Incentives Watch: Boeing Tax Credits Don’t Fly with Unions

Let this figure roll around in your head for a minute: $8.7 billion. It’s the approximate gross domestic product of Malta and the amount that PetSmart was recently sold for. In late 2013, Boeing received $8.7 billion in tax incentives from Washington state, the largest ever tax incentive from a state government. Two of Boeing’s labor unions, however, are now saying that those tax credits should have some prerequisites.

The International Association of Machinists District 751 and the Society of Professional Engineering Employees in Aerospace (SPEEA) are working together to craft legislation that amends the tax credits granted to Boeing. The bills would propose that Boeing would have to do two things to continue to receive tax credits: maintain a certain number of jobs in Washington and pay aerospace workers higher wages. Boeing has already moved 2,000 aerospace jobs out of Washington and plans to move 6,000 more jobs, according to the SPEEA newsletter. In addition, over 7,600 aerospace workers in Washington make between $9 and $15 an hour.

The Boeing tax credit bill, which extended the sunset date for Boeing’s tax credits from 2024 to 2040, was not contentious in the state legislature. It passed by an overwhelming majority, in both the House and the Senate, just one day after being introduced. Two days later, the bill was signed by Gov. Jay Inslee. Although one of the stated purposes of the Washington bill is to maintain and create jobs, the bill does not contain any employment requirements for Boeing to continue to receive the credit. The deal created a stir with the European Union, who filed a complaint with the World Trade Organization protesting the tax incentives.

Interestingly, Boeing also recently agreed to a deal with Missouri worth up to $229 million in tax incentives. The size of the incentive depends on the number of jobs created or maintained in Missouri. Boeing would receive the largest incentive for creating at least 2,000 new jobs in Missouri and a smaller incentive if it maintains its current number of jobs in Missouri. However, Boeing would still receive tax incentives in Missouri as long as they do not shrink the number of jobs in Missouri by more than 2,000.

Although the Boeing tax credits are not without controversy, it’s unclear what other options Washington may have had when asked to extend the incentives. Boeing is Washington’s largest employer and has a great deal of history with the state. As we’ve seen with various automotive companies in Michigan and Nike in Oregon, when a company has such strong ties to a state, it’s difficult for the state to refuse tax incentives.

Continue the discussion on LinkedIn: Should tax incentives granted to companies be tied to job creation?

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