Boeing tax cut angers builders

By David Ammons

Associated Press

OLYMPIA — Washington voters may be asked to referee a tax battle between two titans of the state capital — Boeing and the state building industry.

At stake is a newly enacted multimillion-dollar unemployment insurance tax reduction for the aerospace giant — and an even larger increase for homebuilders and some small businesses.

The Legislature and Gov. Gary Locke recently approved House Bill 2901, which reduced the unemployment insurance tax rates paid by Boeing, restaurants, retailers and others who pay more into the state-run unemployment system than is paid out to their laid-off workers.

The bill jacked up the rates for homebuilders and a number of small businesses that traditionally cost the system more than the companies pay in.

The Building Industry Association of Washington, the state chapter of the National Federation of Independent Business and other critics are gathering signatures on a referendum. If they collect about 100,000 valid voter signatures by July 5, the new rate structure will go on the statewide ballot in November.

A "yes" vote would sustain the Legislature’s decision; defeat of the referendum would overturn the rate changes.

Sponsors are not challenging the portion of the bill that reauthorizes extended jobless benefits — up to 74 weeks — for laid-off aerospace workers who are retraining for other jobs.

Critics say lawmakers rolled over for Boeing and the machinists’ union and socked homebuilders and others with a big increase, while doing nothing to cut the costs of the system.

The BIAW calculates that the legislation cuts Boeing’s rates by $16 million over the next three years, while increasing rates on builders and others by $30 million.

"Boeing claims they deserve this tax break because they are paying too much," builders’ association President Dottie Piazza said. "They’re right. They are paying too much — every employer in Washington state is paying too much.

"But the answer is not to single out certain businesses for a special tax break and then increase taxes on other businesses. The answer is to reform Washington state’s expensive and inefficient unemployment insurance system, which is among the costliest and most generous in the nation."

Boeing should have worked on revamping the system for everyone, "instead of striking backroom deals," she said.

BIAW director Tom McCabe said his group’s members believe the government is giving Boeing a tax break at the expense of builders.

The BIAW has 9,000 member companies and employs 300,000 workers.

Carolyn Logue, head of the independent business federation’s 17,000-member state chapter, said Monday the state spends $76 million a year for benefits for people who voluntarily quit their jobs. She also noted Washington pays out 30 weeks of basic unemployment benefits, about a month longer than the national average.

Jobless benefits are based on the worker’s two highest paid quarters, not an entire year’s worth of earnings, boosting checks for construction, agricultural jobs and other seasonal workers, she said.

Boeing got the tax break through the "political extortion" of hinting they’d take some of their business elsewhere, she said.

The legislation was a "short-term political fix" that hurts some struggling businesses, while ducking any real changes to make the system more affordable for all businesses, Logue said.

"We need to decide whether we want a welfare system (for unemployed workers) or a safety net for people who are out of work for no fault of their own," she said in an interview.

But Boeing spokeswoman Chris McHugh said the legislation simply provides a measure of fairness.

She said the bill offered "the first step toward providing a more fair and equitable tax system for businesses, and for keeping the UI system solvent. The bill wasn’t intended to be a total reform of the system."

Tax equity was one of the central recommendations of the governor’s Business Competitiveness Council, and the legislation begins to achieve that, she said in an interview.

McHugh said Boeing’s near-term tax savings will be offset by paying some of the cost for additional benefits for its laid-off workers. "Over the long haul, if we remain successful, we will realize some tax savings," she said.

Stan Bowman of the Washington Restaurant Association said it wasn’t just a Boeing bill, since a number of companies, including some small businesses like he represents, benefit from rates that better reflect what their unemployed workers draw out of the system.

McHugh said Boeing is watching the referendum drive closely. If the measure makes the ballot, the company will decide what role it will play in the campaign.