So, why should the state be giving Boeing a tax break in the first place?
It’s easy to see Boeing’s interest. In the most recent tax incentive package passed in late 2013, Boeing stands to receive $8.7 billion in savings as the terms of an earlier tax break in 2003 — which landed Boeing’s 787 in Everett — are extended 16 years beyond 2024 to 2040. But the state and employees of Boeing and other aerospace companies also stand to benefit.
The state made the deal because, in exchange for the $8.7 billion in tax breaks, Boeing agreed to base its 777X production and wing assembly in Everett, which is expected to generate $20.1 billion in economic activity and $21.3 billion in revenue for the state from B&O, sales and other taxes, according to figures from the state Department of Revenue. And, the concern was, if our state doesn’t offer the deal, some other state or nation would.
Who wouldn’t make a deal that secures jobs, economic activity and tax revenue? But all of that is dependent on one thing: the jobs staying here.
Which is what has prompted legislation, proposed by Rep. June Robinson, D-Everett, that seeks to do what wasn’t done in the deal less than two years ago: tie the tax breaks directly to jobs. Robinson’s bill, which has not advanced since a March 13 hearing before the House Finance Committee, would scale back the tax incentives as jobs are moved out of state or eliminated.
Neither Boeing nor its unions, IAM and SPEEA, disagree that there has been a net loss of jobs since passage of the tax package in October of 2013. Boeing’s figures reported 83,295 employees in the state at the time. The most current figures available from late February show Boeing employment in the state at 80,241, a net loss of 3,054 jobs that understandably raises concerns.
But Boeing and its unions do differ on how Boeing is being held accountable. The unions want a direct tie between jobs and tax incentives as Missouri, South Carolina and Alabama did with their incentives. Boeing says its “work statement,” the commitment to base the 777X and its wing assembly unit here, holds it accountable. And, Boeing adds, its employment numbers since the earlier tax agreement in 2003, show a commitment to Everett and the state. In 2003 Boeing’s employment in the state was 53,000, representing a third of its global workforce. At its current level, Boeing’s employment in the state, even with the recent losses, has grown to represent half of its global workforce.
Little is likely to curb the tension between Boeing and its unions. Past strikes have raised doubts for Boeing. Boeing’s insistence that Machinists renegotiate their contract before it would agree to bring the 777X here raised doubts for the unions (and gave the unions ammunition in seeking to renegotiate the 2013 tax package.)
So, it’s up to the Legislature, in the interests of promoting industry and jobs, to act as the diplomat here.
Prospects for Robinson’s bill are doubtful. Even if it passes the House, it faces tougher scrutiny in the mostly Republican-controlled Senate. And time is tight between now and the end of the session.
The Legislature can do two things to encourage clear communication and a fair deal:
As we said earlier and has been recommended by the Citizens Commission for Performance Measurement of Tax Preferences, the state needs to better track not just the jobs involved in the aerospace tax incentives but also the other economic benefits they are supposed to provide.
When Boeing prepares its next update of one of its airliners — perhaps one that will depend on that carbon-fiber wing shop its building for the 777X — and seeks another extension of tax preferences, state legislators and officials need to be clear about what they expect in terms of accountability, whether that’s the number of jobs or Boeing’s work statement.
The relationship has to benefit all, Boeing, its employees and everyone in Washington.