Comments Guidelines

All comments are pre-moderated. No spam, slurs, personal attacks, or foul language will be allowed.

Friday, June 5, 2015

GE threatens to leave Connecticut UPDATED

A non-blogging friend has brought to my attention the fact that General Electric is threatening to move its corporate headquarters out of Connecticut in response to proposed tax increases in the state budget. The company, based in Fairfield, objects to increases in the taxes for data processing and corporate headquarters. Insurance companies Aetna and Travelers have also issued similar threats.

In GE's case in particular, this is pretty rich. The New York Times reports that GE made $14.2 billion in 2010 and received a federal tax refund of $3 billion. It is a company that touts bringing manufacturing jobs back from China but conveniently omits mentioning that the new jobs, in Louisville, pay $13/hour rather than the $22/hour they paid before they left for China. A model of corporate virtue it ain't, yet President Obama sees fit to lean on chief executive officer Jeffrey Immelt as one of his top business advisers.

Regular readers no doubt recall that every time a threat like this is made, vultures start to swoop in to attract the potential relocator to their state with a long list of goodies. So it should come as no surprise that a mere three days after GE first floated this idea, Tampa, Florida, has put GE in in its sights. We've seen this story many times before: Boeing and Sears immediately spring to mind. As always, the possibility of receiving relocation subsidies makes relocation less expensive and makes it more likely that a company's current home will have to give concessions to make it stay. Job piracy and job blackmail are intimately related.

As my friend points out, it's not surprising that Connecticut is running a big budget deficit. In just the past few years, according to the Good Jobs First Megadeals database (March 2015 spreadsheet update), the state gave $313.75 million to Schupp & Grochmal (2007), $89.5 million to Starwood Hotels (2009), $291 million to Jackson Laboratory (2011), $115 million to Bridgewater Associates (2012), and a whopping $400 million to United Technologies (2014). This last deal is fully 20% of the entire 2-year budget deficit facing the state, $2 billion.

A showdown is looming in this newest case of raw corporate power. Yesterday, the Connecticut legislature passed the budget, though leaders signaled a willingness to consider small changes when it comes back for a special session. The same day, however, Immelt emailed employees to let them know a task force had been set up to look into relocation.

Stay tuned!

Update: More evidence that GE is a whiny, hyper-aggressive tax avoider:


  1. If the state of CT forces GE To move headquarter to another state due to a 6 year retro active headquarter tax increase all companies in our state should consider leaving.... But wait we have lost many any companies to New York and Texas and we are last in job common sense is not something out governor is know for.... And I voted for him.

  2. "The New York Times reports that GE made $14.2 billion in 2010 and received a federal tax refund of $3 billion."

    Which would only mean that they OVERPAID their taxes by $3 billion over the course of that year, giving the government an interest-free loan.

    But that's not true, either. The very article you cite tells a different story: "According to the New York Times, in 2010 the company made $14.2 billion and even claimed a tax benefit of more than $3 billion."

    If you are going to quote the NYT, at least put the link to the NYT article, not another article that does not link to the source:

    But this just shows how insane it is to even have corporate income taxes. Just tax the money when it actually gets to the individuals -- tax the owners when they get dividends and capital gains, tax the bondholders when they get their interest payments, and tax the employees when they get paid.

    How 'bout WE become the world's tax haven, and bring some business here?

    1. jack, thanks for the link, but I don't see what "different story" you are talking about. It says worldwide profits were $14.2 billion, and it received tax benefits from the U.S. of $3 billion. The entire premise of the article is that GE is a hyper-aggressive tax avoider.

      As I have explained before, you need corporate income tax to make personal income tax works. Without CIT, people would incorporate their activities to avoid tax altogether.

      The U.S. already is a tax haven for foreigners. It is even still possible to set up untraceable corporations, though in fewer states than a few years ago.

      And please don't shout.

    2. The "different story" is this:
      YOU: "tax REFUND of $3 billion"
      ARTICLE: "tax BENEFIT of more than $3 billion"

      And who's shouting? What are you talking about?

    3. Ah, I see your point now. All I was trying to convey was that they got money back rather than paid. If your tax benefit were based on a refundable tax credit, which term would you use?

      By long-standing Internet convention, using all caps is considered to be shouting. For emphasis, it's more common to use bold, italics, or underlining.

    4. A tax benefit cannot be "based on" a refundable tax credit. It can, however, be a refundable tax credit.

      A refund is what you get from the government based on your tax returns. A benefit is what you put on the tax return which may or may not result in a refund. Many people claim refundable tax credits without actually getting a refund. Others claim no refundable tax credits but do get a refund.

      I have tried using bold and italics here without success. Perhaps things have changed, or I did it wrong.