Washington State Carbon Tax Would Raze Boeing B&O Rate to Nearly Zero

by | Oct 11, 2016

A measure on the November 8 Washington state ballot would impose a carbon tax on fossil fuels that would have a surprising upside for Boeing – a savings of tens of millions of dollars – according to an October 7 report by The Seattle Times.

Initiative 732 balances a new tax on carbon emissions, which would raise gas prices and electricity rates, with a 1 percent cut in sales tax and tax credits for low-income families.

Specifically, according to consumer advocacy organization CarbonWA, the bill would:

  • Reduce the Washington state sales tax by one full percentage point;
  • Fund the Working Families Rebate to provide up to $1,500 a year for 400,000 low-income working households;
  • Effectively eliminate the state’s business and occupation (B&O) tax for manufacturers;
  • Institute a carbon tax of $25 per metric ton of carbon dioxide (CO2) on fossil fuels consumed in the state.

And for Boeing and all other manufacturers in the state, “in order not to disadvantage them against out-of-state competitors,” the initiative would almost entirely eliminate the state’s business and occupation (B&O) tax.

The ballot measure has met with opposition from labor groups and even from environmental advocacy groups, the local news outlet reported.

In fact, the Sierra Club has lined up with a host of other organizations to promote an alternative proposal — possibly for a future state ballot — that would not just be “revenue neutral,” but would raise surplus revenue to invest in clean-energy and other pollution-reducing projects

But should it pass, Boeing, the state’s biggest manufacturer – which already enjoys a discount of 40 percent in the B&O rate, with the other 60 percent offset by tax credits — would see its B&O rate razed to nearly zero.

Data on how much companies pay in B&O tax is available only for those that take advantage of the state incentives, The Times clarified — including aerospace and timber companies, but also such businesses as processors of dried peas. Among all those companies, none comes close to Boeing’s tax bill.

The carbon tax imposed on the airplane manufacturer will likely be substantially less than the B&O tax savings. Because Boeing’s annual state revenue from commercial-airplane sales is north of $50 billion, its B&O bill without any tax incentives would be hundreds of millions of dollars, far higher than for any other manufacturer

Indeed, according to the Times, the initiative’s side effect of reducing Boeing’s tax bill has spurred vocal opposition from the Machinist union:  In the latest issue of the International Association of Machinists District 751 newspaper, legislative director Larry Brown calls the initiative “another Boeing tax giveaway.”

“We gave Boeing more than $530 million in tax breaks in 2014 and 2015,” Brown said. “Now the I-732 campaign wants to give Boeing executives even more tax dollars.”

And Jeff Johnson, president of the Washington State labor Council, AFL-CIO, said, “We need carbon pricing that produces positive revenue that is then invested in clean energy alternatives, deep-dive energy efficiency, and infrastructure for the clean energy economy and to mitigate the negative impacts of climate change. To achieve the climate goals set out in Paris, we need to both cut the use of fossil fuels and increase investments in clean energy. I-732 fails to do this.”

Boeing declined to comment to The Seattle Times on I-732. “Boeing does not take a stance on local initiatives,” a spokesperson said.

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