Ending months of media speculation, General Electric announced this week that the company will relocate its headquarters from Fairfield, Conn., to Boston, Mass.The company’s press release announcing the move explained that its choice is driven by amenities Boston and the state of Massachusetts offer, including its “diverse, technologically fluent workforce” and its emphasis on research and development.
Conspicuously absent from the announcement is any reference to tax-related reasons for the relocation. Earlier this year after the Connecticut legislature marginally increased business taxes, GE threatened to move and anti-tax advocates wrongly held up the state’s tax increases as a cautionary tale. GE’s choice of Massachusetts (New York was the company’s other consideration), hardly a tax haven for footloose corporations, demonstrates that a wide variety of factors, not simply the lowest tax rate, determine where businesses will locate. Boston and runner-up New York are recognized as centers of commerce and innovation. As GE said in its own press release, it chose Boston as its new corporate headquarters because of the broader “ecosystem” it offers.
It should be noted, however, that the biggest winner in this move is GE, not other taxpayers. The company has long been spectacularly successful in avoiding state income tax obligations as a Connecticut resident. In 2014, the company enjoyed $5.8 billion in pretax profits and didn’t pay a dime in state income tax on these profits. Over five years, the company paid just a 1.6 percent state income tax rate on $34 billion in U.S. profits, and it paid less than 1 percent in federal income taxes. The company is one of the nation’s most notorious tax dodgers.
These hard facts haven’t stopped idle speculation over the role of recent Connecticut tax changes in prompting the move. GE CEO Jeffrey Immelt fanned the flames when he wrote a memo earlier in 2015 complaining about tax changes enacted by the state legislature last year. But it’s unlikely that these changes really factored into the company’s decision. After all, the “combined reporting” changes corporate lobbyists in Connecticut complained most vocally about have been in place in Massachusetts since 2008. Moreover, the Connecticut Legislature quietly enacted special new tax breaks for GE in November, and the company itself has been very clear that “GE's move is not being driven by tax policy. It's being driven by a major change in GE's strategy.” Further, the company’s press release admits that corporate leaders had “been considering the composition and location of its headquarters for more than three years,” long before Connecticut’s recent corporate tax changes saw the light of day.
Long-time business leader Michael Bloomberg said that “any company that makes a decision as to where they are going to be based on the tax rate is a company that won’t be around very long.” General Electric’s latest announcement strongly suggests that tax rates weren’t even a blip on the radar in the company’s relocation move.