Joint Legislative Audit and Review Committee staff told the House Finance Committee the state’s package of nine aerospace tax preferences continues to lower the effective cost of doing business and supports Washington’s large aerospace sector, but the auditor said there is no defined metric to show whether preferences meet the legislature’s employment expectations.

JLARC staff reported the preferences were estimated to save roughly $205 million in the 2028–29 biennium under existing law and that beneficiaries saved about $95 million in fiscal 2022 (down from $260 million in 2018 after repeal of a preferential manufacturing rate due to a WTO dispute). The auditor said Washington still ranks among the largest aerospace employers nationally — more than 73,000 employees in 234 establishments in 2022 — and that average annual aerospace wages in Washington were roughly $127,000 in 2022, among the highest nationally.

Why it matters: Aerospace is a major industry in Washington, and preferences were enacted to reduce costs, retain manufacturers and support well‑paying jobs. JLARC said the preferences accomplish three of four stated objectives (lower costs, maintain industry presence, encourage wages) but could not determine whether they meet workforce-growth expectations because the legislature has not specified a target.

Details and committee discussion

- Preferences include preferential B&O rates, credits, sales-and-use exemptions, a property tax exemption and a leasehold excise tax exemption; one preferential manufacturing rate was repealed in 2020 to comply with a WTO ruling and remains contingent on dispute resolution for any replacement preferential rate to take effect.
- Industry stats: 234 establishments, more than 73,000 employees (2022), $27.4 billion contribution to U.S. GDP for aerospace manufacturing; Boeing delivered 528 commercial airplanes in 2023 (down from a high of 806 earlier but rebounding after MAX grounding and COVID-era disruption).
- JLARC’s recommendation: clarify legislative expectations for aerospace employment and consider reverting to a 10-year review cycle rather than the current 5-year cycle for these preferences.

Committee questions raised technical issues about wage calculation methodology (average vs. median), the data vintage (wages reflect 2022 prior to any new contract), and which NAICS codes were included in the employment total. JLARC staff said underlying Bureau of Labor Statistics Quarterly Census of Employment and Wages data produce the wage and employment figures.

Ending

JLARC left to lawmakers the question of whether to continue or modify aerospace preferences and recommended clearer performance metrics; committee members indicated this audit will inform potential legislation later in the session.