Feb. 22, 2016, © Leeham Co.: A group of Democratic legislators in Washington State will introduce five bills aimed at repealing some tax breaks and also taking yet another run at holding Boeing’s feet to the fire by tying jobs and tax breaks. The latest effort died in committee this year. This is the second year in a row by Boeing’s two key Washington unions, SPEEA (engineers) and the IAM 751 (touch labor) to get a bill out of committee to tie jobs to tax breaks. Boeing opposes the effort.
Most of the bills relate to non-aerospace industries. Two, however do:
New aerospace accountability bill (Rep. June Robinson, D – Everett)
This new legislation would tie Boeing’s tax preference to in-state jobs. To maintain eligibility to claim the aerospace preferential B&O rate, Boeing would be required to make a contribution to the state education legacy fund equal to $2,500 for each lost job below a baseline of 83,295 Washington jobs — the company’s in-state employment at the time of the 2013 aerospace tax package.
Repealing sales tax exemption for purchases of large private corporate airplanes (Rep. Noel Frame, D – Seattle)
In 2013, the Legislature created a sales tax exemption for large private airplanes and repair, cleaning, retrofitting, etc. of such planes. This bill would eliminate the sales tax exemption for the purchase, repair and retrofitting of large private airplanes by corporations. The preference would be maintained for sales to individuals and for repairs, cleaning, etc. on individual airplanes. Corporations will no longer claim a tax break when they buy a corporate jet.
The first bill makes sense. Boeing is subject to jobs-for-tax breaks in other states. Why not here? However, based on the description above, this bill is too broad. The referenced tax breaks were for the 777X program. After the tax breaks, Boeing announced job transfers to other states (which also provided tax breaks in many cases). It also announced that some 777X engineering jobs were assigned to its St. Louis plant, where defense business was shrinking.
As a Washington State resident/taxpayer, I absolutely believe in the principal of jobs-for-tax breaks. Locating 777X jobs (in this case) outside Washington strikes me as not living up to the spirit of the intent of the tax breaks.
At the same time, from Boeing’s perspective, when one segment of its business is in decline (defense, in this case), it is desirable to spread work around so those skilled persons affected can be maintained with meaningful work that keeps their skills intact. In this case, I believe the spirit of the tax breaks called for Boeing to keep all the 777X jobs here and if this skill-shift was necessary, other programs might have been a better choice.
There is also a need for Boeing (among others) to have flexibility to make personnel adjustments as economic and strategic decisions warrant.
It’s a difficult issue. Based solely on the description above, it appears this bill needs some work.
The Corporate jet bill, on the other hand, is ill-advised.
These tax breaks were added after years of watching corporate jet refurbishment avoiding Washington and going elsewhere because of Washington’s tax burden. Specific examples of a company in Moses Lake, where efforts are underway to develop another aerospace cluster, were given to legislators kin which a Boeing MD-80 was being converted from airline to corporate use. It’s not too many individuals that actually own a former airliner as a corporate jet (Paul Allen and Donald Trump being high-profile exceptions).
Boeing’s BBJ business includes heads of state, and apparently these are exempt from taxation under the proposed bill described above. But corporations also buy Boeing’s 737-based BBJs, which competed with the Airbus A320-based ACJ.
It took several years for this tax break to become law. It’s a bad idea to reverse this one now.
Trump on Boeing
The spectacle of Donald Trump as he is running for the Republican nomination for president has been truly appalling. Now he’s weighed in on Boeing’s plan for a completion center in China, while campaigning in South Carolina, where Boeing has its second assembly line for the 787. If Boeing proceeds with the completion center, it’s “outta here,” he told South Carolinans. No such thing would happen while he was president, Trump declared.
What a blow hard.
Once more, Trump demonstrates that he hasn’t a clue what he is talking about. As I made clear in this column at the time (linked above), Boeing has no choice but to play the Chinese game, as does Airbus.
Further, suggesting that Boeing would be “outta here,” is preposterous.
Trump’s self-importance knows no bounds. John Kasick is the most reasonable (and rational) Republican running for the nomination. It’s too bad he’s not getting more traction.