Recently the state of Texas has been a perfect example of a country-wide shift in the relationship between politics and business. Like a teenage Facebook romance, it’s a relationship that’s often complicated. At times, state governments offer tax breaks and incentives to usher new businesses in – at other times the corporate and personal income tax goes up and companies threaten to cross state lines. Already this year, Texas’ politicians have – perhaps inadvertently – pushed away General Electric with their objections to the Export-Import Bank. Meanwhile, other companies in the tech sector are flowing out of the Bay Area and into Austin.
This issue isn’t relegated to Texas or even the South as a whole – this year it’s going to be one of great changes for the country, and a number of political and economic factors will determine where companies end up.
Income tax, corporate tax and calculated moves
General Electric is a prime example of how tax situations can affect corporate thinking. According to The Wall Street Journal, GE is moving its headquarters out of Fairfield, Connecticut, its home of nearly 42 years, because of a recent increase in corporate tax rates. GE could have moved to Texas, but passed because, it seems, of differing political views. Likewise, it could have moved to New York, where the company has long-standing ties, but it appears that high personal tax rates were too much. And so one of the largest corporations in the U.S. is moving to Boston, where they will benefit from nearly $145 million in tax incentives.
These kinds of incentives are important to big players like GE, and they could have benefits that reach smaller players. Corporate relocation measures will have to take the tax situation into consideration. It could mean the difference between a fat profit margin and one that’s razor-thin. When a conglomerate like GE makes big moves, it could create a rising tide that raises other ships.
This article was published here