Champion tax avoider GE gets subsidized relocation to Boston
On Wednesday, General Electric announced that it was going to relocate its headquarters from Fairfield, Connecticut, to Boston beginning in 2016. Even without the headline, you probably already guessed that the relocation was subsidized — in this case, by both the state of Massachusetts ($120 million) and the city of Boston ($25 million). 800 jobs will move as a result of the deal, but no new jobs will be created.
Massachusetts has been historically a low-subsidy state, helped in large part by its highly trained workforce along with the Boston area’s 55 universities and colleges, the latter factor noted prominently in GE’s announcement of the move. Yet this is the largest subsidy package ever assembled in the state according to the Good Jobs First Megadeals database (download the December 2015 spreadsheet version here). In fact, the database shows that it is only the fourth package over $50 million in Massachusetts, and the very first above $100 million.
I asked Greg LeRoy, the founder and Executive Director of Good Jobs First, for his thoughts on the deal. His response:
GE’s press release is almost worth bronzing and mounting: the company clearly chose Boston because of its executive talent pool and research assets. Why on earth the state and city felt they had to throw $181,000 per job at the company is beyond me; that’s unconstrained federalism at its worst.
This dynamic is one I have discussed often: a company threatens to move to another state and suddenly you have an auction with numerous other states trying to pay a relocation subsidy, while the home is doomed to pay a retention subsidy as a best-case scenario. Frequently, as with GE, the company moves. Either way, collectively the states receive less tax revenue from the company which threatened to flee. Thus, the common question, “Was this a good deal for Massachusetts?” completely misses the point, which is that the country as a whole is worse off, due to the decreased tax revenue for no new jobs.
In this case, as I reported last summer, GE threatened to leave Connecticut over tax increases in the state budget. This is ironic/hypocritical/outrageous (take your pick) because, as the Hartford Courant (h/t Richard Florida) reported, General Electric pays only the minimum Connecticut corporate earnings tax of $250 per year. The Boston Globe (see first link in this post) reports that GE pays essentially no state corporate income tax in any state!
It’s tiresome to report yet another egregious example of this kind of corporate blackmail. It is depressing to see Massachusetts, with only 4.7% unemployment in November 2015, give its largest subsidy package ever under such circumstances. It’s past time for Congress to solve the job piracy problem once and for all.
Cross-posted from Middle Class Political Economist.
Lose a few win a few http://www.bloomberg.com/news/articles/2016-01-15/apple-may-be-on-hook-for-8-billion-in-taxes-after-europe-probe
AS, yes, I’ve been following that case. The European Commission already ruled against Starbucks and Fiat in similar, but smaller dollar, cases. I think Apple will lose, too.
All three cases will be appealed all the way to the Court of Justice of the European Union, and I predict the CJEU will uphold the Commission. The case law is well-established that no one has a “legitimate expectation” to benefit from an illegal state aid award. As for the claim this is ex post facto, the whole point of the case is that the state aid was not pre-notified to the Commission in advance as required by law, so it was necessarily discovered after the fact.
Such “deal” making can take place in this nation because we are just not growing economically in a way that requires an ever larger labor force.
I just cant get over how this nation responds to our economic whoas as if we’re in the industrial revolution period or about to enter such. I think the tech revolution of the 90’s when computing reach that critical mass such that it became a general consumer item (and all it represents) was views as the coming of the new industrial revolution. It wasn’t.
Worse yet, in a nation that calls its self the United states, all we have been doing is pitting ourselves against each other…right down to the individual.
There is not way Ma can make up for this cost on the income tax of a measly 800 jobs.