A Highly Suspect Philanthropic Tradeoff for Public Subsidy: GE and Boston

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April 4, 2016; Boston Globe and Boston.com

Even as a coalition of activist groups protested the financial incentive package used to attract GE from Connecticut to Boston, a package that could run to nearly $145 million in tax breaks and state grants, the company announced a series of philanthropic pledges: $50 million to be devoted to the public schools, $15 million for local community health centers, and $10 million for manufacturing-oriented training opportunities for small-business owners and students in the low-income cities of Lynn and Fall River.

The activist groups are not just outraged by the size of the subsidy; they also want to alert the public to GE’s track record in minimizing federal tax payments and its pollution of the Housatonic River in Western Massachusetts.

NPQ has covered the controversy over GE’s federal taxes over many years. As has been carefully documented by the Citizens for Tax Justice and the Institute on Taxation and Economic Policy, between 2008 and 2010, GE (whose CEO is a special jobs advisor to President Obama) earned $10.5 billion in pretax profit and had an effective tax rate of negative 45.3 percent. That strikes us as reason to worry.

Not all of the promised philanthropic donations will be made in cash, by the way; some will be made in training and equipment—in other words, it will be partially in-kind.

“We know education, we know healthcare, we know manufacturing,” GE CEO Jeff Immelt said. “The idea is to open up so that in addition to our financial resources, we can have people that volunteer their time, we can have our own employees give hands-on capability and experience.”

Some philanthropic leaders are supportive, perhaps hoping to establish partnerships beneficial to their initiatives. “This instantly makes GE a major corporate giver in our community,” said Paul Grogan, president of The Boston Foundation, which has been deeply involved in the corporate reform of education. “This vaults them into a leading position in terms of corporate philanthropy.”

And, by the way, the Boston contributions will not represent an increase in GE’s annual giving.

“I think it’s outrageous that we would give millions of dollars of tax cuts to an extremely abusive transnational corporation while our MBTA, our schools and our public services are vastly underfunded,” said Ari Rubenstein, a Boston resident at the protest on behalf of Boston-based Corporate Accountability International.

The new complex, set to be developed on the site of Gillette, will host only 800 jobs, and about 200 of those will be corporate leadership positions. In other words, there will not be major local hiring. GE already employs nearly 5,000 people in Massachusetts—largely at its plant in Lynn, although it also has facilities in Boston, Marlborough, and Billerica.

Among the groups protesting GE’s subsidy is No Boston 2024, the group that successfully opposed the Boston Olympic bid. The issues, says a spokesman, are largely similar, in that the state and city would be making a speculative investment in an outside entity with questionable intentions toward the public budget instead of directly in the things that are needed by the residents that pay the taxes.—Ruth McCambridge

  • Janet Rechtman

    So GE gets the tax break and the write-off of charitable donation, plus an outsize voice in major community endeavors. So blurs the line between social capital and financial capital. I’m old fashioned enough to resent the corruption of philanthropy into self-interested, highly conditional gifts to benefit business instead of altruistic, unconditional gifts to benefit others.