Boeing tax breaks: Fighting over accountability

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Governor Jay Inslee signs a 2013 Boeing tax-breaks bill, flanked by U.S. Sen. Patty Murray.

When Washington gave the Boeing Co. $8.7 billion worth of tax breaks in late 2013, the corporation had 83,295 employees in the state.

In 2014, Boeing's average employment in the state fell, to 81,497. That's a loss of 1,798 Boeing jobs since the corporation received 2013's controversial extensions of several tax breaks originally enacted in 2003.

Boeing's threat to move production of the coming 777X airliner out of Washington prompted the 2013 legislative decision to extend the expiration dates on the existing tax breaks from 2024 to 2040 — extensions worth $8.7 billion over the extra 16 years. Boeing also said its main union had to agree to a revamped contract, which the International Association of Machinists and Aerospace Workers Local No. 751 grudgingly accepted on the second ballot attempt in January 2014.

All this has raised concerns among legislators about whether aerospace tax breaks are really creating or saving good jobs in Washington.

At a hearing Friday before the House Finance Committee, aerospace unions and individual workers from Boeing and subcontractor workers gave strong support to two bills to ensure workers here benefit from the tax breaks. The two bills fired up opposition from Boeing's management, leaders of aerospace subcontractors, and business organizations.

Rep. June Robinson, D-Everett, introduced one bill, which would trim away a little bit of Boeing's business-and occupation tax break -- essentially raising the company's B and O tax a little -- for every 250 Washington jobs that the corporation drops below the 83,295-worker baseline. That tax break would entirely disappear if Boeing's Washington employment drops below 78,295.

"This bill closes a loophole in the law that currently allows aerospace companies to receive lucrative tax breaks without having any net increase in employment," said Thomas Cafcas, a Seattle-based researcher for a Washington, D.C., think tank called Good Jobs First. He also told lawmakers that others states have given Boeing tax breaks with binding job-creation requirements, while Washington state does not attach specific goals with its tax exemptions.

Another bill, sponsored by Rep. Mia Gregerson, D-SeaTac, would link wages to tax breaks for the state's aerospace industry. In the first year after the bill's passage, all of a firm's aerospace supplier and subcontractor workers with at least three years on the job would have to be paid 80 percent of Washington's median hourly age for the company to be eligible for an aerospace B&O tax break.

In the second year after passage, a company's workers would have to make 90 percent of the state's median hourly wage for that year. And in the third and subsequent years, a company would have to pay workers with at least three years on the job an hourly wage that is at least equal to the state's median wage for that year, or lose the tax break. In 2013, the state's median wage was $19.67 an hour.

The House Finance Committee's staff calculated that 210 out of 380 Washington aerospace firms covered by this tax break currently do not meet the standard set by Gregerson's bill. Boeing pays considerably more than the standard.

Several veteran Boeing engineers and technicians expressed concern about the loss of jobs in the state. They testified that the company has been laying off highly experienced coworkers, while also making them train their replacements either in Washington or in other states. Barbara Hoyt, a 57-year-old information technology employee with 35 years at Boeing, told the committee about getting a raise and a lay-off notice almost simultaneously, while also being ordered to train her replacement prior to mid-April.

Engineer Tom Gendzwill with 26 years at Boeing testified, "I agree with the tax incentives that went to Boeing. I really do. But I believe they should be tied to some accountability."

Bill McSherry, Boeing's vice president for local and state government affairs in the region, told the committee that the corporation has been getting an unfair image from its local critics, saying the complaints have focused only on the past year or so. "It is inaccurate and misleading to view our relationship (with Washington) through such a narrow lens," McSherry said.

He said Boeing's Washington employees have grown dramatically from 53,000 to the current levels since the company first received the 2003 set of tax breaks. And he said Boeing has grown more in Washington than in any other state during that time. "The biggest problem on the Everett side is parking," McSherry said.

McSherry, Kris Johnson, president of the Association of Washington Business, and others argued that changing the legislative agreements on tax breaks would undermine trust in Washington's government, scaring businesses away. "It sends the wrong message that Washington won't stand by its commitments and agreements," Johnson said.

Finance committee member Rep. Chris Reykdal, D-Olympia, countered that Boeing forced its machinists union to renegotiate the existing contract in the company's favor in 2013 with the threat of moving the 777X work out of state.

Leaders of small aerospace firms described Gregerson's bill as forcing a minimum wage on their industry that is significantly higher than the minimum wage for the rest of the state. They said many of subcontractors would be unable to pass their extra costs along to Boeing and other customers. Tim Morgan of TTF Aerospace of Auburn said, "The whole idea of passing a (higher) minimum wage for aerospace seems punitive to me."

A few aerospace subcontractor employees testified in favor of Gregerson's bill, describing living from paycheck-to-paycheck on their wages. Richard Hopkins from AIM Aerospace in Sumner joined that company after being laid off elsewhere. He said, "It was hard for me to work for lower wages, but I needed the job."


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About the Authors & Contributors

John Stang

John Stang

John Stang is a freelance writer who often covers state government and the environment. He can be reached on email at and on Twitter at @johnstang_8