Tax incentive bill reveals economic ties

Tax incentive bill reveals economic ties
SB 6690 eliminates tax incentives for aerospace manufacturers in order to avoid potential tariffs. The Feb. 27 public hearing revealed the extent to which Washington companies depend on trade – and each other. Photo: freepik.com

The state legislature in 2003 enacted several tax incentives for aerospace manufacturers such as the Boeing. In a strange turn of events, the company is now asking state lawmakers to eliminate its preferential business and occupation (B&O) tax preference to help settle a trade dispute within the World Trade Organization (WTO) and avert a potential $22 billion in retaliatory tariffs from the European Union (EU).

The potential economic fallout resulting from those tariffs was on display at a Feb. 26 public hearing for the bipartisan-backed SB 6690 in the Senate Ways & Means Committee. Boeing Global Corporate Citizenship Vice President Bill McSherry said tariffs could be in place later this year, warning that “it would impact not just Boeing and our state’s robust aerospace industry but many other industries in Washington and the United States.”

That warning was backed up by testimony from a variety of industries testifying to the importance of protecting state exports.

“The issue at hand is such a crucial one for us,” McGregor Company Chairman Alex McGregor told the committee. “It’s so important that we reduce the risk of punishing tariffs that have already cost us dearly.” McGregor provides seeds and equipment for agricultural growers in the inland Northwest.

“A vibrant and healthy aerospace industry is essential for the retail industry to be vibrant and healthy as well,” Washington Retail Association Government Affairs Senior Vice President Mark Johnson said. “We think this bill is very important and necessary at this time.”

The connection between Boeing, which has more than 150,000 workers, and smaller employers was also emphasized by various individuals testifying, including Hobart Machined Products Owner Rosemary Brester who employs only 10 people.

“You have the big player in the room, and you have one of the smallest players,” Brester said. “This is a real serious problem that we have today facing all of us – retaliatory tariffs don’t help any of us.”

Also emphasizing the link between Boeing and other employers was bill sponsor and Senate Majority Floor Leader Marko Liias (D-21). He said that while his parents didn’t work in aerospace, “like thousands of Snohomish County families, my family’s fate economically was interwoven with the fate and the health of the Boeing company.”

Liias also noted Washington’s trade dependency, with one-third of jobs directly or indirectly connected. “Our economy is tied to international trade. We have to satisfy this dispute.”

However, the bill allows for those incentives to return if the U.S. and EU resolve their trade dispute and it “expressly allows the tax rates.”

While declining to comment on the bill itself, state Department of Commerce Director Lisa Brown told the committee the EU tariffs could hit a wide variety of products ranging from seafood to wine. “I believe we need to address the dispute and to offer a solution.”

Also co-sponsoring SB 6690 is Sen. Curtis King (R-14). Its companion bill, HB 2945 sponsored by House Majority Leader Pat Sullivan (D-47), received a Feb. 25 public hearing in the House Finance Committee and is scheduled for an executive session Feb. 27.

No further action is scheduled for SB 6690.

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