Boeing recently announced plans to consolidate all production of its 787 Dreamliner jet, moving some existing work from the company’s traditional home in Washington state to its more recently established facilities in South Carolina. Boeing has been involved with production in the Palmetto State since 2004, expanding its ownership and footprint in 2009 and 2014. This new decision will affect many of the 30,000 employees who are currently employed at Boeing’s plant in Everett, Washington, though the vast majority of them will continue to work on other series of aircraft, including the 747, 767, and 777.
In response, we saw a classic example of what’s wrong with economic development policy, especially at the state level. Governor Jay Inslee released a statement that called Boeing’s move “an insult to the hardworking aerospace employees” of the state and threatened “a review of our partnership and the company’s favorable tax treatment.” In other words, retribution.
Needless to say, this is not how business should be done. It is the job of state governments, if they want jobs and economic development in their borders, to create an attractive place to operate. Low taxes, reasonable regulation, and a fair legal system tend to attract and retain job-creating firms. The opposite tends to drive them away. The best systems are fair, transparent, and—most importantly—universally available to all companies.
Unfortunately, many states and politicians like to game the system by offering special deals and favors to some companies. They will write up special-order packages of credits, waivers, and tax abatements and then dangle them in front of particular entities to get them to launch in, move to, or stay in a particular state. These bespoke deals are fundamentally unfair and in opposition to the best traditions of American law and politics.
Normally politicians like to downplay this process and its sordid backroom dealings, but Inslee offered a surprisingly candid view into how it works. The governor said: “I recently asked Boeing’s leadership what the company needs to keep 787 production in Washington state. In all our conversations, they never asked for anything.”
This is offered as a damning accusation, but is exactly how the process should work. Firms should make decisions about production just as the company did in this case, in the words of Boeing Commercial Airplanes CEO Stan Deal: “For months, teams studied options, engaged all of our stakeholders, including unions, and considered a number of factors including logistics, efficiency, and long-term health of our production system. It became clear that consolidating to a single 787 production location in South Carolina will make us more competitive and efficient.”
Boeing shouldn’t have to apologize for that decision. In fact, it should be congratulated for making the decision on a business basis and not trying to demand Washington’s governor or legislature cut it a sweetheart deal for which other businesses and state taxpayers end up holding the bag. It certainly shouldn’t be threatened with uniquely unfavorable tax and regulatory treatment because of the decision.
For more on fair and uniform treatment of business at the state level, see the Goldwater Institute’s work on gift clauses in state constitutions, such as in their 2019 report “The First Line of Defense: Litigation for Liberty at the State Level.” See also the Tax Foundation’s 2015 report on state business tax burdens, “Location Matters.”