GE’s Decision to Scrap Boston HQ Shows Corporate Tax Incentives Don’t Work
It was just three years ago that General Electric (GE) moved its corporate headquarters from Fairfield, Conn., to Boston, lured by $25 million in tax breaks.
On Thursday, the multinational said it plans to downsize its building plans to better accommodate its streamlined business, scrapping plans for a 12-story office tower on the Boston waterfront. It will instead sell the land and two state-owned buildings being renovated for the company, then lease space in those buildings (which were once home to the Necco candy company).
The overall result is that GE will now be staffing its corporate headquarters with about 250 employees rather than the planned 800. It will also return $87.4 million the Massachusetts development agency has spent on the move, the Boston Globe reports.
Which prompts a much bigger question: are tax incentives enough to attract big corporations any more?
Gary, Ind., put together a $47 million incentive package for U.S. Steel (X) in hopes that the $750 million the company would invest in modernizing a steel plant would preserve nearly 3,900 steelworker jobs in the process. Now it turns out that U.S. Steel may still have to cut jobs.
Wisconsin put together a $4 billion incentive package for Foxconn to start manufacturing in the state, but as negotiations play out, Foxconn has flip-flopped on what kinds of jobs it will create: manufacturing jobs, as promised, or more research-oriented roles. At last check, it said it would, in fact, build a manufacturing plant, albeit a lower-cost one than originally planned.
And New York’s $3 billion in incentives to attract Amazon’s HQ2 weren’t enough to counteract the public and political outcry over the planned Long Island City headquarters that would have eventually added 25,000 employees. Candidate cities were falling over themselves to offer better incentive packages to the company owned by the world’s richest man.
Research indicates there’s no major correlation between a state’s giveaways and its unemployment rate or income levels, Bryce Covert wrote in the New York Times in November, and incentives also don’t have much influence over the chosen location. About two-thirds of incentives are given to companies that would have moved to the location offering them anyway.
A study in December from subsidy watchdog Good Jobs First found that schools in 28 states lost at least $1.8 billion in tax funding that was diverted to corporations.
“Amazon’s arrogance in staging a rare public auction that caused hundreds of politicians in three nations to embarrass themselves — and waste millions of taxpayer dollars on bids that never had a prayer — will go down in history as both a financial failure and as a negative turning point in the corporation’s reputation,” Good Jobs First Executive Director Greg LeRoy said in a statement.