Locke Unveils Boeing 7E7 Tax Cut Wish List

Locke Unveils Boeing 7E7 Tax Cut Wish List
OLYMPIA - Gov. Gary Locke on Monday launched an 11th-hour bid for a major tax break for The Boeing Co., the state's largest private employer, if it agrees to build its next-generation jetliner here.

The tax package, available only if Boeing assembles the new 7E7 here, would be worth an estimated $2.4 billion over 20 years. It includes a 40 percent cut in business taxes, research and development tax credits and lower property taxes.

Locke said the state will more than recoup the tax breaks if Washington lands the new assembly line for Everett or Moses Lake, and perpetuates the state's aerospace industry, which anchors the manufacturing sector.

The governor also pleaded with lawmakers to slice unemployment taxes and to make the state's workers' compensation program cheaper.

"This is what we must do, to make the state of Washington competitive" for the new 7E7 plant, Locke said after a huddle with legislative leaders.

The special legislative session must adjourn by Tuesday night, and Locke wants to squeeze the Boeing package under the wire. Legislative leaders generally reacted favorably to the tax incentives, but said the unemployment bill is still on the bubble.

The state is making an all-out bid to win Boeing's newest assembly line, and rivals are saying the cost of doing business is cheaper in their states.

Washington state has been home to Boeing airplane factories since the company's inception in 1916. Corporate headquarters were moved to Chicago two years ago, and the company has thrown the 7E7 bidding open to all states.

Locke said the stakes are high, with an estimated 17,300 direct and indirect 7E7 jobs and at least 56,000 other jobs in aerospace potentially on the line if Boeing phases out its Washington presence.

The net revenue impact to the state if the 7E7 is built here is at least $265 million a year.

Locke's tax package would save Boeing and others in the aerospace industry about $120 million a year once assembly begins in full in 2007. The impact would be minimal in the next four years, Locke said.

The plan includes:

  • Cutting the business and occupation tax rate in two stages, saving Boeing and aerospace-related companies $224 million in the 2007-09 biennium. After the second reduction, in July 2007, the rate would have been cut 40 percent.

  • State research and development tax credits for aerospace design and engineering, as well as a sales tax exemption for computers, hardware and software used in product development, design and engineering of components and airplanes. A B&O credit would be given for sales tax paid on work stations.

  • A B&O tax credit to offset state and local property taxes paid on new 7E7-related construction.

  • Tax breaks by ports for project-related costs.

    Locke said the "tax incentive and reform package" can give Washington an edge as Boeing decides where to locate.

    Asked if the state can afford the tax giveaway, Locke said the state can't afford a slow decline and extinction of the industry.

    Washington could lose 150,000 jobs over 20 years and $540 million in annual revenue if Boeing picks another state for 7E7 and eventually phases out the older generation airplanes here, he told a news conference.

    "It is in part about the future of manufacturing in the state," said state Trade Director Martha Choe.

    The tax breaks and business legislation would help Boeing be more competitive with the government-subsidized Airbus in Europe, she said.

    "This is about the future of the aerospace industry in Washington, our state's most dominant industry," the governor said. "Our efforts will make our state even more competitive and, in turn, help Boeing and its supplier network reduce their costs and compete even more effectively with Airbus."

    The state plans to turn in its bid document next Monday.

    Boeing had no immediate comment on Locke's plan. The company has previously praised the Legislature's approval of a $4 billion, 10-year plan to improve the state's transportation system, and has urged action on the unemployment compensation and workmen's comp measures.