7 ms·

'So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.' Isn't this what already happens with business

by dazc 9y ago

'So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.' Isn't this what already happens with businesses that have the potential to employ a lot of people? In the UK, at present, there are plenty of firms playing this game of 'we're thinking of shifting operations to mainland Europe' just to see what concessions they can get from the Govt.

pjc50 9y ago
> we're thinking of shifting operations to mainland Europe More like "we need to know what the legal regime will be for import/export of goods and services will be in a year's time, so please get your act together before we have to assume the worst".
dionidium 9y ago
This happens at every scale. For example, Centene announced a few years ago that they were moving from St. Louis County into Downtown St. Louis (a separate city), but eventually decided to stay, ultimately receiving a package of tax incentives from their home city just about equal to what St. Louis City was offering. Does it really matter to "St. Louisans" on which side of this silly, arbitrary border they build their HQ? This system is ridiculous.
- ryanianian 9y ago
  > Does it really matter to "St. Louisans" which side of this silly, arbitrary border they build their HQ? For those that pay taxes and use things paid for by taxes, it matters. The services on the other side of that silly, arbitrary border is paid for with different funds and gets to make its own decisions about how money is spent or saved. > This system is ridiculous. Yes, but an alternative would be...what? Federally-mandated local-tax rates and policies or something? I like that my city (not on the HQ2 list) can control what it spends its money on and can decide if giving tax breaks to X would lead to suitable growth in Y and make the trade-offs with its tax-base in mind.
  - crdoconnor 9y ago
    >Yes, but an alternative would be A federally mandated blanket prohibition on city tax incentives that companies can use to play cities off against one another. >I like that my city Can participate in this race to the bottom? I don't see the value in making cities compete with one another for jobs with tax breaks. It's simply a mechanism to create subsidies to big business because they are big that drains city budgets.
    - ryanianian 9y ago
      My point: If the city decides the breaks are worth it, then the city has ended up ahead. Your point (I think): It's competing with other cities and taking less tax in doing so. So it may end up _less_ ahead than if there were no competition. Since every city is doing this, it makes sense to keep under-cutting other cities until the net-gain is effectively just larger than zero. Nobody forces the city to participate or offer incentives. This article advocates that they shouldn't. A city should be clever about its incentives and make them align with what the company wants so the outcome isn't so zero-sum. Many cities do this with zoning - only allowing waterfront building permits if the developer also builds parks or whatever. These increase the property-values for the developers while paying for a public-good that everyone can use. Something similar here may be to offer tax credits toward infrastructure near the campus. E.g. don't demand the taxes directly but instead force the company to build new roads. This is more or less an accounting-trick of course, but imho it's a lot less zero-sum and actually forces the company to consider how their incentives (or requirements) will actually benefit them. If you prohibit all tax-incentives, cities are effectively forced to pre-build or promise services to make themselves attractive to companies. This can lead to huge amounts of waste (4-lane roads that could have been 2 for example) and cities defaulting on bonds to build such things when the company ends up choosing another city etc. I don't know if this is much better than requiring clever accounting.
      - crdoconnor 9y ago
        >Nobody forces the city to participate or offer incentives. The fact that cities need jobs and an inflow of money in order to function means that they're forced. It's like saying that nobody forces you to take a job coz the park bench is always an option.
- danudey 9y ago
  Or, on a micro level, "I'm quitting because this other company is offering me a 10% raise and another week of vacation."
  - dionidium 9y ago
    This is an extremely muddled analogy. Local municipalities competing for a company headquarters is basically nothing at all like an individual considering different job offers, across a whole bunch of very important dimensions. It's hard to find any relevant way in which they're alike.

by dazc 9y ago

pjc50 9y ago

> we're thinking of shifting operations to mainland Europe More like "we need to know what the legal regime will be for import/export of goods and services will be in a year's time, so please get your act together before we have to assume the worst".

dionidium 9y ago

This happens at every scale. For example, Centene announced a few years ago that they were moving from St. Louis County into Downtown St. Louis (a separate city), but eventually decided to stay, ultimately receiving a package of tax incentives from their home city just about equal to what St. Louis City was offering. Does it really matter to "St. Louisans" on which side of this silly, arbitrary border they build their HQ? This system is ridiculous.

ryanianian 9y ago
> Does it really matter to "St. Louisans" which side of this silly, arbitrary border they build their HQ? For those that pay taxes and use things paid for by taxes, it matters. The services on the other side of that silly, arbitrary border is paid for with different funds and gets to make its own decisions about how money is spent or saved. > This system is ridiculous. Yes, but an alternative would be...what? Federally-mandated local-tax rates and policies or something? I like that my city (not on the HQ2 list) can control what it spends its money on and can decide if giving tax breaks to X would lead to suitable growth in Y and make the trade-offs with its tax-base in mind.
- crdoconnor 9y ago
  >Yes, but an alternative would be A federally mandated blanket prohibition on city tax incentives that companies can use to play cities off against one another. >I like that my city Can participate in this race to the bottom? I don't see the value in making cities compete with one another for jobs with tax breaks. It's simply a mechanism to create subsidies to big business because they are big that drains city budgets.
  - ryanianian 9y ago
    My point: If the city decides the breaks are worth it, then the city has ended up ahead. Your point (I think): It's competing with other cities and taking less tax in doing so. So it may end up _less_ ahead than if there were no competition. Since every city is doing this, it makes sense to keep under-cutting other cities until the net-gain is effectively just larger than zero. Nobody forces the city to participate or offer incentives. This article advocates that they shouldn't. A city should be clever about its incentives and make them align with what the company wants so the outcome isn't so zero-sum. Many cities do this with zoning - only allowing waterfront building permits if the developer also builds parks or whatever. These increase the property-values for the developers while paying for a public-good that everyone can use. Something similar here may be to offer tax credits toward infrastructure near the campus. E.g. don't demand the taxes directly but instead force the company to build new roads. This is more or less an accounting-trick of course, but imho it's a lot less zero-sum and actually forces the company to consider how their incentives (or requirements) will actually benefit them. If you prohibit all tax-incentives, cities are effectively forced to pre-build or promise services to make themselves attractive to companies. This can lead to huge amounts of waste (4-lane roads that could have been 2 for example) and cities defaulting on bonds to build such things when the company ends up choosing another city etc. I don't know if this is much better than requiring clever accounting.
    - crdoconnor 9y ago
      >Nobody forces the city to participate or offer incentives. The fact that cities need jobs and an inflow of money in order to function means that they're forced. It's like saying that nobody forces you to take a job coz the park bench is always an option.
danudey 9y ago
Or, on a micro level, "I'm quitting because this other company is offering me a 10% raise and another week of vacation."
- dionidium 9y ago
  This is an extremely muddled analogy. Local municipalities competing for a company headquarters is basically nothing at all like an individual considering different job offers, across a whole bunch of very important dimensions. It's hard to find any relevant way in which they're alike.