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 at Angry Bear.

Romney Gets Incoherent on Pre-Existing Conditions

Mitt Romney was on the Jay Leno Show last night (via @didkins4life) and gave a completely incoherent account of whether people with pre-existing conditions should be able to get insurance. As the author of Massachusetts' health insurance reform as Governor, he was able to articulate the free-rider problem of people waiting to get sick to get insurance--which is why Romneycare and the Affordable Care Act have an individual mandate.

But Romney stumbled badly when Leno asked him what should happen to people with pre-existing conditions. If they had had insurance before, Romney said they should be able to get it again. (Note, however, he says nothing about how long ago they'd had insurance.) But if they never had insurance before, Romney gave what was essentially a non-answer: a) You can't play games like that; b) "But you have to find rules that get people in that are playing by the rules.” That, of course, would be a mandate, but he can't bring himself to say it because of primary politics and, as Greg Sargent points out, perhaps his own beliefs as well.

The alternative, though, is to do nothing for the uninsured who get sick. Romney did not rule that out, but merely tried clumsily to finesse it. As Mark Thoma says,

If we could make people pay the full cost of this wager that they won't need insurance, i.e. if society could turn it's back and say you made your choice, now live (or die) with it, a mandate wouldn't be needed. But we can't (and I wouldn't want to live in a society that could).

 I wouldn't want to live in such a society, either, which is why we need universal coverage. Though I'd prefer single payer, right now the Affordable Care Act's individual mandate is as close as we are going to get. Romney's repudiation of it is as hilarious (and depressing) as that of the Heritage Foundation. As a result, his plans for the uninsured look distressingly like what Alan Grayson called the Republican health plan: 1) Don't get sick. 2) If you do get sick, die quickly.

Romney Tax Plan Blows Hole in Budget, Remains Short on Specifics

Mitt Romney unveiled his tax plan today, but it revealed few surprises except for surprisingly few specifics. Via Chris Hayes (@chrislhayes), conservative economist Josh Barro estimates that the Romney plan consists of $5 trillion in tax cuts over 10 years, divided as follows:

$1 trillion from cutting the corporate income tax
$3 trillion from cutting all personal income tax rates by 20% (not 20 percentage points, by the way)
$1 trillion from miscellaneous tax cuts like abolishing the alternative minimum tax (AMT)

According to the Romney plan, the corporate income tax rate would fall from 35% to 25% and the U.S. would stop taxing countries on their foreign profits. Contrary to Romney's claim, making foreign profits tax-free would not encourage their investment in the U.S., but would instead give companies an incentive to make more of their profits appear to be foreign by creative use of transfer pricing to make profits show up in tax havens instead of the U.S. Under the Romney plan, companies would then be free to bring that money back to the U.S. without facing any tax, anywhere in the world.

Among the other non-surprises in the plan, Romney would not increase the 15% tax rate on his own main source of income, capital gains. He would repeal the Affordable Care Act, even though his version of it in Massachusetts gave the state the highest level of insurance coverage in the country at 95%. He would raise the eligibility age for Social Security and end Medicare as we know it a la the Ryan Plan, two staples of conservative talking points that would negatively affect the middle class.

As Barro points out, Romney has said before that he will increase American military spending (already tops in the world by far). This makes it even more difficult for him to offset the $5 billion in tax cuts without huge cuts to programs that the middle class depends on. Thus, I think the inescapable conclusion is that of Benjy Sarlin: "Romney's Tax Plan Still a Boon to the Rich, Despite 1% Talk."

Heritage Doubles Down on Individual Mandate Denialism

As I reported in July, the Heritage Foundation has been bellowing against the Affordable Care Act despite the fact that the critical elements (individual mandate, community rating, and subsidies so everyone can afford insurance) were first proposed by -- the Heritage Foundation!

In USA Today (via Don Taylor) Stuart Butler, author of the Heritage lecture linked above, says "Don't Blame Heritage for ObamaCare Mandate." He writes:

The confusion arises from the fact that 20 years ago, I held the view that as a technical matter, some form of requirement to purchase insurance was needed in a near-universal insurance market to avoid massive instability through "adverse selection" (insurers avoiding bad risks and healthy people declining coverage). At that time, President Clinton was proposing a universal health care plan, and Heritage and I devised a viable alternative.

My view was shared at the time by many conservative experts, including American Enterprise Institute (AEI) scholars, as well as most non-conservative analysts. Even libertarian-conservative icon Milton Friedman, in a 1991 Wall Street Journal article, advocated replacing Medicare and Medicaid "with a requirement that every U.S. family unit have a major medical insurance policy."

My idea was hardly new. Heritage did not invent the individual mandate.

  What this self-serving narrative omits, as Taylor points out, is any mention of Butler's original proposal, linked above, from October 1989. This is more than three years prior to the Clinton health care legislation he claimed to be opposing. Butler's entire article puts his support of the mandate in "the 1990s," despite the fact that he had to have been conducting research on it prior to lecturing on it in 1989. Indeed, he cites no publication prior to his own where an individual mandate was proposed. That doesn't mean one isn't out there, but he gives us no reason to think there is.

He continues:

Additionally, the meaning of the individual mandate we are said to have "invented" has changed over time. Today it means the government makes people buy comprehensive benefits for their own good, rather than our original emphasis on protecting society from the heavy medical costs of free riders.

 This is a very strained distinction. I'm not aware of the President or any other supporter of the mandate (I myself would prefer single payer) claiming people are to be forced to buy insurance "for their own good." Just as with Governor Romney's health care reform in Massachusetts, the idea behind the individual mandate remains preventing free riders from not getting insurance until they are sick. That is crucial in making it possible to require insurance companies to insure anyone regardless of pre-existing conditions.

Taylor's colleague at The Incidental Economist, Aaron Carroll, is even more skeptical than Taylor. Carroll argues that nothing in Butler's article supports the view that the mandate in unconstitutional, least of all the claim that the mandate is "for their own good." He also rejects Butler's claim that the Heritage mandate used carrots while the ACA's uses sticks as "just semantics." Whether you raise taxes and give a credit to those who buy insurance, or don't raise taxes and penalize those who don't buy insurance, the bottom line, Carroll points out, is the same.

While I guess it is in some way intellectually appealing to see Butler try to explicitly defend his changed position, the fact of the matter is that his defense is entirely bogus. You don't craft a policy in 1989 to defend against a proposal in 1993 by a President who hasn't been elected yet. No, the truth of the matter is that the individual mandate was the conservative approach to expanding health care access right up until the time President Obama advanced it as his own. Then it became both bad policy and unconstitutional, to boot.

And at night all cats are gray.