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This can be very misleading. Say a city gives Amazon a big tax break to encourage it to move there. So instead of paying $5 million in taxes it pays $2 million.

This can be very misleading. Say a city gives Amazon a big tax break to encourage it to move there. So instead of paying $5 million in taxes it pays $2 million. The city didn’t lose $3 million, it gained $2 million + ripple effects of economic growth - increased costs to administer the city resulting from that growth . So it’s almost certainly better off.

JoeAltmaier 8y ago
Others pay the full tax, to support the infrastructure they receive. Amazon gets that for 1/4 the price. Meaning the rest of the city is supporting their share. No, its increased burden on the city at a bargain-basement price. No kind of 'better off', at least not the first year or two.
- marcoperaza 8y ago
  You’re just filling in my equation with very unlikely numbers. When considering the cost of administration, you have to remember that the the marginal cost of administration caused by the new company is much lower than the resulting average cost. You’re right that there might still be a moral problem though. Perhaps it is unfair that some pay full tax and others don’t. I’m inclined to agree, but the tax code is full of such inequities to begin with: deductions for tuition, mortgages, health care, children; exemptions from sales tax for certain kinds of goods; luxury and sin taxes; wealth taxes on land but not other property; progressive taxation of income; etc. Unless we move to a flat tax applied uniformly, that won’t change.
  - toyg 8y ago
    You are mixing unfairness among theoretically equal actors (regular businesses vs Amazon) and disparities that are supported by societal values. Progressive taxation is a moral imperative to correct excessive disparity; marriage allowances promote fertility and societal stability; and so and so forth. You are free to make the argument that targeted tax breaks can be worth the cost to the rest of society, but you cannot brush off the entirety of tax laws as morally unjust when the exact opposite is true.
    - agensaequivocum 8y ago
      > Progressive taxation is a moral imperative to correct excessive disparity. That relies on the premise that disparity is evil. What is the argument for that?
      - toyg 8y ago
        History, including contemporary. The most unequal societies are the most troubled ones.
        agensaequivocum 8y ago
        Three questions: 1. Unequal in what respect? 2. Which countries are you speaking of? 3. Is the inequality the necessary cause of the trouble?
danso 8y ago
Describing it as a simple loss of $3 million is definitely a simplification, for the reason you mention. But saying this is "very misleading" is perhaps even more of an oversimplification. Unless you are so cynical that you think the normal tax rates are a complete sham -- i.e. that the official tax rates have no basis in reality, such that there is no impact whether a city charges $5M or $0. But if we assume that that $5M is somewhat tied to the actual costs to the city to administer services and regulation, then offering a $3M tax break is done with understanding the potential opportunity cost, and believing that Amazon's business will more than make up for that $3M that the city might have reaped otherwise. The point of these stories is that, in the past, there was basically no easy way for the public to evaluate these tax breaks. A situation like Amazon seems like a sure net win. But there are many, many more American jurisdictions than the city that happens to get Amazon's business.
- marcoperaza 8y ago
  Like I said in reply to another comment, the marginal increase to the cost of administration is probably a good deal lower than the resulting average cost.
twunde 8y ago
Yes it's misleading. However, the point is that before now these giveaways weren't calculated. In many cases, this has lead to governments giving away more in tax benefits than they receive. The classic example are sorts stadiums. For example take a look at the Atlanta Braves new stadium, which cost Cobb County 400 million https://www.google.com/amp/s/reason.com/blog/2017/04/15/atlanta-braves-new-stadium-is-a-disaster/amp https://www.google.com/amp/s/reason.com/blog/2017/04/15/atla... While that example is extreme, I'd guess that many of these deals aren't with doing if you do the financial modeling out.

JoeAltmaier 8y ago

Others pay the full tax, to support the infrastructure they receive. Amazon gets that for 1/4 the price. Meaning the rest of the city is supporting their share. No, its increased burden on the city at a bargain-basement price. No kind of 'better off', at least not the first year or two.

marcoperaza 8y ago
You’re just filling in my equation with very unlikely numbers. When considering the cost of administration, you have to remember that the the marginal cost of administration caused by the new company is much lower than the resulting average cost. You’re right that there might still be a moral problem though. Perhaps it is unfair that some pay full tax and others don’t. I’m inclined to agree, but the tax code is full of such inequities to begin with: deductions for tuition, mortgages, health care, children; exemptions from sales tax for certain kinds of goods; luxury and sin taxes; wealth taxes on land but not other property; progressive taxation of income; etc. Unless we move to a flat tax applied uniformly, that won’t change.
- toyg 8y ago
  You are mixing unfairness among theoretically equal actors (regular businesses vs Amazon) and disparities that are supported by societal values. Progressive taxation is a moral imperative to correct excessive disparity; marriage allowances promote fertility and societal stability; and so and so forth. You are free to make the argument that targeted tax breaks can be worth the cost to the rest of society, but you cannot brush off the entirety of tax laws as morally unjust when the exact opposite is true.
  - agensaequivocum 8y ago
    > Progressive taxation is a moral imperative to correct excessive disparity. That relies on the premise that disparity is evil. What is the argument for that?
    - toyg 8y ago
      History, including contemporary. The most unequal societies are the most troubled ones.
      - agensaequivocum 8y ago
        Three questions: 1. Unequal in what respect? 2. Which countries are you speaking of? 3. Is the inequality the necessary cause of the trouble?

danso 8y ago

Describing it as a simple loss of $3 million is definitely a simplification, for the reason you mention. But saying this is "very misleading" is perhaps even more of an oversimplification. Unless you are so cynical that you think the normal tax rates are a complete sham -- i.e. that the official tax rates have no basis in reality, such that there is no impact whether a city charges $5M or $0. But if we assume that that $5M is somewhat tied to the actual costs to the city to administer services and regulation, then offering a $3M tax break is done with understanding the potential opportunity cost, and believing that Amazon's business will more than make up for that $3M that the city might have reaped otherwise. The point of these stories is that, in the past, there was basically no easy way for the public to evaluate these tax breaks. A situation like Amazon seems like a sure net win. But there are many, many more American jurisdictions than the city that happens to get Amazon's business.

marcoperaza 8y ago
Like I said in reply to another comment, the marginal increase to the cost of administration is probably a good deal lower than the resulting average cost.

twunde 8y ago

Yes it's misleading. However, the point is that before now these giveaways weren't calculated. In many cases, this has lead to governments giving away more in tax benefits than they receive. The classic example are sorts stadiums. For example take a look at the Atlanta Braves new stadium, which cost Cobb County 400 million https://www.google.com/amp/s/reason.com/blog/2017/04/15/atlanta-braves-new-stadium-is-a-disaster/amp https://www.google.com/amp/s/reason.com/blog/2017/04/15/atla... While that example is extreme, I'd guess that many of these deals aren't with doing if you do the financial modeling out.