Back in January, General Electric announced that it will be moving its headquarters from Fairfield to Boston, Mass. Since that announcement, corporate lobbyists have pushed the narrative that GE’s move was motivated by higher taxes and a so-called ‘bad business climate.’ And the move has been mentioned often to rationalize drastic and harmful budget cuts and austerity measures. But a smart look at the facts shows that GE’s move has been portrayed inaccurately and we have taken the wrong lessons for the experience.
Even last summer when GE injected itself into the state budget process, politicians and lobbyists decried the ‘business unfriendly’ budget because it closed some corporate tax loopholes to fund schools, public safety, and infrastructure. But GE’s announcement in January illustrates that taxes clearly were not a major motivating factor in the decision to move.
If they had been, GE could be moving to Texas or Georgia, where tax rates are substantially lower than Connecticut’s. Instead, their decision came down to New York or Massachusetts, which both have higher tax rates. Ultimately GE went with Massachusetts, a state that has a long-standing reputation for higher taxes.
So if taxes are not the main factor for moving to Massachusetts, other factors must be. Every serious study of the location selection of corporate headquarters shows that the rate of the corporate income tax is far down the list of factors major corporations consider. The top factors include livable communities, good education systems, transportation, and an educated workforce.
GE’s CEO Jeff Immelt himself backs up this assertion, saying: “Greater Boston is home to 55 colleges and universities. Massachusetts spends more on research and development than any other region in the world, and Boston attracts a diverse, technologically fluent workforce focused on solving challenges for the world. We are excited to bring our headquarters to this dynamic and creative city.”
Because Massachusetts does collect more taxes, it is able to invest in these very factors that attract businesses. Massachusetts has the best-ranked schools in the country according to Education Week. They have one of the highest rates of spending per pupil at $13,157, and one of the highest graduation rates at 86 percent.
More than 70 percent of 18 to 24-year-olds in Massachusetts were enrolled in college or already completed a post-secondary degree, the highest percentage in the nation. The state has invested heavily in its transportation infrastructure with plans to invest $3 billion over the next year. And Boston is among the top 10 cities in the country that invests the most in public safety.
GE’s move comes up constantly when corporate lobbyists argue in favor of drastic budget cuts to vital services families rely on, instead of common sense revenue-generating proposals that would give our state long-term financial security. This is backwards. Corporations are looking for vibrant and vital communities with a well-educated workforce, so what sense does it make to cut vocational training programs and community college funds in the name of being ‘business friendly?’
Instead we should look to programs that can create additional funds for the state so we are not in a continuous cycle of cuts and austerity. For instance, we could pass the Low Wage Employer Fee. It would ask large, profitable companies to pay their workers a fair wage, or pay a small fee to offset the costs of public assistance programs their employees are forced to rely on to survive.
The fee could generate $305 million a year in revenue, and give families the resources they need to make ends meet. We could join a compact with other Northeastern states in asking the 1 percent to pay their fair share by closing the carried interest tax loophole, which lets hedge fund managers and bankers pay a much lower tax rate on income earned from stock market investments, and shortchanges us about $535 million every year. If our tax rates matched the tax rates for the super-wealthy in states such as New York, New Jersey, and Massachusetts, it could generate over $300 million annually.
The ‘new economic reality’ will only become permanent if we continue making harmful budget cuts and state layoffs. Shouldn’t we strive to create the kind of vibrant, safe, well-educated, supported communities GE, and other companies, want to be in?
If we continue cutting vital services and slashing public programs in the name of being ‘business friendly,’ we will create exactly the opposite environment. Only with reliable and stable sources of revenue will our state have enough resources to support our communities and draw businesses to the state.
Lindsay Farrell is the Executive Director of Connecticut Working Families.