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No one likes to see big companies avoid taxes. But I don't see what other options are available for states to compete with each other if not through tax breaks
by cj 5mo ago
No one likes to see big companies avoid taxes.
But I don't see what other options are available for states to compete with each other if not through tax breaks.
Edit: I suppose if you ban tax breaks, if a state wants to be competitive, they still can but through modifying the tax code for everyone instead of giving certain people exceptions. That doesn't seem like a terrible alternative..
- lern_too_spel 5mo agoCompete for what exactly, in this case?
- deleted 5mo ago[deleted]
- amazingamazing 5mo agoCapital, assets, jobs.
- skywhopper 5mo agoA datacenter complex provides basically none of those things to a state, beyond capital in the form of taxes. But if the state gives tax breaks, then there is no benefit to the state for having a giant warehouse draining its electricity supply and/or polluting its air.
- rybosworld 5mo agoPer $ spent, data centers are one of the worst "job creators". This was well known before the AI boom - see this study from back in 2016: https://goodjobsfirst.org/study-state-and-local-governments-pay-2-million-job-tech-giants-data-centers/ https://goodjobsfirst.org/study-state-and-local-governments-... The numbers are even less favorable today.
- amazingamazing 5mo agoSure, but the alternative is zero.
- rybosworld 5mo agoOver paying for job creation is a net negative... AKA job creation at any cost. Zero is a good alternative in that case.
- ceejayoz 5mo agoFirst to touch the bottom!
- laweijfmvo 5mo agoSeriously. A few thousand construction jobs, short term, and a few tens of jobs long term. For $3,000,000,000 dollars.
- cyanydeez 5mo agocompete for graft, kickbacks, energy parasites.
- aspenmartin 5mo agoYou know I’m sure this is true on some level but if you think this is all or a majority of the motivation I think that sounds pretty conspiratorial.
- cyanydeez 5mo agoStadiums routinely get tons of public funds and never return the same value to the city. It's not really a conspiracy, perhaps more a delusion.
- ianm218 5mo agoWhy do you see data centers as "energy parasites"? They are basically the best customers of the grid possible - consistent high usage. This is an opportunity for the US to pursue energy abundance and grow the economy. The only issues these cause is when states make it impossible to deploy more energy. Anti growth environmentalism is so toxic when we could just be pursuing wide spread clean energy and growth.
- ceejayoz 5mo ago> Why do you see data centers as "energy parasites"? https://news.ycombinator.com/item?id=48123090 https://news.ycombinator.com/item?id=48123090 > They are basically the best customers of the grid possible - consistent high usage. The grid exists to serve the populace. It's why we tend to call it a "public utility".
- ianm218 5mo agoThat linked fortune article talks about how the Sierra Club is leading the charge on trying to stop those data centers. You know the same group that has opposes nuclear energy [1], largely opposes hydro power, opposes housing being built in California. We could have data centers, nuclear, and cheap housing if we threw out these negative sum thinkers from the common discourse. Anti growth is bad for everyone. [1]. https://www.sierraclub.org/nuclear-free https://www.sierraclub.org/nuclear-free
- swatcoder 5mo agoThe important consideration is whether states are competing for community benefits truly worth the bids made as tax breaks or whether the competition is just among politicians leveraging their personal control over tax breaks towards private benefit as power brokers.
- ceejayoz 5mo ago> But I don't see what other options are available for states to compete with each other if not through tax breaks. Federal ban on tax breaks for companies over a certain market cap? Why can't they compete on "we have a good regulatory setup" or "we have good schools for your employees" or "we are a nice place to live"? Why compete on "we'll soak or own taxpayers more than the next state over so you can make even more obscene profits"?
- triceratops 5mo agoOr make state tax breaks taxable federal income. No need to interfere in any state law whatsoever.
- twoodfin 5mo agoHow would that not require a Constitutional amendment?
- ceejayoz 5mo agoOh no, legislators might have to do some work? We apply interstate commerce extremely broadly to all sorts of things (example: https://en.wikipedia.org/wiki/Gonzales_v._Raich https://en.wikipedia.org/wiki/Gonzales_v._Raich; six marijuana plants in a basement for personal consumption = interstate commerce!). Why not here? > The government also contended that consuming one's locally grown cannabis for medical purposes affects the interstate market of cannabis and the federal government may thus regulate and prohibit such consumption. I contend that cushy state/local tax breaks for datacenters affects the interstate market of datacenters and the federal government may thus regulate and prohibit such consumption.
- twoodfin 5mo agoState and local tax law is not “interstate commerce”, it’s state and local tax law. The SCOTUS ruling overturning Federal intrusion into state tax law would be 9-0.
- 5mo ago
- ReptileMan 5mo agoInfrastructure is a good one. Universities and high quality labor too.
- dgellow 5mo agoDo datacenters really require good infrastructure? Given they are planned all around I suspect that’s not really the case. I’m also not convinced university or the quality of labors are strong arguments. Aren’t those datacenters made fairly cheaply and full of automation?
- ReptileMan 5mo agoI answered a general question. And datacenters require quite a bit of infrastructure - roads, power lines, cheap electricity, abundant water. And if they don't use labor, then there is no reason to want them in your state anyway.
- pertymcpert 5mo agoUniversities...for a data center?
- cogman10 5mo agoThe other option is to not offer the tax breaks and if the company wants to build a data center, they also need to pay the taxes for it. If a state is dumb enough to offer tax breaks that's on them. There's also not "competition" here. It isn't as if data centers have almost any positive local effects, beyond their property tax revenue. They have very few employees and if the property tax is cut they ultimately don't generate any income for the locality. I can tell you that as someone living in Idaho, I see no differences when I work with the datacenters in Oregon, Washington, or Utah. I'm not benefited in the slightest by the few Idaho datacenters that I interact with currently. It's the same argument that's been used to give sports stadiums sweetheart deals. These things have almost no local benefits and a lot of negative side effects with their presence.
- papichulo2023 5mo agoAt this scale they ask different countries for tax breaks though
- cogman10 5mo agoAgain, that's no sweet off my brow. It's not as if working with a datacenter in canada, mexico, or Ireland is all that different from one in the US. Especially when you start talking about what these are being used for, LLMs. The added latency for a datacenter being in China has zero impact on how I use it. There also isn't some magical expertise loss from these datacenters not being local. About the only risk is that the various governments become so hostile to people in the US using their datacenters as to apply taxes and fees on usage. Which is unlikely to say the least. The owners of these datacenters want them used and if they can convince a government to give them preferential treatment they can likely convince the same government not to tax their clients. I guess there is also the risk of the government spying on the incoming and outgoing prompts. But lets be really real here, that's unlikely to matter to almost anyone other than people working for our government.
- KingMachiavelli 5mo ago> But I don't see what other options are available for states to compete with each other if not through tax breaks. They should compete based on actual policy including tax policy. "Tax breaks" for specific projects are just unfair and a quick race to the bottom. Instead, areas should be required to treat all entities equally. Even tax breaks for specific industries like tv/film production are unfair but at least industry wide tax breaks treat individual entities more fairly. If a state's taxes are too high to attract investment, then they should have to lower taxes for everyone (of the same type). > exempt from state and local sales and use taxes on its data center equipment for the next 20 years That said, the real issue IMO is that "use taxes" are just absurd to start with. Why should a random city/town be taxing products neither made nor sold in their jurisdiction. If anything, the sale of the datacenter product/services should be taxed but the external inputs "imported" from other states or countries is crazy to tax. Again, I will die on the hill that a land value tax makes this all very simple. A LVT is the perfect strategy for extracting public value from data centers since electricity & water availability is a major input to a lands value.
- recursivecaveat 5mo agoThe endgame of competing with lower taxes is handing out $99 in incentives to get $100 of mobile corporate spending in your area. The only winners are the corporations. There needs to be a collective spine.
- charcircuit 5mo agoThe other winners are whoever the companies is selling goods or services to.
- 8note 5mo agobuilding a ton of renewable power is a pretty good one data centers could be a great thing for helping with the duck curve and the like, if they can throttle up and down based on energy cost
- gizajob 5mo agoThe big companies have the cash for this by avoiding paying tax in the first place, then, in the areas where they’re spending money like capex and have to pay tax, they pull moves like this to further avoid them.
- tstrimple 5mo ago> "No one likes to see big companies avoid taxes." Bullshit. There is one political party in the US entirely dedicated to this outcome.