August 21, 2019

2019 Tax Preference Performance Reviews Aerospace Tax Preferences

The Washington Joint Legislative Audit and Review Committee (JLARC) utilized the REMI model to ensure that tax preferences benefited the aerospace industry. The tax preferences, initially enacted in 2003, had three public policy objectives in the legislation: The first was to reduce the cost of doing business in Washington; the second encouraged the continued presence of the aerospace industry; and the third provided jobs with good wages and benefits. In 2013, an additional objective was added: maintain and grow Washington’s aerospace industry workforce. To reach these goals, there are three preferential business and occupation (B&O) tax credits, two sales and use tax exemptions, a property tax exemption, and a leasehold excise tax exemption. These preferences improved Washington’s competitive position by cutting the industry’s effective tax rate by at least 50%.

The REMI model analyzed the effectiveness of the tax incentives in accordance to the stated objectives. The results indicated that the original objectives from 2003 were easily met, though the newest objective to maintain and grow the aerospace industry in Washington was unclear. This may be due to Boeing leaving Washington which contributed to the decrease of employment in the state. This report was concluded with additional recommendations to aid in JLARC’s objectives.

Preliminary Report-2019 Tax Preference Performance Reviews-Aerospace Tax Preferences [Full PDF]