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Tax incentives are not the same as cash payments

by jjawssd 9y ago

toomuchtodo 9y ago
Forgoing revenue is the same as forgoing a payment.
- xrange 9y ago
  Is there a way to find out how much Foxconn pays in U.S. taxes right now? Or how much revenue they earn in the U.S.? If Apple has Foxconn make phones in Taiwan, and Apple then ships phones to the U.S., then Foxconn doesn't pay any taxes to the U.S. on those transactions, right? Only Apple would right? If Foxconn doesn't pay any tax to the U.S. right now (???), and they build a factory in the U.S. and don't pay any taxes in the future, then it is a wash (except for now the U.S. employees would be paying income tax, etc.). Or am I missing a piece of the puzzle? (As in, maybe Foxconn is currently paying a lot in U.S. taxes from whatever operations they have in the U.S. currently?)
  - handsomechad 9y ago
    i assume theyre talking about payroll tax
- KekDemaga 9y ago
  Let's say you want to take a portion of my income in exchange for career services that has a cost of 1,000 dollars a year for you to provide. You say "pay me 20% of your 100k job" netting you 19k, I refuse to pay that steep of a fee and counter with "take 10% or nothing" netting you 9k. I don't believe its fair to say that you have lost 10k if you accept my terms as the alternative is receive nothing. You have increased your revenue by 9 thousand dollars as opposed to earning 0 dollars. The option you proposed is simply not on the table and can't really be considered.
- eej71 9y ago
  I think you are offering up a false alternative. It really is a choice between three outcomes. (1) No factory is built, no taxes collected. (2) Factory is built, company pays full sticker price on the taxes. (1) is unappealing because nothing is created. So we arrive at (3), where the company understandably wants to renegotiate the sticker price on the taxes and the taxing body doesn't want to end up in scenario (1), so they come to an agreement somewhere in the middle. Why is this translated into the company received cash from the taxing entity?
- mokus 9y ago
  Those taxes are a cost of doing business in the state - akin to the rent on a property. If nobody wants to rent your property at your asking price, you can let it sit empty and get zero, or lower your price and get more than zero. You are not "forgoing" anything by lowering your price in that case. You never had that revenue to give up in the first place.
dragonwriter 9y ago
> Tax incentives are not the same as cash payments They are exactly equivalent to cash payments without the special tax treatment, so, yes, they are very much the same.
- refurb 9y ago
  Not based on what the article says. If the factory never would have been built in the first place, the taxes never would have been paid. Before: 0 jobs, $0 taxes (factory doesn't exist) After: 13,000 jobs, $100M taxes (down from $300M if no tax concessions were given, as per article) The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said. Also the $3B is the cost over a decade, not in a single year.
  - dragonwriter 9y ago
    > If the factory never would have been built in the first place, the taxes never would have been paid. That does not make the incentives any difference than a cash payment in exchange for building the factory. > The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said The relationship between “would” and “could” in that sentence is quite important.
    - ac29 9y ago
      > That does not make the incentives any difference than a cash payment in exchange for building the factory. Sure it does. A state writing a check for, say $100 million dollars requires spending $100 million dollars (possibly borrowing it to do so). Giving $100 million dollars in tax reductions requires spending $0. The former may not be feasible, while the latter generally is, so the two are not equivalent.
      - dragonwriter 9y ago
        Giving $100 million in tax incentives, conditioned on a specific act, requires just as much spending (or more, if the income from the cash payment itself would have been taxable) as giving a $100 million cash payment, with the same conditions, with no special tax treatment. That people can fail to see this may explain why these deals are politically popular, though.

Tax incentives are not the same as cash payments

toomuchtodo 9y ago

Forgoing revenue is the same as forgoing a payment.

xrange 9y ago
Is there a way to find out how much Foxconn pays in U.S. taxes right now? Or how much revenue they earn in the U.S.? If Apple has Foxconn make phones in Taiwan, and Apple then ships phones to the U.S., then Foxconn doesn't pay any taxes to the U.S. on those transactions, right? Only Apple would right? If Foxconn doesn't pay any tax to the U.S. right now (???), and they build a factory in the U.S. and don't pay any taxes in the future, then it is a wash (except for now the U.S. employees would be paying income tax, etc.). Or am I missing a piece of the puzzle? (As in, maybe Foxconn is currently paying a lot in U.S. taxes from whatever operations they have in the U.S. currently?)
- handsomechad 9y ago
  i assume theyre talking about payroll tax
KekDemaga 9y ago
Let's say you want to take a portion of my income in exchange for career services that has a cost of 1,000 dollars a year for you to provide. You say "pay me 20% of your 100k job" netting you 19k, I refuse to pay that steep of a fee and counter with "take 10% or nothing" netting you 9k. I don't believe its fair to say that you have lost 10k if you accept my terms as the alternative is receive nothing. You have increased your revenue by 9 thousand dollars as opposed to earning 0 dollars. The option you proposed is simply not on the table and can't really be considered.
eej71 9y ago
I think you are offering up a false alternative. It really is a choice between three outcomes. (1) No factory is built, no taxes collected. (2) Factory is built, company pays full sticker price on the taxes. (1) is unappealing because nothing is created. So we arrive at (3), where the company understandably wants to renegotiate the sticker price on the taxes and the taxing body doesn't want to end up in scenario (1), so they come to an agreement somewhere in the middle. Why is this translated into the company received cash from the taxing entity?
mokus 9y ago
Those taxes are a cost of doing business in the state - akin to the rent on a property. If nobody wants to rent your property at your asking price, you can let it sit empty and get zero, or lower your price and get more than zero. You are not "forgoing" anything by lowering your price in that case. You never had that revenue to give up in the first place.

dragonwriter 9y ago

> Tax incentives are not the same as cash payments They are exactly equivalent to cash payments without the special tax treatment, so, yes, they are very much the same.

refurb 9y ago
Not based on what the article says. If the factory never would have been built in the first place, the taxes never would have been paid. Before: 0 jobs, $0 taxes (factory doesn't exist) After: 13,000 jobs, $100M taxes (down from $300M if no tax concessions were given, as per article) The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said. Also the $3B is the cost over a decade, not in a single year.
- dragonwriter 9y ago
  > If the factory never would have been built in the first place, the taxes never would have been paid. That does not make the incentives any difference than a cash payment in exchange for building the factory. > The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said The relationship between “would” and “could” in that sentence is quite important.
  - ac29 9y ago
    > That does not make the incentives any difference than a cash payment in exchange for building the factory. Sure it does. A state writing a check for, say $100 million dollars requires spending $100 million dollars (possibly borrowing it to do so). Giving $100 million dollars in tax reductions requires spending $0. The former may not be feasible, while the latter generally is, so the two are not equivalent.
    - dragonwriter 9y ago
      Giving $100 million in tax incentives, conditioned on a specific act, requires just as much spending (or more, if the income from the cash payment itself would have been taxable) as giving a $100 million cash payment, with the same conditions, with no special tax treatment. That people can fail to see this may explain why these deals are politically popular, though.