Boeing has been the beneficiary of significant tax incentives from the state of Washington, which were offered primarily to encourage the company to maintain its operations in the state or, in some cases, return certain operations after considering relocations. These incentives were designed to retain Boeing's extensive manufacturing presence, including its commercial airplane production, particularly given the competition from other states and countries offering their own incentives.
Major Tax Incentives:
- 2003 Aerospace Tax Incentives:In 2003, Washington state provided a major package of tax incentives to Boeing, valued at around $3.2 billion, to encourage the company to build its 787 Dreamliner assembly plant in Everett. The package included:
- Business and Occupation (B&O) tax reductions for aerospace manufacturers.
- Sales and use tax exemptions for certain aerospace equipment and investments.
- Tax credits for aerospace-related investments and job creation.
- 2013 Extension for 777X Production:In 2013, Washington passed another large package of tax breaks, extending the previous aerospace tax incentives through 2040 to persuade Boeing to build its 777X aircraft and composite wing facility in the state. This extension added up to an estimated $8.7 billion, making it the largest corporate tax break in U.S. history at the time. Key elements included:
- An extension of the B&O tax reduction.
- Property tax exemptions on buildings and equipment related to the 777X project.
- Sales tax exemptions for materials used in manufacturing and equipment installation.
- Boeing ultimately chose to assemble the 777X and its carbon-fiber wing in Washington, which was seen as a win for the state in retaining a crucial part of its aerospace industry.
- Criticism and WTO Involvement:These tax breaks sparked international scrutiny, leading to a complaint by the European Union at the World Trade Organization (WTO). The WTO ruled that some of the tax incentives violated global trade rules, specifically targeting subsidies that were contingent on Boeing producing the 777X in Washington.
- 2020 Adjustments:In 2020, Washington state lawmakers moved to repeal certain parts of the aerospace tax incentives to comply with WTO rulings. This decision aimed to avoid retaliatory tariffs on U.S. goods, primarily in response to ongoing disputes over subsidies between Boeing and its European rival Airbus. However, even with the repeal, Boeing continues to benefit from other state-level tax breaks.
Boeing's Movements and Operations:
Despite the extensive tax breaks offered to Boeing by Washington state, the company has still relocated or shifted certain operations:
- Corporate Headquarters: Boeing moved its corporate headquarters from Seattle to Chicago in 2001, and more recently to Arlington, Virginia, in 2022.
- South Carolina Operations: Boeing has expanded its presence in South Carolina, building a second 787 Dreamliner assembly line there in 2009, a move that created concerns about Boeing gradually moving production out of Washington. Despite this, much of the company's wide-body aircraft production remains in Washington.
Ongoing Discussions:
Washington’s tax incentives were crucial in Boeing’s decisions to keep major production lines, such as the 777X, in the state, but there have been ongoing concerns about the future of Boeing's operations in the region. Labor disputes, the changing global aerospace market, and Boeing's growing presence in other states and countries keep the issue alive.
While Boeing still has a strong presence in Washington, the future of aerospace manufacturing in the state will likely continue to depend on a mix of competitive tax policies, workforce considerations, and broader corporate strategy.
