Quid pro quo.
The Latin term generally means “something for something.” In Washington state it often means “tax breaks for jobs.” At least that was what many thought it meant in late 2013 when the Legislature and the governor passed tax incentives worth about $8.7 billion over 16 years in exchange for Boeing’s promise to build the 777X and its wings in Everett and keep its jobs in the state.
Boeing, indeed, is building the 777X here, but the disappointment was sharply felt when only months later it announced it would move about 1,000 engineering jobs for other aircraft lines in Western Washington to California. In moving the jobs to California, Boeing said employees could apply for the work in that state or it would look to employ displaced workers elsewhere in the area but with no guarantees of employment.
The state, in offering the tax package, left a loophole that allowed Boeing to bring new jobs here with one hand while moving out existing jobs with the other.
Which brings us to the term “clawback,” which must be Latin for “payback.”
Legislators now are seeking to claw back some of the incentives to ensure the state sees a net gain in jobs from Boeing and other aerospace companies taking advantage of the tax incentives. State Rep. June Robinson, D-Everett, is expected to propose legislation this week that would scale back Boeing’s tax breaks if it trims employees here to move jobs elsewhere. A second bill, House Bill 1786, would require aerospace companies, many of them Boeing suppliers, to pay veteran employees a minimum of $53,000 a year — about $25 an hour — or lose their tax breaks.
Robinson’s bill, depending on the details, could be worth consideration, but the other bill may be sinking its claws in the wrong back. The intent of the tax incentives was to keep jobs in the state, not to set payroll policy for smaller aerospace companies.
In trading tax breaks for jobs, state officials should be able to identify the benefits the state is getting in return for incentives that, in the end, are subsidized by taxpayers. Fortunately, there’s a method for doing just that.
In October, the Citizens Commission for Performance Measurement of Tax Preferences, a five-member committee established by the Legislature in 2006 that reviews tax preferences, said the state needed a clear means of assessing what it was getting for its $8.7 billion. But in order to complete that work, the commission advised, the state needs to develop ways of measuring and tracking the jobs that the incentives are supposed to foster. As yet, that hasn’t been done. No doubt, such a study would require that some state agency, and perhaps the commission itself, be provided the resources to do that work.
Legislators can look at ways to make sure the state gets enough quid for its quo. And those negotiating for the state need to be specific about what they expect out of such deals before they have to claw back any tax breaks. But the state also has work ahead of it to establish methods to measure the costs and benefits of trading billions in taxpayer subsidies for jobs.