Governor Inslee's Testimony on Boeing Tax Breaks

On Thursday Nov 7, Gov. Inslee testified to the the House Finance Committee, chaired by Reuven Carlyle, in favor of extending til 2040 tax breaks for Boeing, in exchange for Boeing’s agreeing to build the 777X plane here in Washington State.

Inslee says the deal will be a net win for the taxpayers, due to increased economic activity, despite the loss of over $8 billion in direct tax revenue.

Inslee “said 56,000 jobs are at stake long-term at a time that aerospace jobs have been leaving the Evergreen State. His budget office also released a report showing the $8.7 billion tax investment would produce $21.3 billion in new state revenues over the period of 2024-40.” (source)

The bill includes claw-back provisions to make sure Boeing keeps production and other facilities in the state (in contrast to the previous agreement, which failed to prevent Boeing from moving its headquarters to Chicago and production lines to South Carolina).

In addition to the tax incentives, Boeing is asking for $10 billion in transportation infrastructure funding and a streamlined permitting process.  The $10 billion in transportation funding is something the House, as well as most drivers and businesses, have been pushing for. But Senate Republicans have been demanding changes to lower costs.

Boeing is also asking for concessions from the union (an end to fixed benefit pensions, increased health care premiums), in exchange for a $10,000 bonus, and labor cooperation (no strikes).

Is the Boeing deal a giveaway or a bargain for Washington State, which is short of revenue to pay for education and other needs? Does the deal represent a race to the bottom between states to the benefit of rich corporations, or is it a necessary step to keep jobs and economic activity in the state?

Dozens of people signed up to testify or to state their preference (Pro or Con) for the the bill. Only a few people said “Con.”  Even the liberal Budget & Policy Center and Our Economic Future Coalition weremostly  in favor of the deal.  The Budget and Policy Center says:

Unlike many previous tax breaks, this measure clearly states that the goal of these tax breaks is create and maintain aerospace jobs in Washington state. That’s important because, without clear objectives established by the legislature, auditors can have a difficult time determining whether or not a tax break is successful. The bill also instructs JLARC to review unemployment insurance and other relevant data source to conduct its evaluation.

This is a good start towards ensuring accountability, but more needs to be done.

JLARC is the Joint Legislative Audit & Review Committee, which makes recommendations to the legislature on budget matters, such as tax incentives. But the recommendations are nonbinding, and legislators need not act on the recommendations. One change would be to require the legislators to explicitly vote on the JLARC recommendations; otherwise they incentives would expire.  This idea is similar to Steve Zemke’s proposal for that the legislature adopt a biennial “Tax Expenditure Budget” so that tax incentives that are no longer serving their supposed purpose can be ended.