Our elected officials have given us Massachusetts taxpayers the opportunity to pay some of General Electric’s bills. “GE confirms it’s heading to Boston” (Boston Globe, January 13, 2016):
General Electric Co., one of the most storied names in corporate America, said Wednesday it will relocate its global headquarters to Boston.
The decision marks the end of a high-stakes competition to woo GE from its longtime campus in suburban Connecticut, besting New York, Providence, and other cities, and further solidifies the region’s reputation as a magnet for innovation.
GE said it will have roughly 800 people in Boston: 200 from corporate staff and 600 digital industrial product managers, designers and developers split among various divisions.
GE has not yet picked a site for its new offices, but is focused on the Seaport area. [sort of a new downtown area, across the water from Logan Airport and featuring lightning-quick trips to the airport]
City officials said they are prepared to offer as much as $25 million in property tax relief. The state package could be valued as high as $120 million and could include a variety of benefits, such as grants, tax incentives, infrastructure improvements, and help with real estate acquisition costs.
So we get to buy GE a building because “at nearly $150 billion a year in revenue, GE ranks eighth on the Fortune 500” they apparently don’t have the cash to buy one themselves. It is good to know that we beat Providence (“the economy is so bad in Rhode Island right now that the Mafia had to lay off three judges”), but it seems abusive to tax $21.50/hour workers (our state’s median wage) to pay $181,250 per job to have some GE folks here.
Those 200 corporate staffers will be doing a lot of flying out of Hanscom Field (currently 368 operations per day) unless their special deal with the state government includes discounted landing fees at Logan Airport.
How about the GE spouses? If they are considering suing a GE executive, should they do it now in Connecticut or wait until the couple is subject to Massachusetts law? The states are similar in that both are among the most favorable in the U.S. for plaintiffs hoping to profit from a marriage and/or custody of children and both states set up a winner-take-all battle in which one spouse will typically get the house, children, and profitable child support. Both states are good from the point of view of a plaintiff who needs a judge to find a prenuptial agreement invalid to unlock savings accumulated prior to the marriage. Both states are good for plaintiffs who hope to get a judge to order a defendant to pay the legal fees on both sides.
If it has been a short-term marriage with children, a lawsuit is probably more lucrative if filed in Massachusetts. From the Connecticut chapter of Real World Divorce:
Connecticut has a similar system to Massachusetts in that the guidelines in theory apply only up to a certain income ($4000 per week or $208,000 per year) but judges routinely extrapolate the percentage to higher incomes. Child support is not nearly as profitable in Connecticut, however, because the amounts are smaller and the percentages are based on after-tax income rather than pre-tax income. For example, the $208,000 per year after-tax top-of-the-guideline defendant would pay 11.83 percent of “net income” or $473 per week ($24,596 per year). To earn $208,000 per year after taxes in Connecticut, a person would have to earn $365,000 per year pre-tax. In Massachusetts, that would yield $40,000 per year at the top of the guidelines plus 11 percent of the income over $250,000 per year, i.e., another $12,650 per year for a total of $52,650. Combining this with the 23-year period versus the 18-year period, the same child has 2.74X the cash value in Massachusetts compared to Connecticut. …
As in Massachusetts, a Connecticut child support recipient need not personally take care of a child in order to profit from child support. Roisman says that judges will separately order a defendant to pay for day care or other commercial child child care expenses.
Despite the penchant for extrapolation, Roisman thought that it would be challenging for a plaintiff to get more than $200,000 per year in child support, no matter how wealthy the defendant.
Connecticut is similar to Massachusetts in the philosophy that a stay-at-home parent is entitled to continue that lifestyle at a former spouse’s expense:
Roisman would expect the mother [following a 10-year marriage] to receive alimony for as long as 16 years (until the 2-year-old is in college). “There is no formula for alimony, but you can’t expect that mother to go to work with a two-year-old. The alimony amount would be larger at first and would give the mother an opportunity for advanced education. The court would look at the father’s expenses to maintain his apartment, the mother’s expenses, etc. There is no limit to the number of years, unlike in Massachusetts.”
As noted in that last sentence, staying in Connecticut may be better for the spouse who hopes to profit from alimony. Massachusetts in theory limits alimony payments following a defendant reaching full Social Security retirement age (not always enforced by judges) and, for a marriage of 10 years plus 1 day, alimony would be for no more than 7 years (statute). [Don’t let GE relocate you to Germany, where it might well be 0 years! Texas is also bad…]
How about those of us who don’t work for GE and aren’t married to anyone at GE? I think that we will end up paying more than the $145 million in subsidies. Once the 800 GE employees come into the heart of the city and drive up real estate prices (since let’s hope that they aren’t dumb enough to try to commute), we’ll be told that there is a housing affordability crises. Taxpayers will need to fund 800 new units of affordable (i.e., more or less free) housing in central Boston at roughly $1 million per unit. Let’s say that the real estate demand from the GE folks drives up rents and purchase prices for other residents (since most don’t qualify for free government-provided housing and it is difficult to get approval to build new projects in Boston). Assume an average of $1000 per year for 50,000 units? So over 20 years this will end up costing us $2 billion plus whatever time and frustration we have to deal with due to the increased traffic and public transit congestion.
How much of that do we get back in tax revenue? We can assume that these GE folks earn an average of $200,000 per year? And they’ll pay about 10 percent of their income in state and local taxes? (the state’s tax burden is 10.3%). That’s $16 million per year. So after 125 years the folks who already live here come out ahead? That doesn’t seem right but I’m not sure what else is missing. The extra taxes paid due to local vendors enjoying higher sales now that GE is here?
I feel your, Boston taxpayer’s, pain, but what can I say?
Obviously, the politicians (that the collective you elected), and the GE executives that arranged that relocation deal in cahoots with the first, feel entitled to also be winners-take-all, just as those acting in the spirit of the guidelines of Massachusetts’ jurisprudence in divorce, alimony, and Oxford comma, child support settlements. It’s America, with each and every individual’s Pursuit of Happiness written into the Holy Grail-Constitution!
Didn’t you once write about how good GE upper management was at looting money from the stockholders? Having the top 5 guys as Mass. residents could be worth hundreds of millions of dollars a year.
superMike: I think the looting was mostly done with stock options. There is no tax due until the stock is actually purchased and then finally sold. Most of the selling would presumably happen after the executive has retired and established a tax residence in Florida, Wyoming, Nevada, Alaska, or other state that does not impose an income tax.
Now I can blame you the next time I see one of those dopey GE commercials where the young college graduate tries to explain his new job at GE to his nitwit family or friends. After all, you’ve paid for them!
I’m not sure why you don’t trust the good judgement of the political leadership in Massachusetts. After all, look at all the good work they did with Evergreen Solar.