Washington State $9 Billion Tax Incentive Update: Unions Reject Contract

November 15, 2013

As we recently reported, Governor Jay Inslee (D) called Washington State’s legislature into a special session to consider $9 billion in tax incentives for Boeing last weekend. Boeing announced it was considering relocating assembly of its new 777X plane unless it received a major extension of its tax breaks and the union in Washington agreed to a new contract which cut costs. These changes would have made its costs more comparable to what it can get elsewhere, such as South Carolina. In a hurried session, legislators voted overwhelmingly to approve the incentive package.

But then, on Wednesday, not too long after my debate on tax incentives with Florida’s Secretary of Commerce on Fox Business, the union representing Boeing’s workers voted to reject the new contract. While Boeing has since said it will still consider Washington, they began looking at lower-cost locations elsewhere within a day of the new contract being rejected.

This just goes to show how ineffective, and ultimately embarrassing, tax incentives can be. Tax incentives can’t make an uncompetitive state competitive in the same way that broad-based reform can. Broad-based economic competitiveness, including the overall tax structure, is what attracts long-lasting businesses that invest and create jobs: not just one big “deal.”

More on Washington.

NOTE: We want to clarify that the tax incentive package is broadly available to all aerospace manufacturers and is over 40 years, although the impetus is, to quote Gov. Inslee, "to help secure an unprecedented commitment from The Boeing Company to assemble its new 777X jetliner."

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