When a corporation is willing — nay, eager — to give up tax breaks that save it hundreds of millions of dollars a year, perhaps those breaks were ill-considered in the first place.
That is the situation with Boeing, where legislation to roll back state tax breaks has added to a pattern of missteps as the company tries to regain its footing. We hope it is successful; a sturdy Boeing is essential to the economy and the identity of Washington.
On Wednesday, companion bills were introduced in the state House and Senate to remove tax breaks established for Boeing 16 years ago; in 2013, those breaks were extended during a special session of the Legislature in exchange for the aerospace giant assembling its new 777X plane in the state.
Boeing officials responded by adhering to the letter of the law if not the spirit. While they kept 777X production in Washington, they repeatedly moved other jobs out of the state. In total, state tax breaks saved Boeing $230 million in 2018; the breaks approved in 2013 are expected to save the corporation $8.7 billion in state taxes through 2040.
Now, in a twist that represents the convoluted nature of corporate tax breaks, Boeing officials are asking legislators to remove those tax breaks. That is a result of long-running litigation under the World Trade Organization involving Boeing and European rival Airbus. Boeing officials say removing the tax breaks will comply with WTO regulations and allow Boeing to avoid European tariffs, saving money in the long run.
“When enacted, this legislation will resolve the sole finding against the United States in the long-running trade disputes between Europe and the United States over government support for the production of large commercial airplanes,” Boeing said in a statement. “This legislation demonstrates the commitment of Washington — and of the United States — to fair and rules-based trade, and to compliance with the WTO’s rulings.”
Indeed, government subsidies given to Airbus tip the scales in the global marketplace. Given a level playing field, Boeing will be able to compete in the long run on the quality of its airplanes.
Getting to that place, however, will require much diligence and public relations work on the part of Washington’s largest employer. The company’s 737 Max remains grounded worldwide following crashes in October 2018 and March 2019. And Boeing officials announced this week that debris has been found in the fuel tanks of several undelivered planes and that all 737 Max airliners will be inspected.
“During these challenging times, our customers and the flying public are counting on us to do our best work each and every day,” Mark Jenks, leader of 737 production, wrote to employees. “That’s why we’re taking action.”
This follows the firing in December of CEO Dennis Muilenburg, who under the terms of his contract received a severance package worth $62.2 million. Muilenburg’s replacement, David Calhoun, will receive a $7 million bonus if he successfully leads efforts to attain federal approval and get the 737 Max flying safely again.
In other words, there has been a lot of chaos at Boeing, and that chaos affects the company’s thousands of vendors and suppliers throughout Washington. If company officials can prove that tax breaks are now burdensome and the corporation will benefit from their removal, lawmakers should agree.
But they might want to be more cautious in the future before handing out corporate tax breaks. There is a difference between breaks that benefit the state and those that are unnecessary.
