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Corporations lead taxpayers to the shearing

Boeing is likely to be this year's trendsetter in corporate extortion. It's seeking big incentives from states for its 777X airliner production.

January 05, 2014|Michael Hiltzik
  • The current Boeing 777 manufacturing line in Everett, Wash.
The current Boeing 777 manufacturing line in Everett, Wash. (Mike Siegel / Seattle Times )

Here's a business practice likely to keep booming in 2014: corporate extortion.

We don't mean extortion of corporations, as is practiced by Somali pirates or entrepreneurial Russians. We mean extortion by corporations.

In this field the victims are taxpayers, and what makes it a beautiful business is that the taxpayers think they're getting a great deal, even as they're led to the shearing. And a lucrative shearing it is, for business: By the estimate of the Washington-based Institute on Taxation and Economic Policy, state and local tax incentives funnel $50 billion in tax revenue into corporate coffers every year. On a national basis, ITEP says, this is worse than a zero-sum game: The incentives are "much more likely to reshuffle investment between geographic areas than … to spur genuinely new economic activity."

The trendsetter for the coming year may turn out to be Boeing. The aerospace company has been dangling the prospect of a big airliner production facility in front of several states, including California, since mid-November. That's when union machinists in Everett, Wash., rejected its demands for big concessions on pension and healthcare benefits. The process started only days after Washington Gov. Jay Inslee signed the biggest state tax break in history into law — a package that will give Boeing up to $8.7 billion in benefits through 2040.

Boeing's shopping the production program to other states goaded the International Assn. of Machinists to schedule a second vote Friday. As this column went to press the results were unavailable. The company said it would keep much of the production of its new 777X airliner in Everett if the contract passes, though some work may go to other locations anyway.

"What I've heard is that we're still in the running," Rep. Alan Lowenthal (D-Long Beach) told me. Lowenthal, who says he's spoken with Boeing executives, says that would be true even if the machinists approved the new contract.

So the competition may continue in some form, whatever the outcome of the union vote. The company's specifications for an alternative site are exacting. Its "desired incentives," according to a Seattle Times report on the confidential list, include a plant "at no cost, or very low cost," to the company; infrastructure improvements such as rail and highway access at the expense of the bidder; and "significantly reduced" income, property, excise and sales taxes.

But Boeing is also looking for a workforce of high quality and productivity, which usually results from good educational systems, which in turn have to be paid for with, you know, income, property, excise and sales taxes. It is also seeking to cut its pension contributions to employees.

In other words, this global manufacturer wants all the good things that come from excellent physical and educational infrastructures, but wants someone else to pay. By the way, the company also wants to pay low wages. Who wouldn't want to live in Boeing's nirvana? Great infrastructure, an educated workforce — and all at minimal cost.

It's proper to observe that Boeing is a veteran at such scheming. Back in 2001 it held a nationwide auction for the right to host its corporate headquarters, which it had decided to relocate from Seattle. The company said its rationale was to shed its image as a maker of commercial airliners, which it built in Washington state, and reposition itself as a diversified aerospace company. A laudable goal, no doubt, but does anybody really believe that its ultimate choice of Chicago had nothing to do with the $60 million in tax breaks and other giveaways to be parceled out over 20 years by the state of Illinois?

Despite the discrepancy between what Boeing wants and what it will pay for, state and local governments have fallen all over themselves crafting incentive packages to lure it from Washington state. Missouri, which is hoping that Boeing will expand the St. Louis facilities it acquired by taking over McDonnell Douglas in 1997, is offering as much as $1.74 billion, not counting whatever breaks the company can extract from local jurisdictions in the area.

California has assembled its own package in the name of keeping Boeing in Long Beach, another former McDonnell Douglas location where production of the C-17 Globemaster III cargo jet will be wrapping up next year. The 777X project could last until 2020.

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