During recent meetings, the Buncombe County Commissioners agreed to award the no-longer-mysterious Project X $18.5 million in cash and real estate if they would not pack up and haul away the thirty or so jobs they already have in the county. This week, the City of Asheville agreed to give the multinational corporation another $1.568 million. In return, X promised to create 52 jobs paying an average wage of $40,000. No information was forthcoming on how top-heavy the wage distribution would be.
To his credit, Economic Development Director Sam Powers did not present the colorful pie charts and bar graphs displaying unbelievable numbers about economic multipliers. In fact, Powers said barely nothing about projected numbers except that they’d be positive.
Some folks from the county graced the meeting to speak against council’s expected vote in favor of the project. By that time, as Councilman Cecil Bothwell pointed out, anybody who did a little research had figured out the mysterious company was GE Aviation. Jerry Rice asked why the taxpayers should be expected to shoulder the burden of gifting a company that was larger than the combined Asheville City and Buncombe County governments. “Did you get that?” he asked after a pause to let it sink in. Alan Ditmore complained that GE would be making machines of pollution and war.
Councilman Cecil Bothwell picked up on the war complaint. He said he wouldn’t be too troubled if the company were to expand to support the commercial airline industry, but he would, as a representative of a town that supported Dennis Kucinich in “the” primary, have a problem being responsible for the opening of a manufacturing facility for the military industrial complex downtown.
Bothwell was put off by the secrecy games he had to engage. Just to mention “Project X” made the speaker look like a goof announcing his rank in the pecking order. Members of city council and the county board of commissioners were not even allowed to know what would be manufactured. Bothwell said if, for example, it were to become known that the company was going to manufacture nerve gas, one could bet there would be public outcry.
Mayor Terry Bellamy returned from a conference call shortly thereafter and chastised Bothwell for speaking negatively about members of the community. GE already provided jobs for people that needed money to pay rent and put food on the table. A similar argument had been played for Hitler’s Brown Shirts.
Bellamy said, as if reciting a line for a rehearsed comedy routine, that it wasn’t fair for him to cast aspersions when representatives of the secret company weren’t there to defend themselves. Moving past the obvious rebuttal, Bothwell said the company had had more than enough opportunities to show its face. Bothwell, the only member of council to vote against the measure, said he wanted a change in state and federal laws to get rid of the practice of paying rich multinationals perks to do things of which poor people can’t even dream.
Why So Secret?
In contrast, the county commissioners chastised those speaking against the tax incentives. In paternal tones, they sent the message that the secrecy in the deal was for the public good. If citizens were to trouble their pretty little heads with too much information, the wonderful corporation could pack up its existing business and go elsewhere.
Likely, none of the meddlesome taxpayers had ventured so far from media outlets in the last decade or so to claim ignorance to GE’s involvement in what detractors refer to as “crony capitalism.” As early as 2002, after the World Trade Organization forced the US to terminate its annual disbursement of $5 billion to exporters like GE, the corporation’s Washington boys rewrote an applicable portion of the tax code. In 2004, the American Jobs Creation Act awarded the lion’s share of $100 million in tax savings to GE. In the next three years, the act “saved” GE more than $1 billion.
One item on which Rush Limbaugh and Michael Moore agree is that GE should pay more taxes. Citizens for Tax Justice concluded GE did pay taxes in 2012. They paid $3.2 billion to the federal government and another $1 billion in state and local taxes. As the world’s second-largest corporation, GE paid at a rate of 8.2 percent, whereas the average tax rate for large corporations was 35 percent. In the prior year, the New York Times exposed the company for exempting $3.2 billion of $5.1 billion in profits. GE’s average tax payment rate over the last four years has been negative 11 percent.
According to the Times article, “[GE’s] extraordinary success is based on an aggressive strategy that mixes fierce lobbying for tax breaks and innovative accounting that enables it to concentrate its profits offshore. GE’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes officials not just from the Treasury, but also from the IRS and virtually all the tax-writing committees in Congress.”
One strategy the company uses is the one likely responsible for getting the president a second term in office. Whereas Mitt Romney was demonized for parking profits in overseas accounts to avoid paying taxes, a practice widely used by large corporations that remains quite legal according to the current tax code, GE is credited with taking better advantage of the practice than any other corporation. According to estimates by Bloomberg, $1.9 trillion in corporate profits is stashed in tax-free foreign investments. The Government Accountability Office reported it loses approximately $180 billion annually as a result.
Whereas a large, successful business has the option of turning to traditional lenders to fund expansion projects, GE, half of whose business activities have been described as financial services, needed interest-free perks from government. As an example of GE’s dependence on legislation and legislative constructs, it has been charged that GE would have gone whichever way the “too big to fail” instruments went.
In the end, it must be noted that GE is doing nothing illegal. They are merely taking advantage of the fact that, unlike the little guy, they are able to retain enough profits to hire lawyers to navigate the law, accountants to find workarounds, and lobbyists to make up the difference. GE is no stranger to applying for local economic development incentives and supporting pet projects of legislators who cooperate. Yes, such knowledge coming out of the closet would probably be too big for the public to handle. It is best we feed them colorful pie charts and not venture into advanced mathematics like subtraction.