5 ms·

How can a tax break be a net negative for the city if it creates new jobs in the city (assuming the other location layoffs were in different cities). Without t

How can a tax break be a net negative for the city if it creates new jobs in the city (assuming the other location layoffs were in different cities). Without the tax break, none of the new jobs would have been made in the city at all.

digdugdirk 5y ago
In an ideal situation, that would absolutely be the case. The trouble comes when neighbouring suburban "cities" start competing against each other for the potential for a business like OP referenced. Oftentimes these are just incorporated industrial areas with minimal housing and little/no incentive to invest in public services. The businesses in this city/township are certainly running the show, and the few people living within those borders have little to no incentive or ability to organize and work for change. Afterall - people with surplus money/time would choose to live elsewhere. Its a vicious cycle to the bottom, since these types of cities/townships compete against the main city proper (in the case of large urban areas) or other nearby cities and towns that are actually trying to provide for their citizens.
sandworm101 5y ago
>> How can a tax break be a net negative for the city if it creates new jobs in the city Any time the costs to the city outweigh the benefit of getting those jobs. Industrial pollution can be a greater detriment than a handful jobs. Or the city can turn over land that would otherwise be put to other uses. Or the jobs might all be people who don't actually live in the city, saddling the city with resulting traffic/pollution issues but with no practical job benefits. I don't know or think that Peloton is going to do such things, but it is very possible for downsides to be greater than the benefit of creating jobs. A classic example might be a distribution warehouse (not amazon, oldschool warehouse). Maybe there are five or ten people who work at the facility, but the city has to deal with a constant flow of trucks in and out. The downside of those trucks will probably be greater than the handful of jobs a warehouse may generate.
- baybal2 5y ago
  Where do people keep seeing "industrial pollution" in very basic, not material intensive light industry? There are very few things in the light industry today making pollution. PCB etchants, dyes, solvents — all being actively reclaimed for decades.
  - supertrope 5y ago
    Trucks burn diesel and pump exhaust into the air.
    - baybal2 5y ago
      Trucks burning diesel stand in no rank whatsoever with steel mills, or concrete kilns.
  - eigen 5y ago
    Things like Abattoirs, Textiles, and Paper Making are all considered light industry. If you've ever driven by one of these you may understand industrial pollution.
    - baybal2 5y ago
      I would be very surprised if US textile mills don't reclaim their dyes when even Bangladeshi ones do.
SkyPuncher 5y ago
A few things: * It sets a precedent for other companies to leverage the same tax breaks. * Facilities still use public roads and infrastructure. A road with 50 more trucks per day deteriorates more quickly, but the facility isn't paying for that directly.
vkou 5y ago
Cities typically don't collect income tax, so their ability to derive revenue from 'job creation' is limited. Especially if the people working those jobs are living/shopping in the next town over.
dexterdog 5y ago
If the cost of the tax break is more than the salaries of the employees then it would be cheaper to just hand out the money.
- supertrope 5y ago
  But that would create the moral hazard of paying people not to work and the entire economy would grind to a halt! Just like how restaurant owners have to start paying closer to a living wage now.
  - dexterdog 5y ago
    Don't you mean restaurant customers now have to pay higher prices.
    - supertrope 5y ago
      Sure. Wages are just one cost component. An example restaurant spends 32% of revenue on staff, 32% on food, 32% on overhead. The owner takes a 4% profit. Industry wages inflate by N%. There's not a one to one relationship between wages for dishwashers and hosts and the menu prices. The owner is free to make their own trade offs between holding the line on wage increases, passing through the cost, automating/reducing labor intensity, taking less profit, trying to negotiate no price increase from their vendors, etc.
foxyv 5y ago
The trucks tore the heck out of the roads and there were a lot of infrastructure upgrades like stop lights.
mannerheim 5y ago
Assuming they're tax breaks on property taxes (since other than sales taxes, those are the most viable avenues for a city to tax), they would lose tax revenue on whatever property the factory is on (it is not the case that they wouldn't have been able to collect taxes on the business anyway, because the land they use is land they would have taxed had it been owned by someone else). So they may have to tax other businesses more to make up for it, which could drive those businesses away, or make them less competitive. Other businesses in the area can also be hurt by the presence of an employer who can offer higher compensation than they otherwise would be able to. And while hurting existing local businesses to bring in another could be worth it in the short run, in the long run pandering to a single company at the detriment of others could make you entirely dependent on that company and its fortunes.
imtringued 5y ago
>Without the tax break, none of the new jobs would have been made in the city at all. Are you sure? Those jobs would exist even if no city gives tax breaks, tax breaks didn't create them, therefore you cannot make this calculation.

digdugdirk 5y ago

In an ideal situation, that would absolutely be the case. The trouble comes when neighbouring suburban "cities" start competing against each other for the potential for a business like OP referenced. Oftentimes these are just incorporated industrial areas with minimal housing and little/no incentive to invest in public services. The businesses in this city/township are certainly running the show, and the few people living within those borders have little to no incentive or ability to organize and work for change. Afterall - people with surplus money/time would choose to live elsewhere. Its a vicious cycle to the bottom, since these types of cities/townships compete against the main city proper (in the case of large urban areas) or other nearby cities and towns that are actually trying to provide for their citizens.

sandworm101 5y ago

>> How can a tax break be a net negative for the city if it creates new jobs in the city Any time the costs to the city outweigh the benefit of getting those jobs. Industrial pollution can be a greater detriment than a handful jobs. Or the city can turn over land that would otherwise be put to other uses. Or the jobs might all be people who don't actually live in the city, saddling the city with resulting traffic/pollution issues but with no practical job benefits. I don't know or think that Peloton is going to do such things, but it is very possible for downsides to be greater than the benefit of creating jobs. A classic example might be a distribution warehouse (not amazon, oldschool warehouse). Maybe there are five or ten people who work at the facility, but the city has to deal with a constant flow of trucks in and out. The downside of those trucks will probably be greater than the handful of jobs a warehouse may generate.

baybal2 5y ago
Where do people keep seeing "industrial pollution" in very basic, not material intensive light industry? There are very few things in the light industry today making pollution. PCB etchants, dyes, solvents — all being actively reclaimed for decades.
- supertrope 5y ago
  Trucks burn diesel and pump exhaust into the air.
  - baybal2 5y ago
    Trucks burning diesel stand in no rank whatsoever with steel mills, or concrete kilns.
- eigen 5y ago
  Things like Abattoirs, Textiles, and Paper Making are all considered light industry. If you've ever driven by one of these you may understand industrial pollution.
  - baybal2 5y ago
    I would be very surprised if US textile mills don't reclaim their dyes when even Bangladeshi ones do.

SkyPuncher 5y ago

A few things: * It sets a precedent for other companies to leverage the same tax breaks. * Facilities still use public roads and infrastructure. A road with 50 more trucks per day deteriorates more quickly, but the facility isn't paying for that directly.

vkou 5y ago

Cities typically don't collect income tax, so their ability to derive revenue from 'job creation' is limited. Especially if the people working those jobs are living/shopping in the next town over.

dexterdog 5y ago

If the cost of the tax break is more than the salaries of the employees then it would be cheaper to just hand out the money.

supertrope 5y ago
But that would create the moral hazard of paying people not to work and the entire economy would grind to a halt! Just like how restaurant owners have to start paying closer to a living wage now.
- dexterdog 5y ago
  Don't you mean restaurant customers now have to pay higher prices.
  - supertrope 5y ago
    Sure. Wages are just one cost component. An example restaurant spends 32% of revenue on staff, 32% on food, 32% on overhead. The owner takes a 4% profit. Industry wages inflate by N%. There's not a one to one relationship between wages for dishwashers and hosts and the menu prices. The owner is free to make their own trade offs between holding the line on wage increases, passing through the cost, automating/reducing labor intensity, taking less profit, trying to negotiate no price increase from their vendors, etc.

foxyv 5y ago

The trucks tore the heck out of the roads and there were a lot of infrastructure upgrades like stop lights.

mannerheim 5y ago

Assuming they're tax breaks on property taxes (since other than sales taxes, those are the most viable avenues for a city to tax), they would lose tax revenue on whatever property the factory is on (it is not the case that they wouldn't have been able to collect taxes on the business anyway, because the land they use is land they would have taxed had it been owned by someone else). So they may have to tax other businesses more to make up for it, which could drive those businesses away, or make them less competitive. Other businesses in the area can also be hurt by the presence of an employer who can offer higher compensation than they otherwise would be able to. And while hurting existing local businesses to bring in another could be worth it in the short run, in the long run pandering to a single company at the detriment of others could make you entirely dependent on that company and its fortunes.

imtringued 5y ago

>Without the tax break, none of the new jobs would have been made in the city at all. Are you sure? Those jobs would exist even if no city gives tax breaks, tax breaks didn't create them, therefore you cannot make this calculation.