September 06, 2013 The Tax Lawyer

Why the Recent “Boeing Case” Will Not Ultimately Limit a State’s Ability to Provide Incentives to Attract Business

Vol. 66, No. 4 - Summer 2013

Michelle DiPuma

Abstract

    As the two major competitors in the large civil aircraft manufacturing industry, Boeing and Airbus are constantly looking to gain a competitive edge over each other by selling their respective planes at a lower price than the other and by creating new, innovative planes. In order to lower the sale price of their respective planes or to design new aircraft, both companies are often dependent on government subsidies.

    States are currently eager to grant tax incentives to large companies, such as Boeing, as a means to boost their respective economies, under the theory that such companies bring revenue and jobs into their respective states. Thus, a common belief exists that state tax incentives are mutually beneficial to the States and big businesses alike. This Article focuses on the state of Washington, Kansas, and Illinois tax incentive laws that the World Trade Organization (WTO), of which the United States is a member, found to violate WTO treaty. First, this Article will argue that the United States has the authority to bind the States through international treaty. Second, this Article will argue that the WTO accurately found that the state laws in question violated WTO treaty. Finally, this Article will argue that the United States is unlikely to force state compliance with the WTO decision. Thus, the WTO decision is unlikely to decrease a state’s power to utilize tax incentives to attract business.

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