One of the largest recipients of federal government contracts paid nothing in taxes last year, according to an analysis from the Center for Effective Government, a left-leaning think tank.
Boeing reported an $82 million tax refund last year, but made $5.9 billion in U.S. pre-tax profits during the same period, the analysis of the company’s recent government filings found. That means Boeing paid a federal tax rate of -1.4 percent. At the same time, the company won 4.4 percent of all federal contracts last year, according to the report.
"Companies that live by the taxpayer purse should be contributing to the welfare of the states and paying their taxes," said Scott Klinger, the author of the report. "The fact that we have major federal contractors that are consistently not doing that should raise questions for our legislators about how this could be."
The company has a history of using loopholes to lower its tax bill, according to Matt Gardner, the executive director of the Institute on Taxation and Economic Policy. The report found that Boeing paid a tax rate of -0.4 percent over the past five years.
“The fact that Boeing paid no income tax this year is not at all surprising because they have a very reliable track record of paying little or nothing in federal and income state tax,” Gardner said.
Boeing disputes the report’s findings, saying its federal tax rate was actually 26.4 percent last year. Chaz Bickers, a Boeing spokesman, said the analysis ignores a crucial part of the company's tax expense. When the Boeing decides to embark on building a new aircraft, its taxes are deferred to encourage investment that could take decades to materialize a profit. But once they actually deliver the aircraft, those deferred taxes turn into current ones.
“Our current tax expense has been reduced somewhat in recent years by the very large investment we have made in American jobs, production facilities and research and development for our new airplanes -- they are taxes that largely are deferred until we begin to deliver our new airplanes (and get the revenue back from our investment) in high volume at steady rates,” Bickers wrote in an email to The Huffington Post.
The chart below from Boeing's 10-K filing with the Securities and Exchange Commission shows the company's deferred and current tax expenses. The -82 under "Current tax expense" is what the company paid in federal taxes this year, while other taxes are listed as "deferred." Both are considered part of the company's total tax expense:
While it’s true that the Center for Effective Government analysis doesn’t include Boeing’s deferred taxes, Gardner characterized them differently. “Deferral technically means that you’re postponing tax, that this tax will be paid some day,” he said. “They are essentially shifting taxes forward indefinitely.”
Boeing’s not alone in using corporate tax breaks to its advantage, and Gardner noted that they're doing nothing that's illegal in any way. In fact, Boeing is not known for engaging in some of the more notorious “creative accounting” practices, like moving profits offshore to avoid paying U.S. taxes on them.
“We know that an awful lot of Fortune 500 corporations have found ways to zero out their taxes in a lot of years,” Gardner said. “[Boeing is] doing what the tax law allows them to do. At the same time, we know that other companies are being inventive -- they’re creating their own tax breaks.”
Still, the company’s sheer scale has allowed it to score some major tax concessions. Washington state gave Boeing what is believed to be the biggest state tax break in U.S. history. Lawmakers voted last year to give the company $8.7 billion in tax breaks through 2040 in an effort to convince Boeing to locate a new, large manufacturing plant in the state.
The company insisted on more, though, threatening to pull production from the Seattle area and possibly move it to a less union-friendly state if the machinist union didn’t agree to major concessions. Ultimately, the promise of jobs won out. The union voted by a narrow margin to approve an eight-year contract extension that included a pension freeze. The company conceded some too, scaling back some of its initial proposals to slow workers’ pay increases.
Boeing announced earlier this week that it would build the plant that will make wings for the 777x, a new plane, in Washington.