NEW YORK (TheStreet) -- Officials in General Electric's (GE) - Get Report hometown of Fairfield, Conn., are working to keep the multinational manufacturer's headquarters there -- and out of the clutches of neighboring New York -- after state tax increases this week prompted CEO Jeff Immelt to consider relocating.
GE employees have contacted Connecticut legislators to share their concerns that the company founded by Thomas Edison has already been approached about moving its headquarters to the Empire State, State Rep. Brenda Kupchick, R-Fairfield, said in an interview. New York Gov. Andrew Cuomo's office didn't immediately respond to requests for comment, and GE declined to comment.
GE has a long and storied connection with New York. Its founder, Thomas Edison, built the first central power station in New York City in 1882 and the company has operated a research laboratory in Schenectady since 1900, according to its website. GE was the exclusive provider of switches and switchboards for the Empire State Building, and its headquarters for much of the 20th Century was at 570 Lexington Avenue in Manhattan.
The company moved to Fairfield in 1974, according to the New York Times, and today, about 6,000 of its 305,000 employees worldwide are based there. Immelt said in a letter to them obtained by TheStreet that the company would look to locate in a state with a more business-friendly environment, noting that Connecticut's new taxes would generate more than $1.9 billion statewide. GE declined to specify how much it pays in state taxes.
The increase comes largely in the form of a "unitary tax," which would place a levy on income that GE and other Connecticut-based corporations like Travelers (TRV) - Get Report and Aetna (AET) earn outside the state, Kupchick said.
"If you were a corporation, you would obviously not be set up in a state that has a unitary tax -- you get hit in every which way," she said. "The bottom line is 24 states have this tax and the rest do not. I would venture to guess that the states that do not have it would generatea lot more corporate revenue for their states."
Connecticut's tax increase is the highest since a $2 billion jump in 2011, which was the largest in its history, Immelt said in his letter. "Throughout the week, we conveyed our concerns that these would not improve the competitiveness of small and large businesses in the state."
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Still, GE's total income tax provisions dipped to a five-year low of $1.6 billion in 2014, according to a regulatory filing, while its operating income has been increasing at a steady clip, rising more than 30% since 2010. Cash tax payments made to the IRS, which aren't adjusted for future benefits and expenses, ticked up 11% in the past five years to $3 billion in 2014.
Taxes have been raised five times since 2011, "while support for our strategies has been uneven," Immelt said in the letter. "I believe we should pay our fair share and that all of us should give back to our communities. But, we can compare Connecticut with other states where small and large businesses have a better environment to thrive and compete."
Connecticut Gov. Dannel Malloy, a Democrat, has said he is reevaluating the tax guidance of the biannual budget and remains flexible. His office didn't respond to requests for comment on Friday.
GE is a massive boon not only to Connecticut, in which it spends $14 billion a year, but also to its hometown of Fairfield, where it is the largest generator of property tax, holding about $72 million in local real estate. Under the town's current tax rate, the property would generate well over $1 million in property taxes.
"GE is our No. 1 taxpayer and a phenomenal corporate citizen in terms of everything they do for the town," Fairfield's First Selectman Michael Tetreau, a Democrat, said in an interview. His position is equivalent to the role of mayor. "I have significant problems with the budget, and I'm going to do everything I can to keep GE in Fairfield."
In addition to property taxes, the bread and butter of municipal budgets, GE employees sit on charitable foundations and the company contributes via donations and development projects such as the recent gift of a 40-acre walking trail near the town's Lake Mohegan.
"Someone asked me, 'How are you going to replace GE if they leave?'" Tetreau said. "Well, listen, there is no GE No. 2. If they choose to leave Fairfield, that will have a devastating effect on our local economy and local community."
State legislators are arguing that the unitary tax was slipped into the budget and not introduced to lawmakers, or corporations such as GE, until Tuesday, causing an uproar in the state capital of Hartford.
"No one had any of this information except for the Democratic leadership," Kupchick said. "The rank and file didn't have any of this, and the whole place was abuzz Tuesday."
Democratic leaders contend that businesses are overreacting to reasonable budget increases to gain a better seat at the negotiating table.
"We have nothing in this budget that businesses should see as punitive or as a disincentive for their operation in Connecticut if they were to look at it and assess it fairly," Sen. Martin Looney, D-Conn., said in a news briefing Thursday.