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Boeing benefits from state tax incentives

Boeing disclosed last week that last year it saved $242 million thanks to Washington state’s aerospace-industry tax incentives. That’s $63 million less than its state tax savings in 2015.


May 28, 2017
By Seattle Times

The major elements of the tax savings were:

• $100 million from the 40 per cent reduction in the Business & Occupation (B&O) tax rate.

• $82 million from B&O tax credits for activities related to setting up production equipment for the new 777X and the 737 MAX jets.

• $23 million in a Sales & Use tax exemption for the purchase of construction material.

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Boeing did not disclose how much tax it actually paid in Washington state, but a portion of the taxes paid can be deduced.

The $100 million tax saving from the 40 per cent reduction in the B&O rate implies that Boeing would have been due to pay $250 million, before applying the reduction and the $82 million in tax credits.

The result is that Boeing must have paid $68 million in B&O taxes, by far the largest portion of its total state and local tax bill.

Because the regular B&O tax rate is 0.484 percent of total revenue, these figures also imply that Boeing’s 2016 revenue earned in the state was $51.7 billion.

That’s 55 per cent of the company’s total 2016 revenue of $94.6 billion, of which $65 billion was from commercial airplanes.

Boeing disclosed the figures ahead of the holiday weekend, when the news is likely to get less attention.

The jetmaker’s savings from the tax incentives have become controversial as it has steadily cut its workforce in the state since the fall of 2012.

During 2016, Boeing eliminated almost 7,400 jobs in the state, mostly through attrition.

And that trend is continuing this year. Through March, Boeing data show it has cut a further 1,241 jobs.

When the April and May numbers are added, the figure will jump sharply. In April, 1,000 machinists who accepted a company buyout offer left the workforce.

In releasing the tax savings data, Boeing made the case that its contribution to the state economy warrants the tax relief.

The company said it invested a total of $13.5 billion in the state in 2016, counting its payroll; its purchases from in-state suppliers; its capital spending; its payment of state and local taxes; as well as $32 million in community charitable donations and $35 million in college tuition for state employees.

Boeing’s capital investments in Washington include upgrades to the Renton site to facilitate 737 production rate increases and 737 MAX production; ongoing 777X infrastructure additions in Everett and Frederickson; and modifications and improvements for additive manufacturing processes and equipment at multiple production sites.

“The $13.5 billion Boeing spent in Washington last year reaffirms that the aerospace tax incentives are working as envisioned,” Bill McSherry, vice president of government operations at Boeing Commercial Airplanes, said in a statement. “We continue to invest in our future here.”

Boeing is required to make the annual tax-savings disclosure after The Seattle Times last year challenged and successfully reversed an initial ruling by state officials that the information would not be made public for a decade.

Consequently, Boeing’s tax savings over the past three years are now known. Before last year, it saved $217 million in 2014 and $305 million in 2015.