February 1, 2018

Proposed BIW tax break sparks spirited debate over whether it's necessary

Courtesy / Bath Iron Works
Courtesy / Bath Iron Works
An aerial view of BIW shows the Land Level Transfer Facility (foreground) the Outfitting Hall (left) and drydock (left foreground), elements of the roughly $500 million in facility investments made in the shipyard during the current tax incentive program that expires at the end of this year.

The Legislature's Joint Committee on Taxation on Tuesday heard nearly three hours of testimony on LD 1781, which would renew a $60 million tax break for Bath Iron Works.

"This credit is meant to reduce costs and encourage investments to boost the competitiveness of Maine's shipbuilding industry, reducing the likelihood of a sudden wave of layoffs and better insulating our region from the sometimes-destructive ebb and flow of the world economy," sponsor Rep. Jennifer DeChant, D-Bath, said in a statement Jan. 25.

The Forecaster reported that opponents speaking out at the hearing noted the health of BIW parent company General Dynamics, and compared the tax break to "corporate welfare."

"This bill is nothing more than a $60 million gift for General Dynamics," John Morris of New Gloucester told lawmakers.

BIW spokesman David Hench on Monday declined to discuss specifically how the shipyard would invest the funds. An existing 20-year tax credit, which the Legislature approved in 1997, expires this year.

Lisa Read, a shipyard spokeswoman, said $100 million in new investments, including construction, modernization, improvement or expansion, would happen in 2019 or 2020.

"BIW must compete for work against a shipyard which is well-equipped and aggressively seeks to win work that might otherwise come to Bath," Read said, referring to Ingalls Shipbuilding in Pascagoula, Miss. "The tax credit will benefit the shipyard by lowering the cost of doing business in Maine and helping BIW's competitive position relative to its competitor in Mississippi."

At the hearing, Alice Bolstridge of Presque Isle told lawmakers that General Dynamics is "already profiting from recent corporate tax cuts."

Cushman Anthony of Yarmouth, a former legislator, said Maine needs the tax money for other purposes.

"Passage of this bill would diminish what we can spend on other more important things," Anthony said.

LD 1781, "An Act To Encourage New Major Investments in Shipbuilding Facilities and the Preservation of Jobs," would create up to $60 million in tax incentives for Bath Iron Works over 20 years. It is linked General Dynamics Corp. continuing to make "major investments in shipbuilding facilities" and maintaining a minimum employment level of 5,000 workers.

The tax incentives are intended to begin following the scheduled expiration of The Shipbuilding Facility Tax Credit that was approved by the Legislature in 1997 that enabled General Dynamics (NYSE: GD) to receive an annual tax credit of $3 million for 20 years as long as it invested $200 million in BIW's shipbuilding facilities.

Read more

Sponsor's amendment splits BIW tax credit in half


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