Several bills in the Legislature call into question one of the most difficult conundrums facing state and local governments these days — tax breaks for corporations.
House Bill 1786 and a proposal in the Senate would focus on forcing accountability for Boeing in the wake of the company’s $8.7 billion tax break from the state. In 2013, during a special session of the Legislature, lawmakers approved the deal in an effort to keep production of the 777X plane in Washington. Since then, according to Larry Brown, political director for Machinists District Lodge 751, the number of Boeing jobs in Washington has dropped from 83,295 to 80,199. And last week, Boeing officials notified employees that, “There likely will be layoffs in Puget Sound between April and September, with the initial round of 60-day notices being distributed to upwards of 75 of our team members on February 20.” While legislators might have successfully kept the 777X in Washington, they failed to include safeguards that would maintain other Boeing jobs in the area.
In this regard, Washington is little different from any number of states and cities, who routinely find themselves handing out tax incentives in the name of promoting jobs. This is problematic. As an investigation from The New York Times reported in December 2012, “states, counties and cities are giving up more than $80 billion each year to companies. … They rarely track how many jobs are created. Even where officials do track incentives, they acknowledge that it is impossible to know whether the jobs would have been created without the aid.”
If only those states, counties and cities could provide empirical evidence that such programs are effective. If only they could — as in the Boeing case — have the foresight to have a stick handy to keep corporations in line instead of simply offering the carrot of tax breaks.
Which brings up another question about incentives that is in front of the Legislature. In 2010, Costco spent about $20 million to urge Washington voters to pass Initiative 1183, which privatized liquor sales in the state. The Issaquah-based retail giant argued that competition among private companies would be good for consumers, but apparently that wasn’t good enough for Costco. Now, the company is supporting Senate Bill 5301 and House Bill 1343, which would eliminate a 17 percent distributors’ fee on liquor sold to restaurants by retailers such as Costco that act as unlicensed distributors. According to John Guadnola of the Association of Washington Spirits and Wine Distributors, fees and tariffs from unlicensed distributors have provided about $150 million to the state since 2012.
All of which presents a difficult situation for lawmakers. As giant corporations ceaselessly lobby for tax breaks, the question becomes what is best for the taxpayers. And that should be the overriding question. Incessant tax breaks for big companies have contributed to an economy that is increasingly difficult for the small businesses that form the backbone of a sturdy economy, allowing corporations to price small- and mid-sized businesses out of the market. Those tax breaks also benefit corporations that, in general, are seeing record profits while focusing upon their obligation to stockholders rather than the communities they inhabit.
In the end, lawmakers should view such tax breaks with a more jaundiced eye, ensuring that companies live up to their promises of more jobs and working to assist small businesses rather than helping big-money behemoths.