Gov. Inslee Defends His Call for 'Hard Look' at Boeing's Tax Breaks

Gov. Jay Inslee is standing by his call for a "hard look" at state tax breaks that have reduced Boeing's tax bill by hundreds of millions annually, even as some elected leaders criticized his stance as divisive.

Speaking at a news conference Thursday, Inslee said he had not made any decisions, but insisted Boeing's preferential tax treatment -- long enshrined in Washington's tax code through bipartisan votes -- will be on the table in the coming months.

"We cannot be a state that just takes orders from any corporation, any company," Inslee said, repeatedly expressing frustration at Boeing's decision to permanently halt production of the 787 in Snohomish County, shifting the jobs to South Carolina.

That's a sharp contrast from 2013, when Inslee enthusiastically called the Legislature into a special session to pass a record-setting extension of tax breaks for Boeing, praising the package as "great news for every Washingtonian."

The governor's tone shifted last year, during his unsuccessful run for the Democratic presidential nomination, when he likened Boeing's tax deals in national media interviews to "extortion" and getting "mugged." Despite that rhetoric, he had not previously proposed clawing back the tax breaks.

Some Snohomish County leaders pushed back strongly against Inslee's tax statements Thursday, saying the state should focus on bolstering its relationship with the aerospace giant.

"It's time to look at how we strengthen that partnership and support each other through this. I do not see this as a time for division," said Snohomish County Executive Dave Somers, a Democrat.

Everett Mayor Cassie Franklin said Washington needed to be "the most business-friendly state in the country ... It's not a time for division. What our community needs is hope."

Asked about their comments, Inslee said he shares the local officials' goals of strengthening aerospace manufacturing. But he called the rethinking of the tax breaks a matter of fairness.

"To anyone who suggests it is divisive, I would suggest it is responsible," Inslee said. He said Boeing shouldn't be able to yank jobs out of the state after benefitting from special treatment for years without expecting consequences. "We just can't roll over and play dead here."

He said a proposal related to Boeing taxes could be part of his next budget plan, due in December.

At Boeing's request, one of its major tax breaks -- a vastly reduced business and occupation (B&O) tax rate -- was rescinded this year by Inslee and the Legislature to help the company avoid costly European tariffs.

But as Inslee emphasized Thursday, Boeing continues to benefit from other major tax incentives, including a B&O tax credit, a leasehold tax credit and a sales-tax exemption for software and computer purchases.

In all, the company's major tax breaks saved it $1.4 billion between 2014 and 2019, according to reports by the state Department of Revenue. The tax package enacted in 2013, which helped secure the 777X assembly for Washington, extended tax incentives approved more than a decade earlier for the 787.

Republicans accused Inslee of failing the state.

The state Republican Party tweeted that Inslee "is acting like the Boeing move wasn't because of him and his policies. @JayInslee is bad for jobs."

State Sen. John Braun, R-Centralia, said he believed Boeing's decision came because of the coronavirus pandemic, which has devastated air travel and plane orders.

"Not surprising that they have to look for ways to reduce expenses," said Braun, the ranking Republican on the Senate Ways and Means Committee, which handles tax policy.

But Braun called Inslee's response to the Boeing move a "tongue-lashing" that was "frankly arrogant and certainly not helpful."

Asked whether challenging Boeing's tax status might cause the company to move additional airplane production out of state, Inslee said, "no, they won't do that," adding the 777X deal contained protections against it.

Boeing officials gave no indication the corporation's decision was based on any particular Washington state or Inslee policy. However, the move was seen by analysts as an embrace of South Carolina's lower-wage workforce and lack of union protections.

Inslee and his chief of staff, David Postman, said the governor had spoken repeatedly with Stan Deal, CEO of Boeing Commercial Airplanes, and asked what Washington could do to keep the 787 line. Deal did not offer "any scintilla" of an action the state could take, Inslee said.

The governor's frustration with Boeing was shared by some legislative Democrats. The party holds majorities in the state House and Senate.

State Sen. Karen Keiser, D-Des Moines, who chairs the Labor and Commerce Committee and is Senate president pro-tempore, said lawmakers "absolutely" will look at altering the company's special treatment when it comes to taxes.

"As long as the company maintained its workforce and its productive business in Washington state, they had a good argument to the Legislature because the number of jobs and economic activity outweighed the loss of the taxes," said Keiser. "The whole picture will be revisited."

Keiser said Washington also should look to attract other aerospace companies, such as Boeing's chief rival, Airbus.

State Rep. Noel Frame, D-Seattle, who has sponsored bills to tie Boeing tax breaks to job targets, said she's "tired of playing this game" with the company.

"I don't want Washington state tax policy driven by the Boeing company any longer," Frame said.

Rather than just targeting Boeing or any single company, though, she said lawmakers should reform the state's tax policy as a whole, pointing to the more than 700 special tax preferences in the tax code.

State Sen. Reuven Carlyle, D-Seattle, urged a long-term outlook on the Boeing crisis.

"The battle I would prefer to fight is to ensure that Washington remains the largest state as a percentage of Boeing's workforce. And that means we've got to fight tooth and nail for every single job," he said.

Seattle Times staff reporters Dominic Gates and Joseph O'Sullivan contributed to this report.

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