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Joan Vennochi

GE wants money for nothing

By Joan Vennochi
Globe Columnist / November 21, 2010

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HERE’S WHAT to do with all that outrage over Bristol Palin’s curious ability to keep on dancing with the stars.

Redirect it towards General Electric, a company that wants to be paid not to fire people.

GE is seeking $25 million in tax credits from the state of Massachusetts. If the company gets the money, it might cut no more than 150 jobs at its Lynn plant and “could’’ keep employment steady at 3,150.

This corporate giant already receives billions of dollars in government contracts, including $1.8 billion in military work at the Lynn plant. Despite that infusion of taxpayer money, 600 workers were laid off anyway this year.

Last year, GE reported $11 billion in profits on $157 billion in revenue. But the company pays zero federal income tax, because it reported losses on its US operations. It received a $139 billion federal bailout for its GE Capital unit. Now, it wants a state bailout, too.

The Bay State’s congressional delegation is currently fighting for funding for an alternative engine to be built at the Lynn plant for the F-35 Joint Strike Fighter, which is expected to eventually replace the F-18 and some other planes. However, the Obama administration wants to cancel the funding, on the grounds that building a second engine is a waste of taxpayer money. In other words, GE is demanding $25 million in tax credits for a plant that makes jet engines the Pentagon doesn’t need or want.

As recent Massachusetts history shows, workers don’t always get to keep their jobs when companies get the tax break they desire.

“The Great American Jobs Scam,’’ a book by Greg LeRoy, executive director of Good Jobs First — a Washington-based non-profit that promotes corporate accountability in economic development — chronicles what happened in 1995 in Massachusetts. That’s when Lexington-based defense contractor Raytheon Corp. threatened to move its defense operations out of the state if it didn’t get an extensive package of tax cuts. With about 16,000 Raytheon jobs on the line, along with thousands of other industrial jobs when the tax break was extended to other firms, lawmakers bought the spin that this was “a jobs package, not a Raytheon package.’’ Within five months of getting what it wanted, Raytheon offered buyouts to 4,400 workers. Two years later, the company had reduced its Massachusetts headcount by 4,100 people. Since the 1995 law said the company had to sustain its dollar payroll, not its headcount, Raytheon was free to lay off lower-paid production workers and replace them with higher-paid, white-collar workers.

Tax cuts for other companies followed, most notably, for Fidelity Investments, which waited for a job requirements clause in the law to expire before it shifted its workforce outside Massachusetts. Meanwhile, movie producers who film in Massachusetts are getting lucrative tax credits. In return, they provide jobs for a few scant weeks and most of the salaries they pay go to movie stars who live in California or elsewhere.

But, in these tough economic times, every job is precious. A company like GE has tremendous leverage when it comes to preserving or eliminating them. The sheer audacity of GE’s demand reflects the company’s understanding of just how desperate people are to keep a paycheck — and how desperate state government is to keep its unemployment rate from rising. Today, a good job preserved is equal to a good job created.

Yet, even as they are being asked to subsidize a giant corporate awash in cash, taxpayers don’t have equal understanding of the company’s true motives or plans. “At the end of the day, nobody can see the poker hand GE is holding. We don’t really now what they’re thinking,’’ said LeRoy.

That’s why he believes it’s important for companies to really open their books and disclose the true consequences, with or without the tax break or subsidy. “I think companies should be required to really justify the decision. Otherwise taxpayers may be giving $25 million for nothing, and never know it until it’s done. That really is outrageous,’’ he said.

It’s even more outrageous than Bristol bumping Brandy from “Dancing With the Stars.’’

Joan Vennochi can be reached at vennochi@globe.com.