I laud the recent statements by Pope Francis and President Obama on inequality—and urge them and everyone else to acknowledge how the escalating Economic War Among the States is a growing part of the problem.
Take, for example, The Boeing Company. For the third time in 10 years, it is staging a public economic development subsidy auction for some of its jobs. It is hard to imagine a more regressive event. Let us count the ways.
On two days’ notice last month, the company prevailed upon the Washington State legislature to go into special session and offer Boeing and its suppliers a subsidy package valued at $8.7 billion—the largest “megadeal” in U.S. history.
If Boeing takes the offer (and that is hardly assured, read on), that would be more than half a billion dollars per year for 16 years—more than twice what the state provides to the University of Washington. It would mostly consist of a discount on the state’s Business & Occupation tax, a gross receipts tax. Given Boeing’s enormous marketplace power (only Airbus really competes with its commercial lines), the company would likely pass along that normal tax-rate cost to its customers, most of whom are foreign-based airlines, as well as U.S. airlines based in other states.
In other words, Washington residents would either have to pay higher taxes or suffer lousier public services (or some of both) instead of having Boeing’s out-of-state customers support better services.
Washington State lacks an income tax. In fact, as the Institute on Taxation and Economic Policy has found, it has the most regressive tax system of any state in the U.S.: low-income families there pay more than six times the share of their income in taxes than do one-percenters. So any new tax burden shifted from Boeing’s customers would fall extremely unequally.
Boeing’s tax dodging is hardly limited to Washington State. As Citizens for Tax Justice has documented, the company received net rebates of $96 million in state corporate income taxes for the decade 2003 through 2012 despite making more than $35 billion in pre-tax U.S. profits. For the same decade, Boeing also received federal income tax rebates totaling $1.8 billion.
Of course, the financial benefits of Boeing’s tax avoidance flow to its shareholders, who are disproportionately the global wealthy.
Boeing has also used its power to whipsaw states against each other as a way to suppress wages and benefits. Washington State thought it won a 21-state sweepstakes for the 787 “Dreamliner” line in 2003 with a subsidy package valued at $3.2 billion. But Boeing later built a second 787 line in South Carolina, publicly denouncing Machinists members in Puget Sound for striking.
I say it’s hardly assured Boeing will accept the $8.7 billion offer from Washington State, because it simultaneously demanded a deeply concessionary contract from the Machinists. The day after workers voted it down 2-to-1, the company launched a very public auction for the 777X, with bids already reported in the works from Alabama, California, Georgia, Kansas, Missouri (special session), North Carolina, Pennsylvania, South Carolina, Texas, Utah, and Wisconsin.
Among the union concessions Boeing sought was the termination of defined pension benefits, which would earn, as Seattle Times columnist Dan Westneat explained, a 30-year Machinist about $2,700 a month on retirement. Instead, the company seeks to replace defined benefits with a lesser 401(k) plan. Boeing CEO Jim McNerney has also led the Business Roundtable, the elite U.S. corporate group that has called for raising the Social Security retirement age to 70 and reducing benefits by changing inflation calculations.
But as Westneat points out, McNerney would get a pension of $265,575 per month if he retired tomorrow. As Westneat put it: “The man presiding over a drive to slash retirement for his own workers, and for stiffs in the rest of America, stands to glide out on a company pension that pays a quarter-million dollars per month.”
The Economic War Among the States, which Boeing is openly stoking and which we have documented is on steroids with a surge in “megadeals” since 2008, is absolutely driving inequality in the United States. Those elite companies with the greatest ability to move capital and jobs—or threaten to move—are taking it to the bank: dodging taxes, enriching shareholders, and using taxpayer-financed subsidy bids as a crowbar to drive down wages and benefits.
What would the Pope and the President say?