corporate welfare

Washington state pays out millions in corporate welfare to the aerospace industry. One beneficiary, the jetmaker Boeing, took $227 million in state tax incentives last year while cutting 6,052 jobs.

The idea behind corporate welfare is simple. The idea is that by giving businesses more money, they will invest that money in new jobs and stimulate the economy of the state or country that offers the incentives. Though there’s little evidence that it actually works, it remains the most popular tool for economic growth — particularly among Republicans.

But over the past five years, Boeing has gotten $6 billion from Washingtonians, who have to make up that money through either personal taxes or decreased services. Instead of creating jobs, Boeing has been shedding them — more than 6,000 last year and 7,500 the year before, according to filings reported by the Seattle Times.

“We are proud of Boeing’s foundational role in the economic success of Washington state and the people who live here,” said Boeing Commercial Airplanes’ vice president of Government Operations Bill McSherry.

McSherry pointed to economic analysis of the impact of the aerospace industry on the Washington economy. Boeing is also finally creating jobs in Washington again this year, though specific jobs numbers are not yet available.

Boeing is an example of the larger case of corporate welfare.

One of the hallmark experiments in corporate tax cuts is Kansas. In 2012, Kansas’ Republican government pushed a dramatic package of tax cuts they promised would be a shot of adrenaline into the state’s economy. It wasn’t. The plan was such a calamitous failure that Kansas Republicans rolled those cuts back in 2016.

During the four years of corporate welfare, Kansas’ revenues shrank. The bond rating of Kansas plummeted while its economy grew slower than it’s neighboring states.

“Studies have shown that tax cuts tend to pay anywhere between 10 percent and 30 percent of their costs,” Wichita State University professor of public finance Kenneth Kriz told NPR. “If we cut taxes by a trillion dollars, we’re going to probably get an extra hundred billion back … in extra revenues from economic growth. But that still leaves $700 [billion] to $900 billion in cuts that will have to be made. Those cuts also have an economic effect in drawing down the economy.”

Yet states, cities, and even Congress still obsess over tax incentives as a means of corporate welfare to boost their economies. Cities tried to woo Amazon by offering to pay their employees’ taxes directly to the mega-retailer. Trump’s tax plan was a windfall for corporate interests.

And Washington is trying to get Boeing’s new middle-market airplane, the Boeing 797.

 

Katelyn Kivel is a contributing editor and senior legal reporter for Grit Post in Kalamazoo, Michigan. Follow her on Twitter @KatelynKivel.

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