Bath Iron Works Seeks 20-Year, $60 Million Tax Break

Jan 30, 2018

Bath Iron Works could get another tax break under legislation being considered this session in Augusta, which comes as a 20-year-old break for the shipyard is about to run out.

BIW is one of the largest employers in the state and offers some of the highest wages, with an average yearly salary of over $64,000. The Legislature gave a tax break nearly 20 years ago to help BIW compete with other Navy shipbuilders, and BIW Vice President John Fitzgerald told members of the taxation committee that that challenge still exists.

“We are a company that lives or doesn’t live on our own merits and we have to win work,” he said. “And then we have to win work on terms where we can make a profit.”

Fitzgerald said shipbuilding is a capital-intensive business, requiring heavy investment in equipment and skilled workers to build complex warships.

The value of the proposed break would be $60 million over the 20 years, and would require BIW to invest in its facilities and keep a workforce in the current range of some 5,600.

The proposal has the support of the Maine State Chamber of Commerce. Chamber President Dana Connors said keeping BIW competitive will spread the wealth.

“BIW also has a significant indirect impact on the multitude of vendors and suppliers with whom they do business. An impact approaching 300 Maine companies,” he said.

Unions representing workers at BIW also support the tax break, saying they recognize the need for the yard to stay competitive.

“This tax credit will help ensure the much-needed investments to keep our shipyard competitive in today’s ever changing and advancing industry. Now more than ever it is vital to invest in our shipyard and the over 5,000 employees that work here,” said Jessica Chavig, vice president of Local 7.

But opponents were also out in force criticizing the tax proposal as a giveaway to the parent company of BIW. Mark Roman of Solon said General Dynamics does not need a tax break.

“That $60 million that the state would not get would mean increased taxes for all Maine workers,” he said. “General Dynamics Corp. is the world’s fifth largest defense contractor.”

Opponents also question whether the tax cuts passed last month by Congress — which lowered corporate tax rates from 35 percent to 21 percent — were considered when this bill was proposed. Peter Morgan of Raymond said that will greatly help the competitiveness of General Dynamics and its subsidiaries.

“The new rate, as mentioned, is going to go down considerably so I don’t know this was factored into this proposal,” he said.

And retired CPA Albert DiMillo from South Portland, who was the chief tax officer for BIW in the 1980s and ’90s, said the company was able at that time to compete head to head with its Mississippi-based rival.

“We had all the same competitive disadvantages with Ingalls back then, yet we got no tax breaks. No tax breaks from the city, no tax breaks from the state,” he said.

The Taxation Committee will now consider the bill and possible amendments, and appears to be divided on the bill.