Texas wants General Electric (GE) ... bad. That's good news for GE and probably not such good news for the people of Texas.
Here's the back story: GE's CEO, Jeff Immelt, is fuming over a tax hike in Connecticut. He feels it's outrageous and unfair. GE has had it headquarters in Connecticut for many years. An article I read said GE employs 5,700 people in the state and pays $1.8 million in property taxes. Wow ... 1.8 million bucks. I hope GE can afford it. The industrial giant earned $65 billion in gross profit last year on revenues of $144 billion. That $1.8 million has gotta hurt. I'd move out, too!
When Immelt heard about the statewide tax increase on businesses, he immediately sent out an email telling employees he was assembling a team to look to other locations that might be more "business friendly."
First let me say this, and I've said it before: The whole argument about corporate taxes being too high is bogus. The fact is, 80% of all taxes collected by the federal government come from employment taxes. That means withholding and FICA (Social Security, Medicare, etc.). That's $2 trillion of the $2.6 trillion collected last year by the government and it's primarily people working for a paycheck who pay that.
Corporations kicked in $345 billion, or about 13% of the total. Wow, what a burden.
I realize that corporations also get taxed at the state and local levels, but so do most of us, so it's not like they're being unfairly picked on. Furthermore, as with federal taxes, you'll find the percentages are wildly skewed in favor of businesses over workers, all the corporate whining notwithstanding. If that were not the case, there wouldn't be such a big problem with income inequality, yet there is.
Finally, what's with this endless whining about a state always having to be "business friendly"? What about worker/consumer friendly? After all, its workers and consumers who do most of the buying of the products that businesses produce and sell. Ensure that workers and consumers have enough income to satisfy their consumption needs and maybe some money left over to save a little, and you have a really, really healthy economy and state -- for everyone -- not just a few.
Now let me get to the charade of corporate welfare that so many states, particularly Southern states, have engaged in. I'm talking about tax giveaways and subsidies to companies like Toyota (TM), Hyundai (HYMTF) and BMW from states like Kentucky, Tennessee, Alabama, Mississippi, South Carolina, Georgia and Texas.
Politicians and many right-leaning economists have long touted these deals (which go hand in hand with union busting) and how they've "transformed" the economies of these states. Some transformation. In nearly every metric of economic well-being (gross state product, income per capita, poverty, etc.), these states rank near the bottom, with Texas being the exception, but mainly because of its oil wealth.
Furthermore, they are all net recipients of federal aid. In other words, they get back more from the government than they pay in. Indeed, that's the only way these welfare gifts would be feasible. High-tax states like New York, California and yes, Connecticut pay in more than they get back. That means high-tax states are subsidizing those Southern states and their giveaways to corporations. It's important that people understand this.
Now let me get back to where I started, which is with the observation that Texas is aggressively wooing General Electric. There's an investment angle here and it's potentially big news if you are a General Electric shareholder, which I am. (Full disclosure: I bought GE years ago, in the midst of the financial crisis; just because I think it is well positioned to profit from America's drive to be an export nation, which I oppose, but heck, I also gotta make some money.)
I am sure that some state, maybe Texas, who knows, will give GE what it wants and it will move there. Either that or Connecticut will back down and "tweak" the new tax law so that Jeff Immelt stops crying. Either way, that will mean savings.
Personally, I am hoping GE does move its headquarters because it will probably mean hundreds of millions in tax breaks and perhaps direct subsidies for the company. That will be great for its stock price, but maybe not so great for its workers, but it's not like we haven't seen that before.