This Boeing deal could have ‘clawbacks’ in the ‘snap-back’

OLYMPIA — Gov. Jay Inslee and state lawmakers moved swiftly during a 2013 special legislative session to give the Boeing Co. a lengthy extension of tax incentives to land assembly of the 777X in Everett.

When Inslee, in just his 11th month as chief executive, signed the package, he said it would secure Washington’s place as the world’s leader in aerospace. Not to mention save the industry giant around $8 billion in future tax payments to the state.

But the governor and the current batch of lawmakers aren’t moving anywhere near as swiftly on legislation sought this week by Boeing to get rid of one of those incentives. That’s because folks aren’t looking back so fondly on what’s occurred since. This time they want to do more than just say yes.

In the months after that 2013 special session, Boeing shed jobs through layoffs, buyouts and transfers to sites in other states.

Aerospace workers and a handful of Democratic lawmakers said the state gave Boeing too good a deal by not prohibiting the company from shifting hundreds of jobs to other states without penalty. Some of those jobs, unions pointed out, went to Missouri, which offered Boeing tax breaks as long as the firm created 2,000 new jobs.

Labor advocates have sought to rewrite the terms to let Washington “claw back” some of the generous incentives in the event aerospace companies fail to create and retain union jobs.

It’s been futile – though maybe not for much longer.

Boeing’s new request is to repeal one of those incentives, a 40 percent lower tax rate. Doing so could clear the way for resolution of a messy and lengthy trade dispute between the U.S. and the European Union, home to rival jet-maker Airbus. Absent such a settlement, the European Union is poised to impose up to $22 billion in tariffs on U.S. products this summer, about a third of that on Boeing planes and exports of Washington wine, fruit and seafood.

Boeing wants that lower tax rate again someday. Under legislation in the state House and Senate, the tax break would be restored when the U.S. and E.U. reach agreement to resolve World Trade Organization disputes regarding large civilian airplanes.

Union leaders and Democratic lawmakers are OK with repealing the tax break, but they want “clawbacks” in the “snap back” – which is what folks call a provision allowing later restoration of the lower tax rate.

This is an opportunity to hold Boeing’s corporate toes to the fire, and union leaders and lawmakers don’t want to miss out.

They are interested in adding language about things like retaining jobs, employing apprentices and expanding training. An aerospace machinist leader even thinks Boeing should have to commit to building its next new airplane in Washington if it ever wants the lower tax rate reinstated.

Enter Inslee. This might be another moment for him to redeem himself with veteran union members and pro-labor Democrats. They’ve neither forgotten nor fully forgiven the governor for his zeal for the 2013 deal and subsequent distance from their clawback efforts in the Legislature.

It’s no secret Inslee, too, is sour on Boeing. He’s gone on national television and likened what transpired to “corporate extortion” and “blackmail.”

In March, while campaigning for president, he dropped by “The Daily Show,” where host Trevor Noah asked why he gave Boeing the tax break.

“Look, if you’ve ever been mugged, you understand what it feels like,” Inslee said. “I was not happy about the Boeing situation. What happens is these corporations put a gun to your ribs and say, ‘You’re going to lose 20,000 jobs unless you give us a tax break.’ ”

This is Inslee’s chance for political payback. Not too much, though. The threat of tariffs is real, and Inslee would be among those loudly vilified if legislative inaction leads to the imposition of tariffs.

The governor needs to extract a concession that benefits the state, and one which Boeing can tolerate and won’t derail a resolution to the trade dispute. It’s got to happen fast, because the legislative session is winding down.

One approach could be as simple as delaying the restoration of a lower tax rate for an agreed period. Lawmakers and the governor would gain a windfall of tax collections, around $115 million a year, which they could pledge to any number of undertakings. (Republicans are already offering ideas.)

Within that period, interested parties could keep chatting about ways to permanently amend the long-term agreement.

Moving too quickly is what lawmakers said got them a bad deal before.

Moving too quickly now might not get them the best one now.

Jerry Cornfield: 360-352-8623; jcornfield@heraldnet.com. Twitter: @dospueblos.