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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.

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
        $25k in state and local taxes would be high even for FANG in NYC
        Eridrus 8y ago
        They'll pay that in income taxes alone in 2 years.
        alistairSH 8y ago
        Probably not; 2 years is overly optimistic. See my reply above.
      - alistairSH 8y ago
        The highest marginal tax rate in NYC is 3.65%. The effective rate on a $140,000 salary is about 2.6%. Leaving a local tax liability of about $3500. On the same income, NY state has a marginal rate of 6.45% and an effective rate of about 4.3%, for a liability of $6,000. So, in year one, that's a bit over $9000 in revenue from a highly compensated employee. If the $25k figure stated above it true and a one-time incentive, it takes 2.5-3 years to pay off. Employees earning less than $140k will take 3+ years to pay off. If the incentives are recurring in any way, then the payoff is pushed out even more. But, as mentioned, the employee doesn't just have to "pay back" the initial incentive, she has to produce tax revenue to pay for increased services and infrastructure demand, pushing the timeline out even further. Anyway, the NYC deal doesn't sound to bad. Even at a 5-8 year pay-off, if the positions are relatively long-lived, it's a long-term positive. But, when we consider the Foxconn deal in the Mid-West, ouch, that one's going to sting the local community for a long time.
        gok 8y ago
        The deal requires an average wage of $150,000. [1] And with the nature of variance in salaries combined with progressive taxation works out even better for the state; one $100K and one $200K employee will result in more revenue than two $150K employees. [1] https://www.documentcloud.org/documents/5096409-New-York-Agreement.html https://www.documentcloud.org/documents/5096409-New-York-Agr...
  - jen20 8y ago
    Pertinent to the headline of this article: Texas has no state income tax.
  - karmajunkie 8y ago
    They also cost a great deal in required infrastructure, drive up competition for affordable housing, and create complications in other ways. Texas has no income tax so there's no revenue from that. The city will end up net negative from most corporate incentives.
- Alex888 8y ago
  Aren't roads funded from gas tax? And schools are almost entirely paid by the local property taxes, at least in the communities where most of Apple employees will live.
  - peatmoss 8y ago
    > Aren't roads funded from gas tax? No. Not much at all. Highways, once upon a time, mostly. Local roads not really ever. https://frontiergroup.org/reports/fg/do-roads-pay-themselves https://frontiergroup.org/reports/fg/do-roads-pay-themselves
  - jandrewrogers 8y ago
    How roads are funded depends on the State and locale. In some States, all highways are funded solely by use (gas and car) taxes as a constitutional requirement. Local roads, on the other hand, are funded almost arbitrarily -- it does include a gas tax in many places but in many places it does not.
  - karmajunkie 8y ago
    Texas has a"Robin hood" school finance system, where districts with high property values are subject to recapture, where they send a large percentage of the property taxes collected to the state to be used for districts in less wealthy areas. If memory serves, Austin ISD sends almost half of its billion dollar budget back to the state.
    - goldmouth 8y ago
      $670 million this year. Due to our our exploding home values and decling enrollment.
dmos62 8y ago
I see what you're saying, but, to paraphrase the article, giving a billion dollar company an 8.6 million tax break when you're shutting down social programmes can be a tough pill to swallow. On a parallel note, I'd like to underline just how good the tech giant has it. Since it can move anywhere, you have to give it excessive gifts for him to come to you. So the giant gets those rewards, simply because he's a giant.
- ricardobeat 8y ago
  Why is it tough? The choice is not between those 8.6m and the discounted taxes, it is between that and _zero_. Revenue doesn’t come out of thin air.
  - minikites 8y ago
    That's not the choice either. How about no tax breaks for companies, we enforce existing corporate taxes on those companies, and we raise the marginal income tax rate on very high earning individuals?
    - rayiner 8y ago
      At the state and local level, that just means companies will leave your state and go somewhere else. In a globalized world, the same thing is true for countries. There is a reason France has an effective 11% corporate tax rate: https://www.npr.org/2017/08/07/541797699/fact-check-does-the-u-s-have-the-highest-corporate-tax-rate-in-the-world https://www.npr.org/2017/08/07/541797699/fact-check-does-the... (Chart 2). If you want to pay for the safety net, do what Europe does and tax middle class people who can't just move to a lower-tax jurisdiction. E.g. in Germany, the 42% tax bracket (just shy of the top 45% bracket) kicks in at around $70,000, and there is a 20% VAT.
      - perfmode 8y ago
        The fundamental problem is that capital is permitted to cross borders, but people are not. Not in the same way. So, corporations can vote with their feet, but people cannot.
bogomipz 8y ago
>"Taking less money from someone who is building a business in your area is not a cost" Let's look at what that someone will be expecting of your area - working roads, a fire department, a police department, public transportation, a school system, a library, a park, emergency services. How is an influx of of potentially much more people consuming those services not a cost?
- kiallmacinnes 8y ago
  That certainly is a cost. But it's not what the parent poster was saying... I'll bet the costs you speak of are covered by income taxes and the corporate tax, with a little leftover per employee (so - a large pot of extra money at the end of the day).
  - karmajunkie 8y ago
    No income taxes in Texas.
  - bogomipz 8y ago
    >" I'll bet the costs you speak of are covered by income taxes and the corporate tax, with a little leftover per employee (so - a large pot of extra money at the end of the day)." So you believe all local governments run a budget surplus? You can't be serious. You realize there operating expenses and capital expenses right? Maintaining an existing bridge and building aa new bridge are very different budgetary consideration.
    - kiallmacinnes 8y ago
      Of course not.. But .. What on earth does that have to do with what amounts to giving a quantity discount to large employers? Yes, if they didn't give a discount, and somehow managed to keep the "sale" anyway, there would be more money in the register - great! However the reality is that without the discount, there is no sale, and no additional money in the register. It may be that the discount is too great, that's entirely possible. I don't think we have the info to judge this.
C1sc0cat 8y ago
And many states in the US compete in the same way eg the states that have much lower state income taxes its ok for them. Its the same in the EU where Ireland had very low CGT - that's one reason Google has a big office there - access to an educated English speaking work force is another
- disgruntledphd2 8y ago
  I believe you mean corporation tax, not captial gains tax, as CGT is well above the European average here in Ireland, while corporationtax is quite low.
  - C1sc0cat 8y ago
    Sorry your right my bad
specialist 8y ago
Is it fair for the Goliaths to get special consideration? Why doesn't everyone get the same deal?
- longerthoughts 8y ago
  Because the Goliaths bring more to the table in terms of revenue and bragging rights for politicians who can say they brought [insert high number here] jobs to their city. I'm skeptical of these deals and not sure the math works out for the average taxpayer but I'm not surprised that cities are operating this way. From a city's perspective, why should companies of vastly different sizes, impacts, and expected lifetimes have the same leverage in terms of negotiating tax benefits today? Companies are getting the same "deal" in the sense that they will be eligible for these benefits when they bring enough to the table to make a city desperately want them. I'm not saying it's just, but creating the "same deal" for all companies is only likely to occur if it's federally enforced - otherwise there will always be cities willing to offer these incentives.
QuotedForTruth 8y ago
The problem is that the companies get municipalities to compete to provide the best incentives package. With sufficient competition and assuming well meaning, rational government officials, the winning municipality will have to reduce their "margin" (new tax dollars - incentives) down to a very small amount. These incentives often require the government to take out large loans that they will be paying down for decades before realizing any actual new "profit." Then factor in the fact that their will always be some municipalities with government officials who are willing to overspend (other people's money) for personal political points. When they win an RFP for a big factory, sports team/stadium, movie production, or corporate headquarters they get to have a flashy press conference touting all the jobs. This helps them in their political career which is often over well before the actual net value of the deal can be realized in 20 or 30 years.
- AlexTWithBeard 8y ago
  20 years sounds like a reasonable time for the investment to pay off. It's not mindblowingly tremendous, but not a catastrophe either.
  - QuotedForTruth 8y ago
    Sure, but the city is taking on risk that the business, sports team or factory is still around generating revenue for that entire time and after. Factories are often purpose built for whatever they will build. Retooling can be very expensive. Why would Foxconn for instance pay to retool their factory from LCD production to OLED or whatever new technology emerges in 10 years when they can just get another government to build them a new factory somewhere else?
bryanlarsen 8y ago
It's a huge cost to the whole community, if by the "whole community" you mean the entire US. Let's say that Apple pays municipal tax of $X-$Y to Austin because of incentive $Y instead of $X to Denver (for example) Then Denver loses $X while Austin gains $X-$Y and Apple gains $Y. Sure, the Denver loss is only theoretical but Apple has to build somewhere so American municipal taxpayers lose as a group. A "race to the bottom" has real costs. The municipal governments are behaving rationally; it's the federal government who represents all municipalities as a collective; they're the ones who should be passing a law banning this type of behavior.
- briandear 8y ago
  Actually Denver doesn’t lose anything. The loss isn’t even theoretical. It’s like saying I lost billions on Apple stock I didn’t buy. That just makes no sense. You could also, using your theoretical logic, say that Berlin lost money too. Or Marseille. Or Dubai. Apple could have built new facilities literally anywhere they wanted. So should the international government pass a law against the US having lower taxes than France? The only people that should have a say in the tax rate of a place are the people paying the tax rate of a place. Denver never had it in the first place. Money not earned isn’t the same as an actual cost. The people of Denver are in exactly the same shoes they were yesterday; they aren’t worse off. And why should the federal government tell individual cities how they should tax? I’m afraid you don’t understand what federalism is, nor freedom for that matter. If a hypothetical Austin wants to give Bezos the key to the city what business is it to the people of Boise? Boise didn’t lose anything.
  - bryanlarsen 8y ago
    Denver didn't lose. America did. You know full well they weren't going to build anywhere outside of the US.
- taobility 8y ago
  Then Apple can contribute $X out of US, like China, India etc.
Avshalom 8y ago
It's never just 'not taxes' because significant businesses bring significant infrastructure needs with them. It's x-ty million dollar overpasses to allow better freeway access and new police/fire substations and running new utilities and ongoing maintenance on those. 'beautification' efforts to make real estate developers on the limn happy.

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
      $25k in state and local taxes would be high even for FANG in NYC
      - Eridrus 8y ago
        They'll pay that in income taxes alone in 2 years.
        alistairSH 8y ago
        Probably not; 2 years is overly optimistic. See my reply above.
    - alistairSH 8y ago
      The highest marginal tax rate in NYC is 3.65%. The effective rate on a $140,000 salary is about 2.6%. Leaving a local tax liability of about $3500. On the same income, NY state has a marginal rate of 6.45% and an effective rate of about 4.3%, for a liability of $6,000. So, in year one, that's a bit over $9000 in revenue from a highly compensated employee. If the $25k figure stated above it true and a one-time incentive, it takes 2.5-3 years to pay off. Employees earning less than $140k will take 3+ years to pay off. If the incentives are recurring in any way, then the payoff is pushed out even more. But, as mentioned, the employee doesn't just have to "pay back" the initial incentive, she has to produce tax revenue to pay for increased services and infrastructure demand, pushing the timeline out even further. Anyway, the NYC deal doesn't sound to bad. Even at a 5-8 year pay-off, if the positions are relatively long-lived, it's a long-term positive. But, when we consider the Foxconn deal in the Mid-West, ouch, that one's going to sting the local community for a long time.
      - gok 8y ago
        The deal requires an average wage of $150,000. [1] And with the nature of variance in salaries combined with progressive taxation works out even better for the state; one $100K and one $200K employee will result in more revenue than two $150K employees. [1] https://www.documentcloud.org/documents/5096409-New-York-Agreement.html https://www.documentcloud.org/documents/5096409-New-York-Agr...
- jen20 8y ago
  Pertinent to the headline of this article: Texas has no state income tax.
- karmajunkie 8y ago
  They also cost a great deal in required infrastructure, drive up competition for affordable housing, and create complications in other ways. Texas has no income tax so there's no revenue from that. The city will end up net negative from most corporate incentives.
Alex888 8y ago
Aren't roads funded from gas tax? And schools are almost entirely paid by the local property taxes, at least in the communities where most of Apple employees will live.
- peatmoss 8y ago
  > Aren't roads funded from gas tax? No. Not much at all. Highways, once upon a time, mostly. Local roads not really ever. https://frontiergroup.org/reports/fg/do-roads-pay-themselves https://frontiergroup.org/reports/fg/do-roads-pay-themselves
- jandrewrogers 8y ago
  How roads are funded depends on the State and locale. In some States, all highways are funded solely by use (gas and car) taxes as a constitutional requirement. Local roads, on the other hand, are funded almost arbitrarily -- it does include a gas tax in many places but in many places it does not.
- karmajunkie 8y ago
  Texas has a"Robin hood" school finance system, where districts with high property values are subject to recapture, where they send a large percentage of the property taxes collected to the state to be used for districts in less wealthy areas. If memory serves, Austin ISD sends almost half of its billion dollar budget back to the state.
  - goldmouth 8y ago
    $670 million this year. Due to our our exploding home values and decling enrollment.

dmos62 8y ago

I see what you're saying, but, to paraphrase the article, giving a billion dollar company an 8.6 million tax break when you're shutting down social programmes can be a tough pill to swallow. On a parallel note, I'd like to underline just how good the tech giant has it. Since it can move anywhere, you have to give it excessive gifts for him to come to you. So the giant gets those rewards, simply because he's a giant.

ricardobeat 8y ago
Why is it tough? The choice is not between those 8.6m and the discounted taxes, it is between that and _zero_. Revenue doesn’t come out of thin air.
- minikites 8y ago
  That's not the choice either. How about no tax breaks for companies, we enforce existing corporate taxes on those companies, and we raise the marginal income tax rate on very high earning individuals?
  - rayiner 8y ago
    At the state and local level, that just means companies will leave your state and go somewhere else. In a globalized world, the same thing is true for countries. There is a reason France has an effective 11% corporate tax rate: https://www.npr.org/2017/08/07/541797699/fact-check-does-the-u-s-have-the-highest-corporate-tax-rate-in-the-world https://www.npr.org/2017/08/07/541797699/fact-check-does-the... (Chart 2). If you want to pay for the safety net, do what Europe does and tax middle class people who can't just move to a lower-tax jurisdiction. E.g. in Germany, the 42% tax bracket (just shy of the top 45% bracket) kicks in at around $70,000, and there is a 20% VAT.
    - perfmode 8y ago
      The fundamental problem is that capital is permitted to cross borders, but people are not. Not in the same way. So, corporations can vote with their feet, but people cannot.

bogomipz 8y ago

>"Taking less money from someone who is building a business in your area is not a cost" Let's look at what that someone will be expecting of your area - working roads, a fire department, a police department, public transportation, a school system, a library, a park, emergency services. How is an influx of of potentially much more people consuming those services not a cost?

kiallmacinnes 8y ago
That certainly is a cost. But it's not what the parent poster was saying... I'll bet the costs you speak of are covered by income taxes and the corporate tax, with a little leftover per employee (so - a large pot of extra money at the end of the day).
- karmajunkie 8y ago
  No income taxes in Texas.
- bogomipz 8y ago
  >" I'll bet the costs you speak of are covered by income taxes and the corporate tax, with a little leftover per employee (so - a large pot of extra money at the end of the day)." So you believe all local governments run a budget surplus? You can't be serious. You realize there operating expenses and capital expenses right? Maintaining an existing bridge and building aa new bridge are very different budgetary consideration.
  - kiallmacinnes 8y ago
    Of course not.. But .. What on earth does that have to do with what amounts to giving a quantity discount to large employers? Yes, if they didn't give a discount, and somehow managed to keep the "sale" anyway, there would be more money in the register - great! However the reality is that without the discount, there is no sale, and no additional money in the register. It may be that the discount is too great, that's entirely possible. I don't think we have the info to judge this.

C1sc0cat 8y ago

And many states in the US compete in the same way eg the states that have much lower state income taxes its ok for them. Its the same in the EU where Ireland had very low CGT - that's one reason Google has a big office there - access to an educated English speaking work force is another

disgruntledphd2 8y ago
I believe you mean corporation tax, not captial gains tax, as CGT is well above the European average here in Ireland, while corporationtax is quite low.
- C1sc0cat 8y ago
  Sorry your right my bad

specialist 8y ago

Is it fair for the Goliaths to get special consideration? Why doesn't everyone get the same deal?

longerthoughts 8y ago
Because the Goliaths bring more to the table in terms of revenue and bragging rights for politicians who can say they brought [insert high number here] jobs to their city. I'm skeptical of these deals and not sure the math works out for the average taxpayer but I'm not surprised that cities are operating this way. From a city's perspective, why should companies of vastly different sizes, impacts, and expected lifetimes have the same leverage in terms of negotiating tax benefits today? Companies are getting the same "deal" in the sense that they will be eligible for these benefits when they bring enough to the table to make a city desperately want them. I'm not saying it's just, but creating the "same deal" for all companies is only likely to occur if it's federally enforced - otherwise there will always be cities willing to offer these incentives.

QuotedForTruth 8y ago

The problem is that the companies get municipalities to compete to provide the best incentives package. With sufficient competition and assuming well meaning, rational government officials, the winning municipality will have to reduce their "margin" (new tax dollars - incentives) down to a very small amount. These incentives often require the government to take out large loans that they will be paying down for decades before realizing any actual new "profit." Then factor in the fact that their will always be some municipalities with government officials who are willing to overspend (other people's money) for personal political points. When they win an RFP for a big factory, sports team/stadium, movie production, or corporate headquarters they get to have a flashy press conference touting all the jobs. This helps them in their political career which is often over well before the actual net value of the deal can be realized in 20 or 30 years.

AlexTWithBeard 8y ago
20 years sounds like a reasonable time for the investment to pay off. It's not mindblowingly tremendous, but not a catastrophe either.
- QuotedForTruth 8y ago
  Sure, but the city is taking on risk that the business, sports team or factory is still around generating revenue for that entire time and after. Factories are often purpose built for whatever they will build. Retooling can be very expensive. Why would Foxconn for instance pay to retool their factory from LCD production to OLED or whatever new technology emerges in 10 years when they can just get another government to build them a new factory somewhere else?

bryanlarsen 8y ago

It's a huge cost to the whole community, if by the "whole community" you mean the entire US. Let's say that Apple pays municipal tax of $X-$Y to Austin because of incentive $Y instead of $X to Denver (for example) Then Denver loses $X while Austin gains $X-$Y and Apple gains $Y. Sure, the Denver loss is only theoretical but Apple has to build somewhere so American municipal taxpayers lose as a group. A "race to the bottom" has real costs. The municipal governments are behaving rationally; it's the federal government who represents all municipalities as a collective; they're the ones who should be passing a law banning this type of behavior.

briandear 8y ago
Actually Denver doesn’t lose anything. The loss isn’t even theoretical. It’s like saying I lost billions on Apple stock I didn’t buy. That just makes no sense. You could also, using your theoretical logic, say that Berlin lost money too. Or Marseille. Or Dubai. Apple could have built new facilities literally anywhere they wanted. So should the international government pass a law against the US having lower taxes than France? The only people that should have a say in the tax rate of a place are the people paying the tax rate of a place. Denver never had it in the first place. Money not earned isn’t the same as an actual cost. The people of Denver are in exactly the same shoes they were yesterday; they aren’t worse off. And why should the federal government tell individual cities how they should tax? I’m afraid you don’t understand what federalism is, nor freedom for that matter. If a hypothetical Austin wants to give Bezos the key to the city what business is it to the people of Boise? Boise didn’t lose anything.
- bryanlarsen 8y ago
  Denver didn't lose. America did. You know full well they weren't going to build anywhere outside of the US.
taobility 8y ago
Then Apple can contribute $X out of US, like China, India etc.

Avshalom 8y ago

It's never just 'not taxes' because significant businesses bring significant infrastructure needs with them. It's x-ty million dollar overpasses to allow better freeway access and new police/fire substations and running new utilities and ongoing maintenance on those. 'beautification' efforts to make real estate developers on the limn happy.