GE Wants It Both Ways — Low Taxes and High Subsidies
Relocating from Connecticut for lower taxes, avoiding Texas over Ex-Im opposition.
General Electric’s plan to relocate its corporate headquarters out of Connecticut is the latest example of the damage that has been done to American business by invasive government policy. That said, GE is hardly an innocent victim.
The manufacturing giant recently announced that it was on the hunt for a new home after Connecticut levied a series of corporate tax hikes. The corporate tax rate for established companies in the Nutmeg State previously ranked 44th among the states. Nearby New York wants to lure GE with relocation incentives, but it still tags new corporate citizens with a 28.3% rate, and that only drops to 25.3% for firms that have been in the state longer. That’s hardly an improvement.
GE would be better off in a state like Texas, which has a much friendlier business climate in terms of taxes and regulation. Yet GE refuses to make the move to the Lone Star State because members of that state’s congressional delegation do not support the Export-Import Bank.
Texas Congressmen Jeb Hensarling, Louis Gohmert, and 10 others along with Senator Ted Cruz opposed renewing the Ex-Im charter, which expired in June — and for good reason. Like many other conservatives, they realized that Ex-Im is nothing more than corporate welfare. The government used Ex-Im to funnel taxpayer money to foreign markets that would in turn use the money to buy U.S. goods from corporations who were certainly not in need of a helping hand to boost sales or profits.
Big business and their supporters in both parties naturally loved the Ex-Im Bank. This is sad because all it ever really did was allow companies to play loose with money taken from taxpayers and make irrational investments and poor decisions. If Boeing, GM, GE and other companies didn’t have the collective billions in handouts to play with, they would be forced to be wiser with their spending. They might run tighter companies that would in turn make more money and ultimately strengthen the economy. After all, if open-ended, unaccountable welfare doesn’t work for individuals, why would it ever work for corporations?
Government likes having tools like Ex-Im at its disposal because it gets to pick the winners and losers in the marketplace. It can exert a level of control over corporations, guiding their behavior by dangling taxpayer handouts in front of them. For GE to reject high tax rates while pitching a fit over not getting Ex-Im subsidies is a great example of wanting it both ways.
Back to the corporate tax issue, when companies act in their own best interest — paying a lower tax bill — they’re labeled as unpatriotic. Burger King’s merger with a Canadian company last year and its shift of headquarters to the Great White North meant a tax bill 10% lower than the U.S. corporate rate. This practice, known as inversion, has become increasingly popular with corporations looking to get out from under the draconian federal tax code. Burger King’s actions resulted in calls for a boycott and attempts to draft legislation to penalize companies that engage in inversion. As if doing business under the current U.S. tax code weren’t punishment enough.
In a truly free market, a company thrives or sinks based on the quality of its products or services and its ability to address consumer need. But under a system of cronyism, the government meddles so deeply into business affairs that the natural laws of economics no longer apply. GE may be a victim of bad policy here, but it isn’t an innocent one. CEO Jeffrey Immelt is buddies with Barack Obama (tapped as his “jobs czar” in 2011), and, as any company of its size will do, GE lobbies hard for rules that benefit its bottom line. And that’s the point — a level playing field means true and free competition.