LIVE from Crosscut Festival: Tax breaks for titans

Hel­lo again from the Cross­cut Fes­ti­val, host­ed by Seat­tle University.

For the sec­ond ses­sion I attend­ed a pan­el titled “Tax breaks for titans” includ­ing Wash­ing­ton state Sen­a­tor Reuven Car­lyle, chair of the Wash­ing­ton Health Ben­e­fit Exchange Board and for­mer Deputy Sec­re­tary for the U.S. Depart­ment of Hous­ing and Urban Devel­op­ment Ron Sims, Kriss Sjoblom of the Wash­ing­ton Research Coun­cil, and Lar­ry Brown from Aero­space Machin­ists Union Dis­trict Lodge 751. The mod­er­a­tor is for­mer Cross­cut Man­ag­ing Edi­tor Drew Atkins.

Atkins first point­ed out the con­text of Ama­zon’s search for a new city to host their HQ2, and the tax incen­tives that gov­ern­ments are offer­ing to try to get Ama­zon to locate there. He also remind­ed every­one that the largest cor­po­rate tax break in US his­to­ry was from Wash­ing­ton state to Boe­ing in 2013.

Rep. Car­lyle said that Wash­ing­ton has the most tax breaks because we have the most upside-down and back­wards tax struc­ture in the nation. Regard­ing the nego­ti­a­tions around Boe­ing tax breaks, he acknowl­edged that there were both “sub­stan­tive wins and sub­stan­tive los­es” for the peo­ple of Washington.

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Sims not­ed that in his 2004 run for gov­er­nor, he crit­i­cized tax cuts for Boe­ing, but that it was only an exam­ple of one aspect of the issue. He believes we need(ed) a larg­er dis­cus­sion about tax­a­tion. Tax reform, not tax breaks, are what needs to happen.

In his ques­tion to Brown from the Machin­ists Union, Atkins not­ed that Newark, NJ offered the largest pack­age of ben­e­fits and tax incen­tives to Ama­zon, par­tial­ly because they have a very high unem­ploy­ment rate and want the jobs. Brown said the Machin­ist Union sup­port­ed tax cuts for Boe­ing, but that there is a spe­cif­ic context.

After the ter­ror­ist attacks of Sep­tem­ber 11, 2001, orders for planes dropped dra­mat­i­cal­ly as there was less air trav­el. Twen­ty-thou­sand hourly work­ers were laid off from Boe­ing, plus com­pa­ra­ble num­ber of salaried work­ers. Work­ers were very con­cerned since Boe­ing had moved their cor­po­rate head­quar­ters to Chica­go, and it seemed like Boe­ing’s com­mit­ment to Wash­ing­ton State was wan­ing. So they want­ed to make sure to keep Boe­ing, and their jobs, here.

How­ev­er they also did­n’t know that Boe­ing would be out­sourc­ing wing con­struc­tion to Japan and a sec­ond line to South Car­oli­na. So in the 2013 nego­ti­a­tions, they stip­u­lat­ed that wing and sec­ond line con­struc­tion could not go any­where else, and sup­port­ed the tax incentive.

Atkins said that when­ev­er he brings up attach­ing more strings to the tax cuts for Boe­ing, peo­ple say “we did­n’t have the lever­age” to have done that in our nego­ti­a­tions. He asked Brown why that was.

Brown replied that “I think we had more lever­age than we thought we did.”

He point­ed to delays and cost over­runs with com­po­nents that are being built in Japan and South Car­oli­na, but that Wash­ing­ton’s Boe­ing work­ers have a con­sis­tent his­to­ry of deliv­er­ing projects on time. He point­ed out that Boe­ing has moved over 16,000 jobs out of state since the tax incen­tive pack­age was passed. There have been efforts to imple­ment a tax incen­tive account­abil­i­ty mea­sure, but it has­n’t happened.

Car­lyle shared that in 1995, Wash­ing­ton was the 11th state in the nation in terms of com­bined lev­el of tax­a­tion. Over the next twen­ty years, that went down to 35th. Among the changes that caused this decline, he not­ed Tim Eyman initiatives.

“We are on our way to being a low tax, low ser­vice state,” Car­lyle con­tin­ued. He says Wash­ing­ton res­i­dents are being “nick­eled and dimed to death.” He feels the state is not tax­ing in a respon­si­ble way, that there are very real struc­tur­al issues with how we tax, and pref­er­ences to com­pa­nies like Boe­ing are just a piece of that.

When asked if he had any­thing to add to Car­lye’s com­ments, Sims said “I could­n’t have said it as elo­quent­ly.”  He says that we know we need to fix the sys­tem, and there is going to be a day of reck­on­ing if we don’t.

Car­lyle con­tin­ued to point out that in Wash­ing­ton state, most tax­es are paid by small busi­ness­es and peo­ple in the mid­dle class.

“What we need is con­sis­tent rates, broad­ly applied, with few excep­tions, but we have the exact oppo­site; vary­ing rates, nar­row­ly applied, with hun­dreds of excep­tions.” This was the first com­ment of the day that I wit­nessed to get applause.

When Atkins asked what need­ed to be done in order bal­ance tax­es, Sims said “a new pres­i­dent and a new con­gress.” This com­ment received laughs and loud applause.

Sims con­tin­ued that we cant let insti­tu­tions hit rock bot­tom before we make changes. If they do, that will prob­a­bly prove to more peo­ple that changes need to be made to our tax struc­ture, but he hopes it will not come to that and that we can make nec­es­sary changes soon­er than that.

“If we want to be a vibrant, com­pet­i­tive state for the rest of cen­tu­ry, we have to change,” Sims said.