Business, Industry Leaders Say Aerospace Tax Incentives Would Harm Competitiveness

Business, Industry Leaders Say Aerospace Tax Incentives Would Harm Competitiveness

Following the announced layoffs of hundreds of Boeing workers, state lawmakers are considering two bills during the special session that would link job quotas to eligibility for certain tax incentives related to the aerospace industry.

Proponents of HB 2145 and HB 2146 say the legislation would ensure taxpayer accountability and discourage further job outsourcing by Boeing to other states or countries. However, Washington industry and business leaders warned at a May 2 public hearing of the House Finance Committee that the new requirements would only inhibit further development of the state’s aerospace industry.

The Future Of Incentives For Aerospace Industry

Since 2003, the state legislature has approved numerous tax incentives related to the aerospace industry and commercial airplanes, including business and occupation (B&O) rate reductions and B&O tax credits. These incentives were extended by the legislature in 2013 for 16 years – from 2024 to 2040.

Yet despite these incentives, companies such as Boeing have been criticized for continuing to issue significant voluntary and involuntary layoffs. Boeing executives have argued their actions are necessary to maintain competitiveness with foreign rivals that receive government funding.

State Rep. Noel Frame (D-36) is the primary sponsor of HB 2145, which is cosponsored by 29 other Democrat lawmakers. The bill stipulates that a major aerospace company such as Boeing must employ 70,000 full-time workers to receive the tax incentives, though it provides exceptions in the event of a national economic downturn. If the minimum baseline is not met, tax incentives are diminished based on the actual employment figures; the incentives are eliminated entirely if jobs are fewer than 67,500. Additional state revenue generated as the result of lost tax incentives would go toward basic education and a new small business tax credit account.

Frame: Legislation Is About Taxpayer Accountability

Frame told colleagues at the May 2 public hearing that “for me, this is a matter of taxpayer accountability. The original tax incentive bill was intended to retain and grow jobs.”

“I do not feel like I can stand by and do nothing,” she added.

Similar is HB 2146, sponsored by State Rep. Richard DeBolt (R-20) and cosponsored by State Rep. Cary Condotta (R-12). It sets an employment baseline of 75,000 employees, but uses a slightly different calculation formula than HB 2145. New state revenue would go toward the State Need Grant and several newly created accounts.

Condotta told colleagues that the bill was crafted to take a “different approach based on prior hearings and information we got from those hearings in terms of how the industry is very dynamic. What we wanted to look at is over a period of time what the averages were.”

“This is just a different approach, a softer approach,” he added. “But we’re still very concerned with what we want to hear today. Is the overall industry shrinking? Or is there actually a movement of jobs from Washington to other places and why are we losing and shedding so many jobs in this area?”

Proponents included Jason Chan, a Boeing engineer who works at the company’s Renton facility. “I’ve watched jobs of my brothers and sisters be sent to Oregon, Texas, Utah, Missouri, Arizona and South Carolina, to name a few states.”

“When we violate a company policy or our contract, there are repercussion,” he added. “That’s Boeing’s recourse. When Boeing violates the intent of the incentive extension to grow and maintain aerospace jobs, where’s our recourse?”

Business Leader Warn Of Industry Competition

However, Washington Roundtable Vice President Neil Strege warned committee members that “today, competition in the airline industry is intense and growing,” referring to government subsidies in both Europe and China that boost their ability to compete.

“Both of the bills before the committee today will increase Boeing’s costs of doing business, harm Boeing’s competitiveness, and ultimately hurt Boeing employees and Boeing’s future in Washington state,” he added.

Also testifying against the bills was Jim Lee, sales and marketing manager for Tool Gauge, a Tacoma-based aerospace parts company. He told the committee that “our state’s ongoing support for the aerospace industry is key to our growth. We fear that if the aerospace support is diminished, Boeing will be forced to tap into an even lower cost supply base elsewhere to remain competitive with Airbus. That would have a negative impact on our business.”

How To Keep Boeing In Washington State

The bills also drew criticism from local government officials such as Tukwila Mayor Allan Ekberg. Tukwila is located adjacent to Boeing’s Renton facility.

Ekberg cautioned committee members to “… think about the future, think about what could or could not happen. They’ve (Boeing) announced that they want to bring a new airplane to flight – the 797 – we want to be in the driver’s seat to win that competition. Let’s not turn them away with these types of house bills…let’s stand behind Boeing. And let’s bring the 797 home.”


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