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Big corps love to brag about "adding jobs", but don't like to brag about the "tax incentives" they are getting. There are usually huge costs for the whole commu

by jacek 8y ago

Big corps love to brag about "adding jobs", but don't like to brag about the "tax incentives" they are getting. There are usually huge costs for the whole community. Austin tax incentives for Apple seem to be relatively small [1], but Foxconn factory in Wisconsin is an extreme case. I highly recommend the Replay All podcast episode on this [2][3] [1] https://www.statesman.com/news/20120901/austin-council-oks-86m-in-incentives-for-new-apple-facility https://www.statesman.com/news/20120901/austin-council-oks-8... [2] https://www.gimletmedia.com/reply-all/132-negative-mount-pleasant#episode-player https://www.gimletmedia.com/reply-all/132-negative-mount-ple... [3] https://www.theverge.com/2018/12/6/18128133/foxconn-deal-wisconsin-factory-mount-pleasant-trump-reply-all-sruthi-pinnamaneni https://www.theverge.com/2018/12/6/18128133/foxconn-deal-wis...

sschueller 8y ago
I saw this video about LA a few days ago and it is very sad how these tax incentives are ruining entire states. [1] [1] https://www.youtube.com/watch?v=RWTic9btP38 https://www.youtube.com/watch?v=RWTic9btP38
- christopherwxyz 8y ago
  If one state didn't offer a tax break, then another would and win the business. There are 50 states, and most of them compete for businesses with tax incentives fairly competitively.
  - kalleboo 8y ago
    This is why the EU has laws against this kind of race to the bottom between nations
    - ovatsug25 8y ago
      Can you elaborate on these laws?
      - kalleboo 8y ago
        https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
        bunnycorn 8y ago
        And so far... nothing has happened but yellow journalism. Apple is always "going to pay", but they never did (and wouldn't make sense in any way), and Ireland also haven't paid and it doesn't look like it is.
    - biztos 8y ago
      Somebody better tell Ireland...
    - purple_ducks 8y ago
      > This is why the EU has laws against this kind of race to the bottom between nations No, it doesn't. Every country in EU sets it's own corporate, sales & income tax rates. as well as _EVERY_ other rate. Every country in the EU can & does offer incentives & future tax payment agreements to companies who meet certain conditions. These are not inter-EU agreements nor do they need prior approval by any EU establishment.
  - rectang 8y ago
    This is only true because there are always officials in some other state willing to take bribes (in the form of campaign or allied PAC contributions). It is possible that the bribe-for-tax-breaks exchange actually provides benefit for the community, but that's not necessary for the transaction to take place.
- cenal 8y ago
  There is another great video that goes into detail on his Louisiana is trapped in a tax incentive hell because of how they award these credits: https://youtu.be/RWTic9btP38 https://youtu.be/RWTic9btP38
- usermac 8y ago
  Oh, I saw that too! Did the link come from HN? Can't recall but I was shocked.
jrs95 8y ago
Well, there's going to be tax revenue coming from those jobs even if there are less or no taxes to the business itself, before you even consider the money that those employees and potentially even the business itself will spend within the community. I don't think it's as simple as tax incentives inherently being a cost for the community.
- nostrebored 8y ago
  You're being downvoted, but nobody is engaging with the sensible points that you're making. While viewing these in the lens of a corporate handout, it is definitely a practice that deserves a close look, pretending that entire state governmental bodies in the US are acting outside of their own best interest (both fiscally and politically) deserves a conversation
  - ghaff 8y ago
    I suspect subsidies are often excessive, in part because they often arise as part of a bidding war. But that doesn't mean that localities should never provide incentives to encourage companies (and jobs) to locate in a particular location. To think otherwise more or less means that it's not the job of government to take specific actions to encourage job growth, which doesn't seem like a generally sensible opinion.
  - thaumasiotes 8y ago
    https://www.vox.com/2018/11/16/18098479/amazon-tax-breaks https://www.vox.com/2018/11/16/18098479/amazon-tax-breaks > A normal way for governments to raise revenue in the United States is with property taxes. If you build a gigantic new office tower somewhere, then you are going to owe a lot of property taxes to the local government. > So if you’re smart and have good lobbyists, you’ll say, “Hey, we were thinking of building a huge office tower in your city, but your taxes are so high. Maybe instead of paying the 8 percent property tax rate that’s on the books, we could pay 2 percent instead for the first 20 years.” > The city may well agree to this proposal because 2 percent of a giant office tower is still a lot more than 8 percent of a parking lot. What’s more, bringing your office tower to town is going to generate a lot of sales tax and income tax revenue while probably helping to bolster property values across the board. So while reporters are going to write, accurately, that your company got millions of dollars in tax breaks in order to build your office tower, the city still ends up with more tax revenue than it would have had if you hadn’t come to town. > So you can’t really say things like, “Instead of handing out millions in subsidies to Jeff Bezos, we should invest in the subway.” The subway doesn’t need a tax break; the subway needs actual money. And the tax breaks don’t represent money in hand that could be spent. > What we want is a healthy form of competition where companies try to locate in cities that provide a high quality of public services relative to their tax revenue, so that cities have an incentive to try to govern themselves well. The current dynamic not only allocates too much surplus to rich companies, it undermines that healthy form of competition. Amazon doesn’t need to care whether New York City has cost-effective government or not; it just opts out of paying the costs. > But the very fact that mayors are inclined to hand out these subsidies should teach them a lesson about tax policy. (The lesson being that, if giving these tax breaks out is beneficial, maybe you should have been taxing something else in the first place.)
jpttsn 8y ago
VIPs don’t have to pay to get in to nightclubs. Do you think that’s a huge cost? If so, why would club owners agree to it?
- epanchin 8y ago
  Not a very good example. VIPs don’t increase the cost for other punters.
  - wastedhours 8y ago
    Often VIPs are paid by the clubs to appear, which is indirectly passed onto other punters as a marketing cost. Here, you're essentially bringing in a whole bunch of new burden on infrastructure, but getting proportionally less back in order to support it (waiting on some inflection based on future sales tax or property taxes etc is not a guarantee, especially as campuses can be out in the sticks so drawing workers from a wider area). Either you take hits on that, or pass the extra needed cost onto other taxpayers. I'm not sure whether or not the net is positive or negative, but the second order effects do need to be paid for somehow.
    - ricardobeat 8y ago
      The new employees are also going to be taxpayers. Does any city heavily rely on tax revenue from businesses to maintain critical infrastructure? It should come almost entirely from individual / property tax revenue / federal grants, corporate tax usually accounts for a minor slice of total budget.
jpadkins 8y ago
it's weird to frame net new revenue as a "huge cost the whole community" Taking less money from someone who is building a business in your area is not a cost. They have a choice on where to build, and tax burden is one of many factors in that choice.
- ip26 8y ago
  If they are adding people to your community- what roads will these new people be driving on? What schools will their children be attending? The additional revenue is not being added in a vacuum.
  - scarface74 8y ago
    The new people will be paying sales taxes, property taxes and state income taxes.
    - yurishimo 8y ago
      Though usually not enough to make up the difference in incentives. If we take the Amazon NY incentives at face value, each employee needs to pay $25k in taxes to make up the difference just on the initial tax break alone. That doesn’t count extra expenditures for expanded public transportation or nearby development. That’s also if amazon hires the proposed 40k new employees on day one, which they won’t. There’s a good argument to be made that spending that money elsewhere would provide better outcomes and on shorter timelines than giving one of the largest companies in the world a tax break.
      - C1sc0cat 8y ago
        Which given FANG salaries they will do. And the state and NYC preying in aid the problems with its tube system is deeply cynical, maybe try to be 1 less corrupt and competent
        bdhess 8y ago
distant_hat 8y ago
There should be an MFN like law to these incentives. Any incentives given to a company should be given to every company. The government should not be picking and choosing.
- ethbro 8y ago
  From that perspective, one way of looking at these tax breaks is as a rebate of government time & money saved by dealing with a single entity (vs 10 or 50 for the same sized economic impact).
AlexTWithBeard 8y ago
Tech employees are very cheap for the community. They take very little government aid, their use of roads is quite moderate (and is getting lower as "working from home" picks pace), and they usually pay enough property taxes to pay for local schools. On the other hand the benefits they bring to the community are enormous.
- lawnchair_larry 8y ago
  That isn’t my observation. They displace other communities entirely by driving up cost of living.
  - karmajunkie 8y ago
    As an engineer in Austin, I mostly concur.
    - goldmouth 8y ago
      As a native austinite and engineer I completely disagree. The eastSide was a terrible place before. Going into pan am park was a no go at any time of the day. Comunities and infrastructure were dying in eat Austin. Also, It had extremely low home ownership rates so the lower class didn’t even own homes in these areas but made money for westside landlords. South congress was full of crackheads and prostitutes as early as the 90’s. We had real urban decay. Now we are growing like crazy and if you’re willing to work hard any immigrant can get a construction job and make a great living for themselves.
      - karmajunkie 8y ago
        See parent. I was here intermittently in the late 90s and have an aunt with a midcentury house off SoCo bought in the early 90s. You may not have seen those communities as having intrinsic value but the people that live there did. And now most of them can't afford to live there anymore because "the market" has decided to make room for gentrification. Those communities had economic problems, sure. But you're kidding yourself if you don't think the replacements for them have a different sort of economic problem. And just because they're whiter and richer now doesn't make them a better set of problems.
youdontknowtho 8y ago
Dallas did something just as stupid for Hunt Oil several years ago. At the same time they were cutting wages for city employees. It's short sighted in the extreme.
RedPill007 8y ago
This is not about "Big Corps" but more about the voter mentality. For some unknown reason people across the political spectrum totally buy into the claims of "creating jobs" and "protecting jobs". None of the average voter bothers to actually do the math to see the cost of the job. Trump's tariffs for example might have protected 500 jobs at the cost of $500M to American consumers. But this math is beyond most people. Corps will surely love low tax regions and I think that is a good thing. Big Taxes only lead to bigger government than invariably leads to disasters for small people like us.

by jacek 8y ago

sschueller 8y ago

I saw this video about LA a few days ago and it is very sad how these tax incentives are ruining entire states. [1] [1] https://www.youtube.com/watch?v=RWTic9btP38 https://www.youtube.com/watch?v=RWTic9btP38

christopherwxyz 8y ago
If one state didn't offer a tax break, then another would and win the business. There are 50 states, and most of them compete for businesses with tax incentives fairly competitively.
- kalleboo 8y ago
  This is why the EU has laws against this kind of race to the bottom between nations
  - ovatsug25 8y ago
    Can you elaborate on these laws?
    - kalleboo 8y ago
      https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
      - bunnycorn 8y ago
        And so far... nothing has happened but yellow journalism. Apple is always "going to pay", but they never did (and wouldn't make sense in any way), and Ireland also haven't paid and it doesn't look like it is.
  - biztos 8y ago
    Somebody better tell Ireland...
  - purple_ducks 8y ago
    > This is why the EU has laws against this kind of race to the bottom between nations No, it doesn't. Every country in EU sets it's own corporate, sales & income tax rates. as well as _EVERY_ other rate. Every country in the EU can & does offer incentives & future tax payment agreements to companies who meet certain conditions. These are not inter-EU agreements nor do they need prior approval by any EU establishment.
- rectang 8y ago
  This is only true because there are always officials in some other state willing to take bribes (in the form of campaign or allied PAC contributions). It is possible that the bribe-for-tax-breaks exchange actually provides benefit for the community, but that's not necessary for the transaction to take place.
cenal 8y ago
There is another great video that goes into detail on his Louisiana is trapped in a tax incentive hell because of how they award these credits: https://youtu.be/RWTic9btP38 https://youtu.be/RWTic9btP38
usermac 8y ago
Oh, I saw that too! Did the link come from HN? Can't recall but I was shocked.

jrs95 8y ago

Well, there's going to be tax revenue coming from those jobs even if there are less or no taxes to the business itself, before you even consider the money that those employees and potentially even the business itself will spend within the community. I don't think it's as simple as tax incentives inherently being a cost for the community.

nostrebored 8y ago
You're being downvoted, but nobody is engaging with the sensible points that you're making. While viewing these in the lens of a corporate handout, it is definitely a practice that deserves a close look, pretending that entire state governmental bodies in the US are acting outside of their own best interest (both fiscally and politically) deserves a conversation
- ghaff 8y ago
  I suspect subsidies are often excessive, in part because they often arise as part of a bidding war. But that doesn't mean that localities should never provide incentives to encourage companies (and jobs) to locate in a particular location. To think otherwise more or less means that it's not the job of government to take specific actions to encourage job growth, which doesn't seem like a generally sensible opinion.
- thaumasiotes 8y ago
  https://www.vox.com/2018/11/16/18098479/amazon-tax-breaks https://www.vox.com/2018/11/16/18098479/amazon-tax-breaks > A normal way for governments to raise revenue in the United States is with property taxes. If you build a gigantic new office tower somewhere, then you are going to owe a lot of property taxes to the local government. > So if you’re smart and have good lobbyists, you’ll say, “Hey, we were thinking of building a huge office tower in your city, but your taxes are so high. Maybe instead of paying the 8 percent property tax rate that’s on the books, we could pay 2 percent instead for the first 20 years.” > The city may well agree to this proposal because 2 percent of a giant office tower is still a lot more than 8 percent of a parking lot. What’s more, bringing your office tower to town is going to generate a lot of sales tax and income tax revenue while probably helping to bolster property values across the board. So while reporters are going to write, accurately, that your company got millions of dollars in tax breaks in order to build your office tower, the city still ends up with more tax revenue than it would have had if you hadn’t come to town. > So you can’t really say things like, “Instead of handing out millions in subsidies to Jeff Bezos, we should invest in the subway.” The subway doesn’t need a tax break; the subway needs actual money. And the tax breaks don’t represent money in hand that could be spent. > What we want is a healthy form of competition where companies try to locate in cities that provide a high quality of public services relative to their tax revenue, so that cities have an incentive to try to govern themselves well. The current dynamic not only allocates too much surplus to rich companies, it undermines that healthy form of competition. Amazon doesn’t need to care whether New York City has cost-effective government or not; it just opts out of paying the costs. > But the very fact that mayors are inclined to hand out these subsidies should teach them a lesson about tax policy. (The lesson being that, if giving these tax breaks out is beneficial, maybe you should have been taxing something else in the first place.)

jpttsn 8y ago

VIPs don’t have to pay to get in to nightclubs. Do you think that’s a huge cost? If so, why would club owners agree to it?

epanchin 8y ago
Not a very good example. VIPs don’t increase the cost for other punters.
- wastedhours 8y ago
  Often VIPs are paid by the clubs to appear, which is indirectly passed onto other punters as a marketing cost. Here, you're essentially bringing in a whole bunch of new burden on infrastructure, but getting proportionally less back in order to support it (waiting on some inflection based on future sales tax or property taxes etc is not a guarantee, especially as campuses can be out in the sticks so drawing workers from a wider area). Either you take hits on that, or pass the extra needed cost onto other taxpayers. I'm not sure whether or not the net is positive or negative, but the second order effects do need to be paid for somehow.
  - ricardobeat 8y ago
    The new employees are also going to be taxpayers. Does any city heavily rely on tax revenue from businesses to maintain critical infrastructure? It should come almost entirely from individual / property tax revenue / federal grants, corporate tax usually accounts for a minor slice of total budget.

jpadkins 8y ago

it's weird to frame net new revenue as a "huge cost the whole community" Taking less money from someone who is building a business in your area is not a cost. They have a choice on where to build, and tax burden is one of many factors in that choice.

ip26 8y ago
If they are adding people to your community- what roads will these new people be driving on? What schools will their children be attending? The additional revenue is not being added in a vacuum.
- scarface74 8y ago
  The new people will be paying sales taxes, property taxes and state income taxes.
  - yurishimo 8y ago
    Though usually not enough to make up the difference in incentives. If we take the Amazon NY incentives at face value, each employee needs to pay $25k in taxes to make up the difference just on the initial tax break alone. That doesn’t count extra expenditures for expanded public transportation or nearby development. That’s also if amazon hires the proposed 40k new employees on day one, which they won’t. There’s a good argument to be made that spending that money elsewhere would provide better outcomes and on shorter timelines than giving one of the largest companies in the world a tax break.
    - C1sc0cat 8y ago
      Which given FANG salaries they will do. And the state and NYC preying in aid the problems with its tube system is deeply cynical, maybe try to be 1 less corrupt and competent
      - bdhess 8y ago

distant_hat 8y ago

There should be an MFN like law to these incentives. Any incentives given to a company should be given to every company. The government should not be picking and choosing.

ethbro 8y ago
From that perspective, one way of looking at these tax breaks is as a rebate of government time & money saved by dealing with a single entity (vs 10 or 50 for the same sized economic impact).

AlexTWithBeard 8y ago

Tech employees are very cheap for the community. They take very little government aid, their use of roads is quite moderate (and is getting lower as "working from home" picks pace), and they usually pay enough property taxes to pay for local schools. On the other hand the benefits they bring to the community are enormous.

lawnchair_larry 8y ago
That isn’t my observation. They displace other communities entirely by driving up cost of living.
- karmajunkie 8y ago
  As an engineer in Austin, I mostly concur.
  - goldmouth 8y ago
    As a native austinite and engineer I completely disagree. The eastSide was a terrible place before. Going into pan am park was a no go at any time of the day. Comunities and infrastructure were dying in eat Austin. Also, It had extremely low home ownership rates so the lower class didn’t even own homes in these areas but made money for westside landlords. South congress was full of crackheads and prostitutes as early as the 90’s. We had real urban decay. Now we are growing like crazy and if you’re willing to work hard any immigrant can get a construction job and make a great living for themselves.
    - karmajunkie 8y ago
      See parent. I was here intermittently in the late 90s and have an aunt with a midcentury house off SoCo bought in the early 90s. You may not have seen those communities as having intrinsic value but the people that live there did. And now most of them can't afford to live there anymore because "the market" has decided to make room for gentrification. Those communities had economic problems, sure. But you're kidding yourself if you don't think the replacements for them have a different sort of economic problem. And just because they're whiter and richer now doesn't make them a better set of problems.

youdontknowtho 8y ago

Dallas did something just as stupid for Hunt Oil several years ago. At the same time they were cutting wages for city employees. It's short sighted in the extreme.

RedPill007 8y ago

This is not about "Big Corps" but more about the voter mentality. For some unknown reason people across the political spectrum totally buy into the claims of "creating jobs" and "protecting jobs". None of the average voter bothers to actually do the math to see the cost of the job. Trump's tariffs for example might have protected 500 jobs at the cost of $500M to American consumers. But this math is beyond most people. Corps will surely love low tax regions and I think that is a good thing. Big Taxes only lead to bigger government than invariably leads to disasters for small people like us.