House bill ties aerospace tax breaks to higher wages

OLYMPIA — Aerospace companies benefiting from the state’s generous tax breaks must share the financial rewards with their workers through higher wages, lawmakers were told Monday.

But executives of companies in Everett and Mukilteo warned that doing so could make them less competitive and cause them to forgo incentives that have helped each firm expand in recent years.

The competing views emerged in a legislative hearing on a bill that specifically ties the level of wages with a company’s eligibility for a tax break. It marked the first time this session — though maybe not the last — in which lawmakers consider ways to demand more in return from firms receiving tax incentives.

Under House Bill 1786, companies would have to pay veteran employees at least the state’s median wage — now hovering around $20 an hour — in exchange for paying a lower tax rate for manufacturing, wholesaling or retailing of commercial airplanes and receiving a tax credit for aerospace product development.

Leaders of the two largest aerospace worker unions — the International Association of Machinists and the Society of Professional Engineering Employees in Aerospace — called it a reasonable approach.

They said the bill will ensure the tax breaks help the industry grow and provide good-paying jobs as intended at the time they were approved by the Legislature.

“We strongly support the tax incentives,” IAM Local 751 President Jon Holden told members of the House Labor Committee.

The union’s motivation is to raise the standard of living of workers at those companies that are subsidized by the taxpayer, he said.

Surveys conducted by the two unions found roughly a third of aerospace workers are locked into jobs paying less than $15 an hour, he said. Many of them rely on food stamps and subsidized child care to get by.

The bill, as now written, ties wages to the state median for a one-income family as calculated by the U.S. Census Bureau. That was $52,384 in 2013. Holden said they would like to the wage tied to a different calculation that could result in a slightly lower wage of around $19.67 an hour.

If a single employee does not earn the standard in any year, the company loses its entire tax break, according to the bill. A firm can get it back the following year if it complies.

Executives of Aviation Technical Services in Everett and Electroimpact in Mukilteo said if the bill passes it would be too costly and their companies would not seek the tax breaks.

“If we are forced to raise all our wages to that standard … we could not compete,” Gabe Doleac, ATS senior vice president of strategy and commercial programs, told lawmakers.

Losing the incentive, however, wouldn’t drive them out of state, he said after the hearing.

“We would opt out. We would not look to leave the state,” he said. “But not having that tax incentive would be a deterrent to further growth and expansion in the state.”

House Bill 1786, sponsored by Rep. Mia Gregerson, D-SeaTac, is one of two bills looking to add conditions on receipt of tax breaks.

A second bill that could be introduced this week will reportedly focus solely on the Boeing Co. It would take away some of its tax break if it trims its workforce in the state by a certain number of jobs.

Unions representing Machinists and engineers, and their supporters in the Legislature, say the state gave Boeing too good a deal when it extended tax breaks in 2013 to secure the 777X program in Everett. Those tax breaks could save the aerospace giant as much as $8.7 billion in taxes through 2040, yet the firm can still ship jobs out of state.

Rep. June Robinson, D-Everett, is expected to be the prime sponsor.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com.

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