Proposed legislation puts state in best position to avoid retaliatory tariffs on major exports – including aircraft – protecting Washington employers and jobs
OLYMPIA, February 19, 2020 – The Aerospace Futures Alliance Board of Directors voted in support of today’s action by the Washington State Legislature to comply with the World Trade Organization’s ruling in the large civil aircraft dispute between the United States and the European Union.
“By addressing the single state tax measure deemed unlawful in this case, Washington State demonstrates national leadership in the attempt to avoid retaliatory tariffs on American-made commercial aircraft,” said Emily Wittman, President & CEO of AFA.
In April 2019, the WTO determined that the state’s preferential business and occupation tax rate for aerospace manufacturing constitutes an unlawful subsidy to aerospace businesses. H.B. 2945 and S.B. 6690 would change the preferential B&O tax rate for aerospace manufacturing beginning April 1, 2020 unless a U.S. and E.U. agreement expressly allows the rate to be reinstated.
“It is imperative that we support the legislation addressing our state tax measure that has been found to violate WTO rules. Raising B&O tax rates is regrettable but necessary to put us in the best position to avoid tariffs on aerospace and many other types of products produced in our state. Such tariffs would do significant harm to local businesses, jobs, and the economy as whole in the State of Washington,” said Mike Brown, CEO of Aero-Plastics, Inc.
As a result of the April ruling, the European Commission on Trade identified $20 billion in U.S. imports that could receive tariffs as soon as the second quarter of 2020, including products vital to the Washington State economy. These tariffs would apply to Washington built aircraft as well as Washington grown agricultural products exported to the E.U.
“Aerospace employers need certainty where possible. Lingering negotiations with the E.U. hurt our ability to compete globally and grow and retain local jobs,” said Rosemary Brester, President of Hobart Machined Products, Inc. “Changes to this tax measure are understandable when faced with retaliatory tariffs on our major customer, The Boeing Company.”
The preferential B&O tax rate has been an important tool for strengthening Washington’s economy since 2003. Several members of the Aerospace Futures Alliance Board utilize the preferential business and occupation tax rate in question. Between 2013 and 2018, they and fellow aerospace employers in Washington claimed an average $116.1 million in annual savings from the preferential rate.
AFA member companies have invested those savings back into their businesses and communities, stimulating $94.4 billion in business revenue in the state and employing a total 223,700 Washingtonians as of 2018.
The preferential tax rate enabled aerospace employers to offer greater opportunities for workers, including compensation, benefits, and training. In 2018, aerospace companies provided $20.5 billion in labor income and an average wage of $116,770; far greater than the average wage of $63,000 for industries in the state.
During the vote, the AFA Board reiterated that if the preference is permitted to continue as part of an agreement, the tax rate should be maintained at the current .2904 percent level so that aerospace companies we can continue to contribute to the state’s economy in this way.
About the Aerospace Futures Alliance
The Aerospace Futures Alliance is a coalition of businesses seeking to support, strengthen, and grow the aerospace industry in the State of Washington. AFA is inclusive of all sectors, including commercial aviation, space, and UAS. Founded in 2006, AFA is a 501(c)6 that has been successful in helping the aerospace industry thrive through its efforts in advocacy and policy development, workforce development, training and education, market intelligence, meeting facilitation, publishing LIFT magazine (afa-wa.com/liftwa), and holding special events.
For more information, please visit www.afa-wa.com.