Following Recent Layoffs, Two Bills Threaten Boeing Tax Break

The aerospace company has eliminated 7,500 Washington state jobs in the last year. If the layoffs continue, say some Republicans and Democrats, the state should curtail the 2013 deal.

OLYMPIA — As its Washington workforce shrinks, the Boeing Co. is again fending off lawmakers seeking to take back the multibillion-dollar tax break they gave the aerospace giant in 2013.

And now a handful of Republicans are engaged alongside liberal Democrats in this effort.

On Tuesday, a House committee conducted an hourlong public hearing on two bills requiring the company to maintain a minimum number of jobs in the state to receive its entire tax break.

Aerospace workers and their supporters called the legislation a necessary response to Boeing’s purge of nearly 13,000 jobs since lawmakers extended the suite of tax incentives to Boeing in order to land the 777X program.

Meanwhile those incentives enabled the company to avoid $305 million in tax payments to the state in 2015. Because they are in place until 2040, the projected savings for Boeing and the rest of the industry could reach $8.7 billion.

“My question to you, as stewards of the public trust, is what have we gotten in return?” Brian Metz, one of the laid-off workers, testified to the House Finance Committee. “What percentage of jobs is acceptable?”

A Boeing executive contended the company is upholding its end of the 2013 deal and any changes would hurt the company’s competitiveness.

“The 100-year bond between Boeing and Washington is longer and more mutually beneficial than perhaps any other in the country,” said Bill McSherry, vice president of government operations for Boeing Commercial Airplanes.

He noted the company’s $13 billion of investments in the state in 2015 and, since then, in excess of $1 billion in the 777X composite wing center in Everett.

“Boeing has kept its word to Washington,” he said.

Civic leaders spoke against the bills, saying any changes would hurt the economies of their communities where Boeing and other aerospace firms flourish. And owners of aerospace suppliers said they worried changing the rules would drive up their costs of doing business.

The International Association of Machinists and Aerospace Workers District 751 and the Society of Professional Engineering Employees in Aerospace lobbied lawmakers to extend the tax breaks in 2013 thinking it would preserve, and even increase, their ranks. Union leaders never envisioned the number of jobs lost since then. They now are leading the effort to rewrite the law.

“When Boeing violates the intent of the incentives extension to grow and maintain aerospace jobs, where is our recourse?” said Jason Chan, president of Machinists Local 751A. “That’s why there needs to be tax incentive accountability.”

This is the third straight year this committee has considered claw-back legislation. In 2016, the panel voted down a bill sponsored by Rep. June Robinson, D-Everett. One Democrat joined Republicans in opposing the legislation.

Committee Chairwoman Kristine Lytton, D-Anacortes, said she didn’t know if she would bring either bill discussed Tuesday up for a vote.

They both take aim solely at Boeing and link the number of jobs it maintains in the state with the tax break.

House Bill 2145, sponsored by slew of Democrats, sets the bar at 70,000 employees in any calendar year. The company reported having 70,640 workers in Washington as of March 30.

The company would lose half its tax break — which means its tax rate would climb by 50 percent — if the employment level is between 67,500 and 70,000 jobs. If it dips below 67,500, the tax break would be gone.

In that situation, half the additional tax revenue collected from Boeing would go to help fund public schools and the other half to assist small businesses.

Rep. Noel Frame, D-Seattle, the prime sponsor, cited the loss of roughly 7,500 jobs since January 2016 as “extraordinarily upsetting to me. I do not feel I can stand by and do nothing.”

House Bill 2146 crafted by Republicans requires Boeing have a monthly average of 75,000 employment positions from July 1, 2017 through Jan. 1, 2024. If it fails to do so, the tax break would go away on July 1, 2024.

Any new tax receipts would be spent on college scholarships, career and technical education, tax credits for small businesses and assistance for laid off workers in this bill.

“We have concerns and this is just another approach,” said Rep. Cary Condotta, R-East Wenatchee, who is a co-sponsor of the legislation.

In both bills, if the Department of Revenue and Employment Security Department determine the decline in jobs is due to a national economic downturn then the tax break will remain in effect.

Snohomish County Executive Dave Somers and Everett Mayor Ray Stephanson sent a letter to Lytton opposing the bills. Les Reardanz, chief executive officer of the Port of Everett and Patrick Pierce, chief executive officer of Economic Alliance Snohomish County also signed.

The economy in Snohomish County “has been built around a strong aerospace presence, and we are concerned that these discussions may hinder our ability to attract new airplane programs in the future,” they wrote.

“Rather than talking about reopening a deal that is already working for Washington, we ask that you focus on the approaching challenges and potential for a new airplane program in the state,” they wrote. “Changing the aerospace industry tax incentives casts doubt on the state’s willingness to honor its commitments and puts thousands of jobs at risk.”

Jerry Cornfield: 360-352-7623; jcornfield@heraldnet.com. Twitter: @dospueblos.

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