Editorials

Boeing’s tax-break giveback to Washington state is smart, proactive - but not heroic

Boeing has been spiraling on a downward trajectory for over a year now, clobbered by a pair of 737 Max jet disasters, relentless media scrutiny and congressional inquiries, slashed airplane production and its first annual earnings loss in two decades.

So it was nice to see the Washington-born aerospace giant make a course correction Wednesday and change the negative narrative, if only temporarily.

Boeing asked the Legislature to suspend a controversial business-and-occupation tax break, worth at least $100 million a year, to defuse trade tensions with Europe. The jaw-dropping incentive was approved by lawmakers 17 years ago to keep thousands of manufacturing jobs in Washington. Then, in 2013, jaws dropped all the way to the floor when the handout was extended through 2040 for a grand total of $8 billion.

Some people might think Boeing is making a heroic sacrifice, but let’s take a deep breath and watch how it plays out. Boeing executives do nothing without a close eye on public image and shareholder interests.

When one is weaned on a steady diet of corporate welfare, it’s not given up easily or overnight.

This much is clear: Boeing took a smart, preemptive step to escape an international trade mess. The World Trade Organization raised the stakes last year with dual rulings against Boeing and its longtime European competitor, Airbus, determining that both were collecting illegal government handouts.

The tariff-happy Trump administration seized the opportunity to slap $7.5 billion in penalties on European imports. Under the rules of tit-for-tat trade warfare, it was inevitable that the European Union would eventually respond with WTO-sanctioned tariffs on Boeing jets.

That would be bad for Washington’s economy, and certainly Pierce County’s, where Boeing’s impact cuts deep. The top 10 list of local private employers for 2019 featured Boeing at No. 3 (1,550 jobs) and one of its key suppliers, Toray Composite Materials America, based in Frederickson, at No. 10 (565 jobs).

But averting retaliatory tariffs matters greatly well beyond the aerospace sector.

Europe is the second-largest market for Washington goods and services, behind only China, amounting to $12.2 billion in 2018 alone. The EU loves our wine and coffee, apples and cherries, fish and shellfish, and consumer products including video games.

“A new front in the trade war would be tough to absorb,” said Lori Otto Punke, president of the Washington Council on International Trade, in a statement Wednesday that supported ending Boeing’s tax break.

Indeed, it would be tough, and we’re glad Boeing is being proactive.

But heroism it is not. More like enlightened self-interest.

In fact, Boeing shrewdly included an escape hatch in the House and Senate bills introduced Wednesday by Rep. Pat Sullivan and Sen. Marko Liias: a provision reinstating the tax break if the trade dispute is resolved.

According to The Seattle Times, there’s also open-ended language in the state’s original 2003 deal with Boeing, essentially saying the company must be made financially whole if the subsidies are terminated for any reason.

So let’s assume Boeing sees its tax-break loss as strategic and temporary. That’s OK, because it opens the door for a renegotiation of any terms going forward.

Legislators should hold robust public hearings on the Sullivan and Liias bills. There should be a full reckoning of whether Boeing fulfilled its promises to the state by meeting production and employment benchmarks in the years since the incentive package was adopted.

And the Legislature should extract guarantees that the next new Boeing aircraft will be built in Washington, once the damage is finally controlled (keep your fingers crossed) from the still-unfolding 737 Max crisis.

Washington gave Boeing the richest corporate tax break by a state in U.S. history. Now the company, trying to withstand global trade pressures, tragic mistakes and institutional arrogance, wants to give it back.

It’s a gift the state should receive graciously but cautiously, with strings attached.

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