’t need an M.B.A. to figure out that’s a really bad return on our state’s investment of tax dollars,” he said.

Democratic Gov. Jay Inslee is “frustrated” by the job losses, his spokeswoman, Jaime Smith, said Friday.

Despite his official irritation, Inslee has not supported or encouraged lawmakers’ efforts to tie the tax breaks to jobs or other criteria. Smith said Inslee believes some such a measure “is worth considering.”

The released data strengthens public debate over the tax breaks, said state Sen. Reuven Carlyle, D-Seattle. “Tax transparency matters,” he said.

The lost jobs and the projected $8.7 billion in tax savings are only one side of the equation, he said.

Boeing anchors Washington’s economy, he said. Voters have to “look at the long game and acknowledge the profound economic impact of $13 billion injected into our economy, making us really the global center of aerospace.”

According to federal data, state and local taxes are minor considerations for most corporations, making up about 2 percent of the cost of doing business, said Tom Cafcas, a Seattle-based analyst with Good Jobs First.

“If states are only focusing on that 2 percent, then they are missing that 98 percent that’s driving business decisions,” he said.

The state would better serve businesses and taxpayers by improving public education, reducing congestion and overhauling old port facilities, rather than simply slashing corporate tax rates, Cafcas said.

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

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