Industrials

GE Moves to Boston in Mini Tax Inversion

Paul Ausick

Published: January 13, 2016 1:20 pm

Last Updated: January 13, 2020 3:04 pm

General Electric Co. (NYSE: GE) has been unhappy with the state of Connecticut since last July when the state legislature raised corporate taxes to help the government meet a $40 billion biennial budget. According to reports from the Boston Globe and elsewhere, GE plans to announce on Thursday that it is moving its corporate headquarters to Boston.

GE employs about 5,700 people in Connecticut, of which around 800 are located at company headquarters. Here are the sweeteners according to the Globe:

The city is prepared to offer as much as $20 million in property tax relief over 20 years, according to the people close to the process. The state package could be valued as high as $120 million and include a variety of benefits, such as help with real estate acquisition costs, infrastructure improvements, and tax incentives.

Other cities reportedly in the running for GE headquarters were Atlanta, Austin, Nashville and Providence, as well as the state of New York.
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Does this really matter? Do the city and state get something that only GE can provide by giving up tax money? According to research published in 2014 by Christopher Coyne and Loretta Moberg, Boston and Massachusetts shouldn’t expect much:

Targeted benefits often fail to achieve their stated goals and have major negative consequences such as misallocation of resources, an increase in lobbying and other rent-seeking, an increase in cronyism, and a bias toward large firms. … Rather than using policies that are discriminatory toward particular firms and industries, policymakers would be better off pursuing policies that level the playing field for all businesses.

Los Angeles gets the NFL Rams back and Boston gets the eighth-largest U.S. corporation. Which city won this round?