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Originally published Saturday, July 2, 2011 at 8:52 PM

Danny Westneat

Boeing's wartime tax rate: less than zero

Who would you guess pays more in federal taxes: me or Boeing?

Seattle Times staff columnist

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Who would you guess pays more in federal taxes: me or Boeing?

I don't mean in rates but in actual dollars. Has the federal Treasury gotten more money of late from the huge aerospace company, which booked $4.5 billion in pretax profits last year? Or from me?

"It's not even close," says Bob McIntyre. "In the past three years, you have paid way more into the system than Boeing."

McIntyre is a tax wonk, the director of a couple Washington, D.C., think tanks that focus on who actually pays the government's bills.

Last month, his group, Citizens for Tax Justice, released a study showing that 12 major U.S. businesses, with $171 billion in profits, combined to pay negative $2.5 billion in federal taxes the past three years. Meaning that even with all that profit, they paid no taxes.

Boeing was in this group. The company made $9.7 billion in profits in 2008, 2009 and 2010. It paid nothing in federal taxes, booking $178 million back from the government in various credits, for a total federal tax rate of -1.8 percent.

These figures are from the company's financial reports. Still, I was expecting when Boeing executives went to Congress recently to ask for even lower taxes that they would deny this report. But they didn't.

"Over the last three years, we have not paid," confirmed James Zrust, Boeing's vice president for tax.

One congressman was incredulous.

"I think in testimony I heard earlier that Boeing would like lower taxes," said Rep. Pete Stark, D-Calif. "How much lower could you possibly need?"

Zrust explained the zero tax bill isn't likely to last. It's due to temporary factors, he said. Such as pension payments, and the costs of the development — but not yet any deliveries — of the 787 Dreamliner.

"Those same things that gave rise to low tax payments in the last three years will reverse in the next few years and result in considerable tax payments," Zrust predicted.

I asked McIntyre about that. Is he casting Boeing as a tax freeloader by looking at only a three-year window?

"Well, let's look at 10 years," he suggested. He tapped away at a database he keeps of financial statements.

"In the 10 years ending in 2010, Boeing had $29 billion in profits, and paid minus-$948 million in federal taxes."

McIntyre said if you include the past 11 years, Boeing's effective tax rate was positive, but only barely.

In other words, for the decade when the government launched two wars and ran up historic red ink, one of our largest companies — one that's a major beneficiary of military spending — contributed essentially zero to the ledger.

Now, Boeing pumps $1 billion a week into the U.S. economy. Its 160,000 employees have no doubt paid billions of income taxes in a decade. So it has great value beyond what the corporation itself pays to support the common good.

Boeing also didn't do anything wrong. As Zrust testified, the company is under ceaseless IRS audit, with 30 agents eyeballing it from offices located at Boeing. The zero tax bill isn't a sign it got away with something. It's just the way it is.

But should it be this way?

"I just think they ought to pay something," McIntyre says. "Like we all should. Every other time we've gone to war, the government has raised taxes to pay for it. In particular, it has asked the corporations to pay more.

"But nothing was asked this time. We're in two wars and we've cut their taxes, given them new loopholes, allowing them to pay, in some cases, nothing."

In my view, the most irresponsible thing we've done in my lifetime was to go to war while cutting taxes. That put war on a perpetual credit card, as if we were buying a sofa. Ten years in and still no one will say how we pay that bill.

Now Congress is going to political war over the deficit. Spending will be cut, as it should. But one side, the Republicans, insists that taxes not only cannot be raised, but are so high they must be cut still further.

As that one congressman wondered: lower than zero?

I'm not sure what the formula is for getting out of this mess. But somehow I doubt less than zero is going to pencil.

Danny Westneat's column appears Wednesday and Sunday. Reach him at 206-464-2086 or dwestneat@seattletimes.com.

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