Washington: Tying aerospace tax incentives to jobs is easier said than done

In 2003, lawmakers created the aerospace tax preference package, and in October 2013, Washington lawmakers passed a bill that was designed to persuade aerospace companies to make long-term commitments to maintain and grow jobs in their industry. It did this in two ways:

• By extending the expiration date of aerospace tax preferences by 15 years, currently set to expire on July 1, 2024.
• By expanding the sales and use tax exemption for the construction of new facilities that are used to manufacture superefficient airplanes, including the construction of new facilities used to manufacture commercial airplanes or the wings or fuselage of commercial airplanes.

According to the Department of Revenue’s fiscal note attached to the bill, lawmakers estimated that between 2011 and 2013, the tax incentives would save the aerospace industry $168 million annually. Most of this was by way of reductions and credits related to the Business & Occupation tax, though the sales and use tax exemptions accounted for almost $5 million. It was also predicted that general fund revenue would be reduced by $9 million in fiscal year 2016, and that local jurisdictions would lose $3.7 million in the same year. 

Just after Gov. Jay Inslee signed the bill into law, an opinion columnist at US News & World Report noted that Boeing, the mega-manufacturer best known for building huge aircraft, and the sole beneficiary of the $8.7 billion package of tax breaks, had received “the largest subsidy any state or local government has given to a single company in U.S. history.” According to the article, lawmakers crafted the “heap of tax breaks” to ensure that Boeing would build its new jet, the 777X, in Washington, because the company said that it would "pursue other options if the state legislature didn't play ball.”

Since then, many have criticized Boeing for accepting the tax incentives while moving jobs out of state. For example, in October 2014, the Washington Post reported on the company’s announcement that it planned to relocate about 2,000 high-paying engineering jobs in its defense division from Seattle to Oklahoma City and St. Louis by 2017. Boeing also intends to build significant portions of the wings and tails for its new 777X jet in St. Louis, creating about 700 more new jobs in Missouri. Technically, these movements are unrelated to the tax breaks, because the planes will be finished near Seattle, but at least one lawmaker felt cheated, declaring “[w]e’ve been had.”

In November 2015, HeraldNet revealed that the company had shed 3,619 jobs, many of which were moved from Washington to states where Boeing can get additional tax breaks by increasing employment.

Lawmakers attempt to mitigate the job losses, unsuccessfully

Unhappy with the jobs situation, Rep. June Robinson introduced House Bill 2147 about a year ago, but it did not pass. When addressing Boeing’s September 2015 announcement that it was moving more jobs from Washington, this time to China, she described her bill as one that would have gradually taken away the tax incentives when jobs left the state, making the tax breaks contingent upon meeting certain job standards. She characterized her plan as a “simple, common sense idea” similar to those already in place in South Carolina and Oklahoma.

Similarly, another effort, House Bill 1786, has gone nowhere. Calling out the fact that lawmakers have imposed no requirement conditioning tax breaks to job creation and/or retention, TheStand.org encouraged them to reverse the “failures of legislative courage…by ensuring that the billion dollar aerospace tax breaks are tied to keeping good-paying jobs right here in Washington.”