Will This New Tax Break Spur Growth at Boeing?

Boeing 787 Dreamliner Airplane

Boeing (NYSE:BA) can expect a nice tax break at its South Carolina manufacturing plant where it builds 787 Dreamliners. The North Charleston City Council voted on Thursday to cut the top tax rate in half, which is used to calculate annual fees for businesses earning $250 million or more.

Boeing, South Carolina’s largest private employer, will now have to pay only 0.1 percent on gross revenue from Boeing’s local plant for its annual business licensing fee. For companies with revenue between $250 million and $7.5 billion, the rate was cut to 5 percent from 10 percent.

The South Carolina plant is responsible for 1.5 Dreamliners per month and Boeing would like to double that number to three per month by mid-2014, according to spokeswoman Candy Eslinger. The plant is Boeing’s second assembly facility after its main factory in Everett, Washington.

The combined annual production rate target for Boeing’s Washington and South Carolina facilities is ten 787 Dreamliners a month, but so far the company is producing an average of seven 787s a month.

Dreamliners currently have a list price of $207 million per, so 36 completed 787s would bring in $7.45 billion in annual revenue — though airlines often get discounts from manufacturers.

North Charleston finance director Warren Newton says that the new tax measure is not meant as a break for big business. The tax measure, “was not introduced to benefit a particular business or industry,” he explained. The goal is “to promote future business growth,” he said.

Boeing plans to spend $1 billion over the next eight years at its South Carolina factory in order to increase output. Already having 6,000 workers employed throughout the state, Boeing says that the expansion will create at least 2,000 additional jobs.

To date, Boeing has received over $1 billion in tax breaks and incentives from the city.

Despite the news of their impending tax breaks in South Carolina, Boeing is still reeling from a Dreamliner fire aboard an Ethiopian Airlines flight. The 787 caught fire at London’s Heathrow Airport causing the entire airport to shutdown for over an hour. On Friday, Boeing shares were down about 5 percent.

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