In Our View: A Taxing Situation

While there is nothing new about governments offering incentives to companies in exchange for job creation, Boeing has elevated this little corporate game to an art form. In November 2013, during a special session called by Gov. Jay Inslee, the Washington Legislature orchestrated an $8.7 billion tax break spread over 27 years for the aerospace giant. Regarded as the largest incentive package ever offered to a company, the deal was contingent upon Boeing building the 777X in Everett.

And while Boeing apparently is living up to its end of the bargain regarding the 777X, the deal serves as an abject lesson in the give-and-take involved with tax incentives. The State of Washington giveth, and Boeing is happy to taketh while simultaneously seeking handouts from other states. Most recently, the company asked Oklahoma City for $6 million in job creation incentives last week to assist in the move of about 900 jobs to the city. Those jobs, many of them at least, are being transferred from the Seattle area.

Not that this is the first time Boeing has thumbed its nose at Washington. Last fall, the company announced it would move about 2,000 high-paying engineering jobs in its defense division from the Seattle area to Oklahoma City or St. Louis by 2017. It followed that by adding 700 more new jobs in Missouri. As The Washington Post reported in October: “Policymakers who feel they bent over backwards to accommodate the aerospace giant feel burned.” And, as now-retired state Sen. Adam Kline, D-South Seattle, said at the time: “There is an undercurrent of disappointment that rises in some folks, including me, to the point of anger at Boeing. This is the way Boeing thanked us. . . . We’ve been had.”

As mentioned, Boeing is the Picasso of tax breaks. McClatchy news service reported last month: “Boeing is the biggest winner of state and local tax incentives, receiving more than $13 billion of them, according to a nonprofit watchdog group that tracks the subsidies.” According to Good Jobs First, the Boeing subsidies make Washington the second-leading provider of tax incentives among states, behind only New York. “Boeing is playing the subsidy game at all levels of government,” said Phil Mattera, research director for Good Jobs First.

That might seem slightly selfish for a company that had a net income of $5.45 billion in 2014, yet we come here today not to bury Boeing. If local and state governments are willing to offer tax breaks, the company would be foolish not to seek them. If Boeing can play, for example, South Carolina’s desire to subsidize a plant against the desire of Washington to keep jobs in this area, well, that’s how business works. But Washington legislators who supported the $8.7 billion in tax breaks should view the 2013 special session as a teachable moment. State Rep. June Robinson, D-Everett, said: “It is by far the largest employer in my district and I don’t want Boeing to go away. I also know people in my district are losing jobs. I’d like to find a way to make the jobs stay.”

Robinson this year introduced House Bill 2147, supported by labor unions, in an effort to further tie the tax breaks to keeping jobs in the state. The bill is unlikely to gain any traction during this year’s special session, but it could provide a blueprint for future action. And it could provide a cautionary tale for future lawmakers.

Boeing has developed an expertise at the high-stakes game of tax incentives. Lawmakers should be wary of who they are sitting across from at the poker table.