Guest AuthorGE announced on Jan. 13 that it had chosen Boston as the new destination for 800 employees who now work in its Connecticut headquarters.
Although pending tax increases had been blamed for the Fortune 8 company’s wandering eye, it appears GE’s deliberations had started three years earlier. Evidence is leaking out that suggests the decision wasn’t simply a corporate version of a Tea Party revolt against taxes.
Sure, GE reduced its taxes. The company’s effective tax rate will drop from 9 percent in Connecticut to 8 percent in Massachusetts, according to the Tax Foundation. You read that right: 1 percent. Any lobbying team could have negotiated a tax exemption that small.
GE got incentives, too. Massachusetts is ponying up $120 million and Boston another $20 million in property tax relief. Toss in $5 million for an Innovation Center created to connect GE to the local university-based research and development engine. That’s a big number, putting the cost at $181,250 per relocated job.
It’s unlikely that job creation drove Massachusetts’ pursuit of GE. The Boston metropolitan area’s unemployment rate never rose above 8.7 percent in the recession and closed 2015 near 4 percent. The Bay State’s unemployment rate overall is below 5 percent.
While business is always about the numbers, costs are only one side of the equation. Connecticut’s Senate President Pro Tem Martin Looney recognized this dynamic: “If cost were the only factor in decisions, the whole world would be beating a path to Mississippi.”
Mississippians should be outraged. Mississippi is only 20th in tax rankings. Wyoming, South Dakota, Alaska and Florida take the top four slots in low-tax rankings, according to the Tax Foundation.
The perfect match between Massachusetts and GE is qualitative not quantitative. That is, what matters most to policymakers is the type of jobs being created, because they’ll generate many other innovation-based, high-wage, tax-paying jobs. And what matters to the business executives is that Boston can provide the innovation environment GE covets.
The decision hinged on which location would contribute most to the company’s planned transformation.
“GE aspires to be the most competitive company in the world,” CEO Jeffrey Immelt said in a formal statement. “Today GE is a $130 billion high-tech global industrial company, one that is leading the digital transformation of industry. We want to be at the center of an ecosystem that shared our aspirations.”
What are Florida’s prospects? What will it take to be seen as an “innovation ecosystem”?
The state needs to invest in human capital that produces or attracts an educated, skilled and creative workforce. Research and development investments yield new technologies and processes to meet what markets and society demand. Investment capital takes on the risk for a calculated upside in the few projects that ultimately survive.
If our future investments don’t soon reflect a commitment to the architecture of innovation, we will neither grow our own version of GE nor attract Fortune 500 companies that can spawn Florida’s economic revolution. At least one scorecard casts doubt that we’ll succeed anytime soon.
The most recent Milken Institute’s “State Technology and Science Index” ranks Florida’s human capital investment 43rd in the nation. As for technology and science workforce, we rank 38th. Our research and development score merits the 40th position. Our best performance is a risk capital rank of 21st that lifts the overall state technology and science index ranking to 37th.
Massachusetts? It’s number one.
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Dr. Dale Brill is founder and obsessive thinker for Thinkspot Inc., a Florida-based consulting firm. He has previously served as chief marketing officer for VISIT FLORIDA, director of the Office of Tourism, Trade & Economic Development and president of the Florida Chamber Foundation. You can reach Dale at [email protected]. Column courtesy of Context Florida.
