The Boeing tax break argument doesn't fly

BACK IN THE Dark Ages of elementary school Valentine's Day, teachers had a basic rule for maintaining order and avoiding bruised feelings: Everyone gives everybody else a card, even if it's to the kid most likely to wind up being named in a restraining order.

These days the debate in Washington is whether the same theory should apply to tax breaks handed out under the guise of economic development incentives. Everyone gets them, or nobody gets them.

It turns out, according to an account by P-I Capitol correspondent Chris McGann earlier this week, that both Microsoft and Yahoo have been trolling the marbled halls of Olympia in search of a sales tax break on purchase of equipment for server farms, those warehouses full of computer devices that store everyone's online vacation photos and MyFace/SpaceBook pages.

When pressed on the matter of why two profitable companies should get a break for what they'd be doing, anyway, they rolled out the same arguments heard in every state and industry: Every other state does -- you should, too. And, if you don't, we'll go somewhere that will.

But then there was this one, unique to Washington:

You gave a break to Boeing; we deserve one, too.

Let's dismiss the first of those arguments: In a perfect world, states would not give tax breaks to Boeing or Microsoft or anyone else. Businesses would rise or fall on their own merits and competitiveness, and true tax equity would reign o'er the land. Instead we live in reality and, in the real world, refusing to play is not a wise strategy.

But between the extremes of none for anyone and something for everybody is a middle ground in which the other two arguments are worth evaluating.

If we're going to issue a tax break to the likes of Boeing or Microsoft, then it ought to be measured against the following criteria:

Does it produce or preserve jobs? The Boeing tax break for the program that became the 787 quite clearly did. In fact, it could be argued -- at least this column made the argument -- that keeping Boeing here for the 787 also put Puget Sound-area plants in the running for future planes and all the associated employment at Boeing itself, as well as vendors, suppliers and subcontractors.

Server farms? Yes and no. Construction of the server farm generates hundreds of jobs. But the operation of the facility requires only 20 to 30 employees each. Even in Eastern Washington, that's not a lot.

Does the facility involved support other companies in the region? In the case of Boeing, emphatically yes (see above). Server farms? Not so much. A conventional warehouse at least generates jobs for drivers moving merchandise locally or state to state.

Does it conduct research and development that might lead to growth at the company, or create opportunities for spinoffs? Boeing -- yep. Server farms -- not likely.

Does it provide a market for a locally produced raw material? Boeing doesn't really, unless you want to make the stretch that its true raw material is the labor and intellectual power of the local work force.

Server farms much more clearly do -- which in this instance is not necessarily a good thing. The raw material the server farms are a market for is inexpensive hydropower off the Columbia River. Are server farms the best use of that electricity, particularly as a growing region looks for more resources to accommodate growth on both sides of the Cascades and has to turn to more expensive and less reliable sources such as wind power?

This specific issue isn't limited to server farms. While biofuel refineries are much the fashion these days, what does Washington gain by offering tax breaks for such facilities that use as their feedstock Canadian canola, Midwestern corn or Indonesian palm oil?

What would the region lose if the activity went somewhere else? The Boeing tax incentive package headed off a bit of brinkmanship in which the state dreaded the consequences of losing a showdown.

Opponents of the server-farm break would argue the stakes are not so high and the threats are not as valid; those facilities will be built here exemption or no, and the state might as well collect the revenue. Advocates of the exemption say the state is counting revenue it won't get either way. No exemption means no server farm, which means no tax receipts. In addition, the local community will lose the tax benefit from the construction and operation jobs as well as property taxes.

Are those compelling enough arguments for a server-farm tax break? Some purists and strict constructionists would argue they're not even compelling enough to justify what the state handed Boeing.

While mulling over those questions, here are few more around the same theme to ponder: Does granting this exemption now preclude you from offering one that might have more effect down the road?

And does offering an exemption to Boeing and Microsoft encourage them, and everyone else, to come back for more? The kid who got the Valentine's Day card, deserving or not, may now be expecting Halloween candy, a Christmas present, an Easter basket, an Arbor Day seedling ...