GE's decision to scrape Boston's headquarters shows that tax incentives simply do not work


It was only three years ago that General Electric (ge) moved its headquarters from Fairfield, Connecticut, to Boston, seduced by $ 25 million in tax benefits.

On Thursday, the multinational said it plans to reduce its construction plans to better accommodate its streamlined business, breaking plans for a 12-story office tower on Boston's waterfront. Instead, it sells the land and two state-owned buildings that are being renovated for the company, and then rent the space in those buildings (where once the candy company Necco lived).

The overall result is that GE will now be manning its headquarters with approximately 250 employees instead of the planned 800. It will also return $ 87.4 million issued by the Massachusetts Development Agency on the way, Boston Globe reports.

What raises a much larger demand: are tax incentives enough to attract large companies?

Gary, Ind., Compiled a $ 47 million stimulus package for US Steel (x) in the hope that the 750 million dollars the company would invest in the modernization of a steel plant would retain nearly 3,900 steel workers in the process. Now it appears that US Steel may still have to cut down jobs.

Wisconsin put together a $ 4 billion incentive package for Foxconn to begin production in the state, but as the negotiations progressed, Foxconn flopped on what kind of jobs it will create: production jobs, as promised, or more research-oriented roles. At the last check it was said that it would actually build a factory, although cheaper than originally planned.

And New York's $ 3 billion incentives to attract Amazon's headquarters were not enough to counter the public and political protest against the planned Long Island City headquarters, which would eventually have added 25,000 employees. Candidate cities fell over themselves to offer better incentive packages to the company owned by the world's richest man.

Research shows that there is no significant correlation between the giveaways of a state and its unemployment rate or income level, Bryce Covert wrote in the New York Times in November, and incentives also do not have much influence on the chosen location. About two-thirds of the incentives are given to companies that would have moved to the location that would offer them anyway.

A study in December from the Good Jobs subsidy watchdog revealed for the first time that schools in 28 states lost at least $ 1.8 billion in tax funding that was diverted to companies.

"The arrogance of Amazon in organizing a rare public auction that caused hundreds of politicians in three countries to embarrass themselves – and waste millions of tax money on bids that had never had a prayer – will go down in history as both a financial failure as a negative turning point in the company's reputation, "Good Jobs First Executive Director Greg LeRoy said in a statement.