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We know this sounds crazy, but GE could help fix our unfair tax code

Bernie Sanders and others have scolded the company for (legally) paying no taxes. Here’s how the Boston newcomer could emerge a hero.

images from AP; globe staff illustration

Dear GE:

Don’t worry. This isn’t yet another screed calling you out as the king of all corporate tax dodgers. By now, most people probably have a general understanding that you’ve been both aggressive and effective in reducing what you owe Uncle Sam over the years, though I suspect few appreciate just how effective. If there is more art than science at play at the highest echelons of the tax world, then you, General Electric, are our nation’s corporate Picasso. Just last month, the Institute on Taxation and Economic Policy, or ITEP, reported that, averaged out over the last eight years, you paid no US corporate income taxes, in large part because you received a total federal tax subsidy of $15.4 billion, despite raking in $40 billion in profits during that period. Imagination at work, baby!

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I know you dispute those figures, and we’ll get into that later. For now, though, let’s just agree that the members of your best-in-the-business tax team more than earned whatever you’ve paid them in bonuses.

And don’t worry, Governor Charlie Baker and Mayor Marty Walsh. I’m not going to gas on about how the package of tax breaks and incentives worth up to $145 million you offered GE brass to move their corporate headquarters to Boston was likely far more generous than it needed to be. Sure, GE had concluded that moving to a young, brainy, tech-focused “ecosystem” was the best way to make a clean break from its stodgy suburban country club past, and only three locations seriously qualified — Boston, New York, and Silicon Valley. When it comes to tax climate, the other two contenders make Massachusetts look like anything-goes Nevada. The reality is, even if GE would have accepted a smaller incentive package, there’s a good chance the sweet deal you gave it simply saved everybody time and expense by heading off the inevitable court dispute down the line. After all, GE has a history of ferociously battling to reduce any taxes it deems excessive, and, let’s just say that its bar for “excessive” hasn’t been particularly high. Fairfield, Connecticut, previous home to GE’s corporate headquarters, learned this through a bruising court battle, as did a school district in Schenectady, New York, which had to borrow to pay GE nearly $12 million after the company successfully contested its tax bill.

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But, GE, let’s consider all that tax meshugas to be water under the Summer Street Bridge. You’re settling into your new home in Boston’s Fort Point neighborhood and are working hard to establish a fresh identity as a leaner, nimbler GE for the new century. That presumably even includes a new attitude on corporate taxes. “The tax code is complex and outdated, which is exactly why tax reform must happen this year,” you said in your official response to last month’s ITEP report highlighting your remarkably low tax bills. “GE has long been advocating to simplify and modernize the tax system — even if it means we pay more in taxes.”

Critics will doubt the sincerity of your commitment to tax reform, or at least to the kind of genuine reform that doesn’t just lower corporate tax rates but actually closes the giant loopholes that have for decades served as the canvas for tax-minimizing art.

Not me, though. I’m going to take you at your word. After spending a month studying this field with the zeal of a junior associate in your tax department, I’ve found reason to question many of my initial assumptions. I’ve also arrived at a surprising conclusion: I’m now convinced that you, GE, are uniquely qualified not simply to accept the changes that may be imminent, but to lead this nation to the promised land of tax reform that boosts fairness and logic and eliminates needless complexity.

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Man, do we all need help getting there. And though the phrase “tax reform” sounds like enough to sedate the most restless insomniac, it’s actually hugely important to every American. Without access to armies of lobbyists and accountants, average taxpayers shoulder a disproportionate share of the load. Only 9 percent of total tax revenue comes from corporations while a staggering 81 percent comes from personal income and payroll taxes. This imbalance can’t continue.

What better way, GE, for you to shed your image as a me-first conglomerate rooted in the last century, the reliable boo line for all those millennials who pack Bernie Sanders and Elizabeth Warren rallies, than to take the lead now?

Normally, I wouldn’t hold my breath for this kind of dramatic pivot. But because of an unusual convergence of events, the timing could not be better for you to step up to the plate.

As part of your metamorphosis into the leaner GE, you’ve not only shed your loophole-reliant financial division, GE Capital, but in January also took the unheard-of step of selling off most of your world-renowned 800-person tax department. Increasingly, the status quo on corporate taxes seems unsustainable. In Europe, the drumbeat is accelerating for going after tax-dodging multinationals. Witness the staggering $14.5 billion tax bill the European Union served up to Apple. And despite the new business-friendly administration in the White House, let’s remember that Donald Trump won the election partly by tapping into voters’ discontent over a game they feel is rigged and persuading enough of them he’d be the one to make things right.

The Trump administration and Republican congressional leaders will soon turn their attention to tax reform. Granted, there’s a decent chance this will amount to little besides a lower corporate rate and some gimmicky giveaways to the powerful interests armed with the savviest lobbyists. After all, we’ve got a billionaire in the White House who, in response to the charge that he had avoided paying any federal taxes, famously boasted “that makes me smart.” If we blow our opportunity for meaningful reform on a big-business feeding frenzy, we’ll see the nation’s income divide widen, budget deficits balloon, and populist discontent deepen.

Yet with some adroit leadership on your part, GE, you can unify the corporate community and help lead Washington to the first serious, sensible, and comprehensive tax reform in three decades.

For the first time in a long while, it will be in your own interest to do so. Think of other memorably improbable 180-degree turns in history, like when war hero Dwight Eisenhower cautioned against the military-industrial complex, or Texan good ol’ boy Lyndon Johnson pushed through the Civil Rights Act, or redbaiter Richard Nixon made his pilgrimage to Beijing to recognize the Communist government there.

GE CEO Jeff Immelt: This is your Nixon-to-China moment.

II. REWIND

It’s the early days of the new administration, and the president — a pro-business convert to the GOP who won the White House by using his television celebrity and outsider status to peel off frustrated blue-collar voters from the Democratic base — is promising to work with Congress to enact tax-code changes that will rejuvenate the economy.

Donald Trump in 2017? Actually, I’m describing Ronald Reagan in 1981.

Reagan, the actor who became a household name as host of the weekly TV program General Electric Theater, came into the Oval Office promising a huge populist tax cut to reduce individual rates by one-third. Yet after an intense lobbying effort by the Business Roundtable, the corporate advocacy group then led by a GE executive, the focus of the tax cut shifted decidedly to big business. Reagan’s budget director, David Stockman, complained in an infamous Atlantic profile: “The hogs were really feeding. The greed level, the level of opportunism, just got out of control.” Big business managed to play congressional Republicans and Democrats off each other to boost their bennies. As noted in the book Uneasy Partners, this led one liberal Democratic congressman to crack: “It would probably be cheaper if we gave everybody in the country three wishes.”

The package that Reagan signed into law during his first year in office lowered corporate tax rates while boosting investment tax credits and allowances for accelerated depreciation. At the last minute, lawmakers tucked in a provision on so-called “safe-harbor leasing.” It was designed to assist unprofitable companies, like automakers and steel makers, by giving them tax credits they could use against future earnings. But it didn’t take long for these struggling companies to sell their safe-harbor tax credits for cash (at a discount) to highly profitable companies, like GE and IBM, which used them to erase big chunks of what they owed to the Internal Revenue Service.

In the two years following the passage of the 1981 tax cut, perhaps not coincidentally, the US economy suffered what was then the worst economic downturn since the Great Depression.

During an Oval Office meeting at the end of 1983, Treasury Secretary Don Regan asked President Reagan a question. “What does General Electric have in common with Boeing, General Dynamics, and fifty-seven other big corporations?”

The Treasury secretary, who was a former Wall Street executive, wrote in his autobiography that he suspected this question would pique the president’s interest. After all, Reagan spoke so fondly about his days working as host and good-will ambassador for GE in the 1950s and ’60s, an experience that contributed mightily to the Gipper’s conversion from New Deal Democrat to free-enterprise Republican.

Future president Ronald Reagan worked as a TV host for “General Electric Theater” in the 1950s and ’60s, when he went from New Deal Democrat to free-enterprise Republican.

“I don’t know,” Reagan replied, leaning forward in his chair and smiling. “What do they have in common?”

“Not one of them pays a penny in taxes to the United States government,” the Treasury secretary said.

The president was stunned. “I just can’t believe that.”

“There’s no doubt about it. It’s perfectly legal, but it’s wrong, Mr. President.”

The exchange smartened and steeled Reagan and his team for their second attempt at fixing the tax code. The Tax Reform Act of 1986 was remarkably successful. It lowered rates, reduced confusion, and, most important, closed tens of billions of dollars in loopholes and tax shelters to help level the playing field for corporations and individuals alike. Even though the law reduced the top corporate rate from 46 percent to 34 percent, the overall effective rate for large US corporations — the percentage they actually paid to the IRS — nearly doubled, from 14 percent in 1981-1983, to 26.5 percent in 1988.

It also ushered in a new era at GE. CEO Jack Welch bucked the status quo by persuading top legal talent to leave their law-firm partnerships and work in-house at GE. A star tax lawyer and former US Treasury official by the name of John Samuels came aboard to build GE’s tax department essentially from the ground up. Among the bright lights in the field he recruited was Peter Barnes, who would go on to lead GE’s tax efforts in Asia.

“GE was a poster child for why we needed the Tax Reform Act of ’86,” Barnes tells me, since the company had craftily become one of the biggest beneficiaries of the safe-harbor leasing provision tucked into the 1981 bill. “Nobody would stand and defend safe-harbor as good tax policy.”

After the ’86 reform eliminated that and so much other low-hanging fruit, Barnes says, “GE and lots of other companies recognized that they needed to pay attention to sophisticated tax planning they had not needed before.”

The deep bench that GE assembled in its tax department — assigning specialists to become experts at each of the company’s many divisions — served it particularly well beginning in the 1990s. With globalization, tax planning became a complex, international game, as big US firms shifted operations overseas to save money not just on labor but also on taxes. GE’s talented tax and lobbying teams helped ensure the company’s interests were heard in Washington when lawmakers were adding new incentives to the tax codes. It also weighed in as foreign governments, particularly in emerging markets, tried to update their rudimentary tax codes.

Barnes, who advised government ministries across Asia on how best to update their codes for the future, insists he always tried to keep those governments’ interests in mind, and not just GE’s. “If you try to play fast and loose, it probably won’t work in the short run, and it certainly won’t work in the long run.”

He liked the fact that, because GE cast such a big shadow, “we knew everything we did was going to get audited,” removing any incentive to try to skirt the law.

In fact, one thing you don’t hear even from fierce critics of GE’s tax policies is any suggestion the company has broken the law. Instead, GE’s reputation is one of aggressiveness in lobbying for incentives it likes, shifting parts of its operation to countries with much lower corporate taxes, and taking advantage of every penny in tax breaks that US law allows.

Barnes retired as GE’s senior international tax counsel in 2013 after 22 years with the company and now teaches at Duke University’s law and public policy schools. But he still feels protective of GE, and he pushes back on my use of the word “aggressive.’’ He rattles off a list of financial moves I might find myself making at some point — putting money in a tax-deferred retirement account, paying cash for a car because auto-loan interest isn’t deductible, moving to a lower-tax municipality after my kids finish public school, or to Florida, where my pension (if only I had one!) wouldn’t be taxed. “Most of what GE did was of that nature,” he says. The tax team would look at each of its divisions, from every conceivable angle, to lower its tax liability in the same way it tried to reduce, say, its utility bills. “I don’t understand the argument that taxes are just what they are, and that’s that.”

The late television broadcaster David Brinkley used to bemoan how, instead of getting big things done, Washington politicians spent so much time fiddling with the tax code. Lawmakers pass tax breaks because they feel pressure from lobbyists, of course, but also because they feel they’re doing something to improve the economy without having to worry about the political blowback that comes when they vote for new “spending.”

Of course, tax breaks that aren’t fully thought through can cost the government dearly. Case in point: A 1996 attempt to simplify the tax code, called “check the box.” This let companies classify their foreign subsidiaries as something called “disregarded entities.” I’m already asking a lot of your attention span with this article, so I’m not going to try to explain that accounting term. All you need to know is this: If money flows between a company and one of its “disregarded entities,” the IRS doesn’t count it as a transaction and it is therefore magically exempt from US taxes.

There may have been some logic to this “check the box’’ loophole, but it didn’t take long for companies to drive a truck through it, costing the Treasury billions. Multinationals have used it to whack away at their US tax bills by shifting profits to their subsidiaries in low-tax countries. Once “check the box” was on the books, the pressure to keep it in place was so strong that the Clinton and Obama administrations eventually gave up on trying to remove it.

Same story with a host of incentives enacted during the administrations of Bill Clinton, George W. Bush, and Barack Obama to spur the economy. For example, until it sold most of its GE Capital finance division, GE saved billions in taxes through something called the “active financing exception.” That maneuver allows US financial services companies to defer taxes on overseas income.

What’s most interesting about the active financing exception is that pressure from GE and others turned it into a Lazarus of the tax code. The ’86 tax reform bill killed it, but Congress brought it back to life in 1997. President Clinton killed it again, employing his new line-item veto powers. Then the Supreme Court killed the line-item veto, which allowed GE’s favorite exception to rise from the ashes in 1999, as a temporary measure. Congress renewed it repeatedly in subsequent years, until finally making it permanent in 2015. You can see a similar pattern with other business-friendly breaks, such as the research-and-development credit.

If Sir Isaac Newton had been a tax analyst instead of the world’s first physicist, he might have come up with this law: The more popular a temporary tax incentive is with powerful interests, the less likely it is to remain temporary.

III. FACT VS. FICTION

As the debate around tax reform heats up in Washington, you’re going to hear two competing narratives. The first, coming from the business/conservative camp, says corporate tax rates in the United States are among the highest in the world, putting US firms at a competitive disadvantage. The second, coming from the liberal/progressive camp, says many of the biggest, most profitable US corporations have figured out how to pay next to nothing in taxes.

To some extent, both narratives are true.

Although the 35 percent income tax on corporate profits is one of the highest in the world, many companies pay nowhere near that, thanks to tax breaks and sophisticated tax planning. For its eight-year study, the Institute on Taxation and Economic Policy analyzed the tax practices of 258 large, profitable US corporations. As a group, they paid an effective tax rate of 21 percent. GE and 17 other of these profitable companies, such as Priceline and International Paper, paid an average of about zero in federal income taxes over the eight-year period, according to the report. (Any net taxes they paid in a given year were offset by net credits in other years.)

However — and this gets at that competing narrative — many companies in the sample did pay close to the statutory 35 percent rate. The deeper you dive into the numbers, the more it becomes clear that the federal tax code favors certain industries — notably gas and electric utilities, telecom, industrial machinery, and finance — over others. As an industry, gas and electric utilities paid an effective tax rate of a mere 3 percent over that eight-year period, while retailers paid 31 percent. (Local retail giant TJX’s effective rate was nearly 30 percent.) And there’s considerable variation even within those industries. More than half of the $527 billion total in tax breaks accounted for in the study went to just 25 big companies, and nearly half of that half — $131 billion — went to just five favorite sons: AT&T, Wells Fargo, J.P. Morgan Chase, Verizon, and IBM.

While pharmaceutical giant Eli Lilly paid an effective rate of 17 percent over eight years, Cambridge-based Biogen’s rate (thanks in part to some deferred taxes) was twice that, at 35 percent.

In sum, the tax code is a mess.

And how about GE? The ITEP report identified the company as having paid no US income taxes from 2008 through 2015, clocking in with an effective tax rate of negative 3.4 percent. In response, GE spokesperson Tara DiJulio issued this statement: “Over the last decade, GE paid $32.9 billion in cash income taxes worldwide, including in the US, and pays more than $1 billion annually in other US, state, local and federal taxes.”

So I went back to Matt Gardner, ITEP’s senior fellow and report coauthor. (ITEP is considered left-leaning politically, though its numbers are seen as credible by many mainstream academics.) Because GE had referenced a 10-year time frame, while the ITEP study had focused on eight years, I asked Gardner to expand his analysis to cover the additional two years. From 2007 through 2016, his analysis of GE filings shows a total foreign income of $110.8 billion and a total “current foreign tax” of $32.49 billion.

So even though GE says it paid $32.9 billion in cash income taxes worldwide, including the United States (“Do they mean that the US is part of the world?” Gardner wonders), “the available evidence suggests very strongly that almost all the current income taxes GE has paid over the past decade are foreign taxes,” he says. After all, if you subtract the foreign tax from the total worldwide tax, the differential between those two very big numbers is the relatively small number of about $400,000.

Gardner says it would be odd for GE to use that worldwide figure to argue that it pays significant US income taxes if its IRS payments represent just a sliver of that global figure.

I should point out that ITEP’s calculations are not based on actual taxes that companies paid the US Treasury or any other government, since those don’t have to be disclosed publicly. Instead, the analysis uses as a proxy an accounting term called “current income tax provision,” in other words, what the companies expect to pay in taxes. Gardner acknowledges that, in any given year, there may be a discrepancy between “current” and “actual” taxes paid, “but over the long run we should expect them to track pretty closely.”

GE disputes ITEP’s numbers and argues that even if you accept its use of “current” tax as a proxy for “actual,” the methodology is flawed because it misses certain parts of GE operations such as significant tax payments associated with something called “discontinued operations.” However, GE refuses to say how much of that $32.9 billion in tax payments over the last decade went to the US Treasury (it’s not required by law to do so) or what its US effective tax rate was.

Despite the portrayal of GE advanced by progressives like Bernie Sanders (that the company’s “greed” and “selfishness” show a “lack of respect for the people of this country”), University of Iowa accounting specialist Kevin Markle says that “the evil angle doesn’t ring true to me.” In his dealings over the years with Peter Barnes and other top GE tax people, Markle says he’s found them to be razor-sharp professionals who simply have a laser-like focus on lowering their company’s tax liability. “Their number-one tool is the lower rates available in foreign countries,” Markle says.

The US taxes businesses on a “worldwide” basis. That means theoretically companies are charged a 35 percent tax on every dollar in profit they earn, whether it’s earned in the United States or abroad, though they can deduct as credits on their IRS bill any taxes they paid to foreign governments. Of course, there’s often a huge gap between what companies’ tax bills should look like in theory and what they look like in reality.

Companies find a way to “book” profits in the lowest tax countries, using “check the box” and other maneuvers. Tech companies can do it more easily because of the flexible nature of what they’re selling. A corporate parent can “sell” patents and intellectual property to a subsidiary in a country with a low tax rate, like Singapore (17 percent) or Ireland (12.5 percent). The subsidiary and parent can then hatch licensing and cost-sharing arrangements that help reduce or eliminate taxes through what’s called “transfer pricing.” Bottom line: This has led to a surge in US companies shifting their profits to low-tax countries, which, in turn, bleeds an estimated $100 billion from the US Treasury every year.

The European Union has been aggressively cracking down on tax avoidance by multinationals. Apple’s use of an Irish subsidiary to lower its tax bill by $14.5 billion, according to the EU, draws protesters outside the parliament building in Dublin.

PAUL FAITH/AFP/Getty Images

The European Union has been aggressively cracking down on tax avoidance by multinationals. Apple’s use of an Irish subsidiary to lower its tax bill by $14.5 billion, according to the EU, draws protesters outside the parliament building in Dublin.

“Under the current system,” Markle says, “the ideal income strategy is to break even — i.e., report zero taxable income — in the US and have profits in low-tax countries.” For companies that move their profits offshore, the main downside is they can’t “repatriate,” or bring them back, to the United States without handing over 35 percent to the IRS. As a result, US companies have been stockpiling more than $2 trillion in profits overseas, waiting for Congress to lower the repatriation tax or offer a “repatriation tax holiday,” as it did in 2004, when the rate was briefly cut to 5.25 percent.

Markle stresses that while this profit-shifting by GE and many others has clearly become a drain on the US Treasury, it is legal. He contrasts that with the behavior the European Union alleges Apple engaged in.

Apple leans heavily on its Irish subsidiary, but just reducing its tax rate from 35 percent to 12.5 percent evidently wasn’t enough for the hugely profitable company. The Apple maneuver that drew the ire of the EU is something called a “double Irish with a Dutch sandwich.” That may sound like a lunch order at Molly Malone’s in Amsterdam (or a nasty wrestling move). But it’s an elaborate scheme that, leveraging quirks in Irish and EU law, sends profits on a journey from Ireland to the Netherlands and finally to a tax haven, usually in the Caribbean, and eventually converts those profits into tax-free “stateless income.”

Apple is not the only multinational to leverage this maneuver, but it appears to have taken it to a new level. If the EU’s accusations are proved in court, it could be a tipping point. “This is likely going to unravel,” Markle says. “And every country where Apple does business could get in line, saying, ‘That income is mine!’ ”

If the United States doesn’t get its act together quickly, it might find itself at the end of that line.

IV. GUIDE TO COMING ATTRACTIONS

As a public service, here is a cheat sheet for the business arguments for tax reform that you’ll soon be hearing in Congress. To evaluate each claim, I lean heavily on one of the nation’s foremost experts on corporate tax, economics professor Kim Clausing of Reed College in Oregon.

Claim 1: The US corporate income tax rate is the highest in the world.

Bottom line: As mentioned earlier, most companies are paying much less than the 35 percent statutory tax rate. The United States collects less revenue from corporate taxes, as a share of gross domestic product (2 percent), than almost all peer countries.

Claim 2: The US “worldwide” tax system, which taxes corporate income wherever it’s earned, is much less fair than the “territorial” system in place in most other countries, which doesn’t tax a company’s foreign income.

Bottom line: This worldwide vs. territorial distinction is a bit misleading. Yes, the United States is one of the few countries with a worldwide system. But it’s really more of a hybrid system. After all, corporations don’t have to pay any taxes on their foreign income until they bring it back home. And the territorial systems in many peer countries are actually hybrids as well. For instance, Japan and France require companies based there to pay a minimum tax on foreign income they earn, to discourage them from trying to use tax havens. And unlike the United States, which is lax in letting companies go to great lengths to reduce their tax bills, Germany is hard-nosed in making sure German companies pay their fair share. A detailed study by the nonprofit Tax Policy Center of the territorial systems in Germany, Australia, Japan, and the United Kingdom casts real doubt on the idea that a switch to territorial would do much to improve the US mess.

Claim 3: US corporate taxes make the climate for doing business here anti-competitive.

Bottom line: C’mon. After-tax profits for US-based multinationals are at historically high levels — 50 percent higher as a share of GDP in 2010-2015 than they were during the prior 20 years. We also have a fairly narrow base for corporate taxes.

Claim 4: Corporate taxes should be eliminated because they are an unfair “double tax.” The government is taxing income at both the corporate and shareholder level (on dividends).

Bottom line: A red herring. New data from the Tax Policy Center suggest that, because of the tremendous growth of tax-free retirement plans and increased foreign ownership of US assets, the government now taxes only about one-quarter of US equities. If it stopped taxing capital at the corporate level and focused only on individuals, the vast majority of capital income would go untaxed. The corporation would effectively become a new tax shelter. All of this would make our country’s emerging crisis of income inequality much scarier.

Since the US tax system is already rigged in favor of the wealthy over the working poor and running-in-place middle class, corporate taxes — which are less regressive than most other federal taxes — need to remain an important part of the solution.

So what should the building blocks for genuine tax reform look like?

The guiding model should be the 1986 tax reform, a truly bipartisan piece of legislation that resulted in a system that was fairer, clearer, cleaner, and a net positive to the US Treasury. A big reason it made things better, while so many tax code changes in the intervening years have made things worse, is that it was genuinely comprehensive. Only by eliminating all the big loopholes at once can you avoid the whack-a-mole hazard of unwittingly opening two new ones for every one you manage to close.

Reed College’s Clausing suggests that a minimum tax on foreign earnings, whether or not the earnings are repatriated, would be an effective way to reduce multinationals’ growing addiction to profit-shifting and tax-haven-chasing. If companies knew they’d have to pay a tax of, say, 15 to 20 percent on foreign income, there would be no reason to book income in such tax havens, since they would still owe the minimum tax in the United States.

Meaningful reform would also tackle the biggest, most significant distortions in the tax code. Many businesses don’t pay corporate taxes because they’re structured as limited liability companies or partnerships, so profits are reported on the returns of their owners. Still, there’s no way that a partner in a law firm should be paying a much lower effective tax rate than a young associate. Same for someone buying a building with a fat mortgage rather than paying cash.

The surest way for this tax reform to collapse into an orgy of self-interest — like Ronald Reagan’s first go-round in 1981 or the 2001 and 2003 tax cuts under George W. Bush — is if there is division within the big business community. The best way to head off that division would be for the corporate heavyweight that has historically cast the longest shadow in tax policy to step forward and lead. Before he retired from GE, its top tax man, John Samuels, had been trying to unify businesses behind the scenes. It’s time to get out in front.

Mike Gosk, GE vice president and senior tax counsel, tells me that reforming the “broken” US tax system is one of the company’s top priorities, even if it leads to GE paying higher taxes. “There isn’t a single thing we’d fight to keep in the code if we could get comprehensive reform based on a territorial system,” he says.

Just moving to a territorial system is unlikely to be the panacea it’s being made out to be. But if the United States adopted it with guardrails, such as a minimum foreign tax and the mass closing of loopholes, it could be worth it if that’s what it takes to get the GEs of the world on board. The fact that GE is willing to part with tax breaks that have saved it billions could help encourage other businesses to do the same.

V. IMAGINATION AT WORK

This is a big moment for you, GE.

You’ve slimmed down dramatically in preparation for your planned transformation, from old-school infrastructure and financial services giant to industrial “Internet of things” leader. That required a lot of tough decisions.

One of the biggest, at least symbolically, was moving your headquarters to Boston, to tap into all the young brainpower around here. The last time you moved, to Connecticut back in 1974, the choice positioned you well for where you were headed. You were transitioning from the GE of my parents’ generation — the rock-solid provider of American blue-collar jobs for life — to the GE I grew up with, the global conglomerate that had its hands in everything, even owning one of the big-three TV networks.

Your walled-off campus in the tony suburb of Fairfield was perfect for conveying the GE image of power. I’ll never forget David Letterman skewering that image after the GE purchase of NBC, when he tried to deliver a fruit basket to your secondary fortress in Manhattan and was hilariously turned away.

Your new Boston digs on Farnsworth Street in Fort Point (where you’ll be until construction is complete on your headquarters a few blocks away) perfectly convey the youthful, open-to-the-world vibe you’re trying to project. If Letterman showed up today, he’d probably be waved right in, past the cubicles decorated with bobbleheads.

You’ve spent millions on a self-effacing branding campaign to get millennials interested in coming to work for GE, and your hiring data show it has helped considerably.

But it’s going to take more to get the best and the brightest minds from MIT and other Boston brain factories to choose you. All those self-possessed young people brimming with great ideas have tons of options. And while you may be able to offer competitive salaries, you’re competing against tech giants like Google and Amazon as well as startups offering equity and the chance to build the next tech giant.

As your own ad campaign acknowledges, millennials likely view GE through the lens of the past. If they have a more current association for you, chances are — thanks to the rhetoric of liberal political leaders — it is the image of tax avoidance and corporate greed.

I know you don’t want “tax” to be the first thing young people think about when they hear GE. That association would be fine for PwC, the accounting powerhouse formerly known as PricewaterhouseCoopers, which just bought the services of 600 members of GE’s rock-star tax department. Mark Mendola, PwC’s vice chairman and US managing partner, tells me that in just the first three weeks after the deal was announced in January, he heard from 10 large companies that are considering becoming clients now that his firm boasts GE’s tax team and secret sauce.

Still, tax stardom is your past. Being the world leader in the digital industrial era is your future, and you’ll need Boston’s brightest minds to help you get there.

Cambridge is home to the headquarters of the Reputation Institute, which bills itself as the “world’s leading research and advisory firm for reputation” in the corporate world. The business uses an elaborate model to measure and rank the reputations of more than 7,000 companies around the world, factoring in public feelings about everything from each firm’s products/services and financial performance to its governance, citizenship, and leadership.

The Reputation Institute also recently moved its headquarters, from Manhattan to Cambridge, deliberately setting up shop in the shadow of MIT. I stop by to meet Stephen Hahn-Griffiths, the firm’s managing director for North America. Sitting in the open office, with modern furniture set against restored wooden beams, he pulls up the newest rankings of 800 US companies that his team has just compiled for 2017.

The site of the soon-to-be GE Boston headquarters along South Boston’s Fort Point Channel, where several existing buildings will be rehabbed and an additional one built.

David L. Ryan/Globe Staff/file

The site of the soon-to-be GE Boston headquarters along South Boston’s Fort Point Channel, where several existing buildings will be rehabbed and an additional one built.

GE, you’re probably not going to be happy with the results. Despite being one of the most successful US-based multinationals, on this latest reputation ranking, you barely crack the top 200. (No. 199, to be exact.) “It’s an underperformer,” Hahn-Griffiths says. “You would expect GE to be close to the top of the heap, and it hasn’t been there for a good long while.”

Apple has also slipped considerably in the rankings in recent years, and now clocks in at No. 72. One thing both companies have in common is lots of negative publicity around taxes.

Now, I know what you’re going to say, GE. It’s too simplistic to attribute lower-than-expected reputation scores to tax practices. And you’re right. In fact, I talked to a number of academics and analysts who’ve struggled to tease out an unambiguous association here. Companies like Amazon, Facebook, and Google, which have all taken advantage of aggressive strategies to lower their US taxes, have apparently suffered little in their rankings.

However, unlike you (and, more recently, Apple), those other companies have never been held up as villains in the tax debate. They have more of a reputational cushion.

Another trend to keep your eye on: the explosive growth of the “socially responsible” investor. A 2016 report by the sustainable investing nonprofit firm US SIF finds that 1 out of every 5 dollars under professional management in the United States — nearly $9 trillion — was invested according to “socially responsible” strategies.

Ric Marshall is the executive director for environmental, social, and governance research for MSCI, the firm that claims as customers 98 of the 100 largest money managers in the world, who rely on it to measure companies’ “socially responsible” performance. He tells me tax avoidance has not traditionally been one of the metrics they use to measure corporate social responsibility. But “we’re increasingly hearing that large asset owners and asset managers are uneasy about this issue,” Marshall says. In a follow-up, he reports that the firm will now factor tax practices into its measurements.

There’s a growing appreciation of how tax policy is a zero-sum game. If hugely profitable US-based multinationals are managing to avoid paying large parts of their tax bills, that puts the squeeze on small-business owners and regular Joes — taxpayers who don’t have extensive, high-priced lobbying and tax-professional teams to make sure they get the best deal.

Jeff Immelt, you’ve run GE for 16 years now, almost as long as your predecessor, Jack Welch, yet many people still think of him when they think of the company. Your bold moves to remake GE for the 21st century have set you up, finally, to retire the ghost of “Neutron Jack” once and for all. But you need to close the deal.

Step up. If you help deliver real and fair tax reform, you might even see Bernie Sanders and Elizabeth Warren hold up GE as a new kind of hero. Imagine the freedom you’ll feel if you can put all those accounting acrobatics behind you and focus on all the real innovation you do to bring good things to life.

Neil Swidey is a Globe Magazine staff writer. Send comments to swidey@globe.com. Follow him on Twitter @neilswidey.
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