General Electric may be looking for a new home for its corporate headquarters in response to a whopping $150 million Connecticut state tax increase. The company already moved once as a tax refugee from New York City to its current Fairfield, Connecticut location. Delaware could get on the list of potential candidates for GE’s five hundred highly paid headquarters employees.
Connecticut already has a high corporate income tax rate of 9% of earnings but changed to a “combined reporting” system this year that will tax global earnings instead of just earnings generated in Connecticut. With global sales of almost $150 billion, and earnings of $16.7 billion in 2014, GE could see a state tax bill of $150 million. In addition, the sales tax rate on data processing increased from 1 % to 3% which will also add to GE’s state tax burden. In contrast, Delaware has a special tax rate for Headquarters Management Companies that depends on the size of the operation. This is a dramatic savings from the combined tax rate of about 12.5% for manufacturing companies in Delaware when both the Corporate Income Tax on Delaware earnings, and Gross Receipts Tax are considered.
Besides direct corporate taxes, companies also consider the tax on its employees when deciding where to locate. Connecticut has the second highest property taxes in the country and a 6.35% sales tax. Delaware has one of the lowest property tax rates, and no sales tax. Delaware has a top marginal income tax rate of 6.7% compared to Connecticut at 6.99%, though there has been talk of raising the top Delaware rate this year. The bigger issue is Delaware’s top rate starts at $60,000 in income while the Connecticut rate is only 5% up to $100,000 in income. The top Connecticut marginal rate doesn’t start until $500,000 in income. The Delaware legislature needs to think twice about raising income tax rates.
It would certainly seem good strategy to reach out to General Electric and welcome them to Delaware. There are reports Ohio, Georgia, New York, and Florida have already called GE CEO Jeffrey Immelt. The phone number is 203-373-2211!
Here are some other major companies headquartered in Connecticut: Aetna, Cigna, The Hartford, Otis Elevator, Schick, Subway, Timex, United Technologies, and Xerox. It might be interesting to see if targeted legislation might help to attract the insurance industry to Delaware.
Dave T. Stevenson, Director