Cities Don't Have To Offer Huge Subsidies To Companies Like Apple and Amazon (theguardian.com) 82
Greg LeRoy and Maryann Feldman from The Guardian discuss some alternative strategies for cities that want large tech companies like Amazon and Apple to invest locally but don't want to offer huge subsidies. They advise against using "old economy" incentives for "new economy" firms, which are more susceptible to disruption, because it can be costly and counterproductive. Unfortunately, many politicians continue to mismatch incentives "especially because some tech companies have become very aggressive about demanding big tax breaks," reports The Guardian. From the report: Here are two proven alternative strategies. The first could be called "back to basics." A regional government inventories existing small- and medium-sized firms, the backbone of many local communities. Typically family-owned and located in micropolitan and rural areas, these firms are often neglected by policymakers and shortchanged by incentive programs. A regional government asks: which industry sectors are we already comparatively good at? Which of those sectors have the best futures? How can our public systems help those promising firms grow? Do they need export assistance? Customized training? Technology diffusion? More engineering-school graduates? There are some simple fixes that could go a long way.
The second alternative takes this same approach and applies it to very young companies and to emerging technologies with more speculative prospects. This was North Carolina's successful strategy from the 1950s until the mid-1990s. Making no big bets on any one company, the state invested in all levels of education, created its community college system and upgraded the state universities. It also focused on highway upgrades and other infrastructure investments. [...] Austin, Texas, currently the hottest tech-led economy in the U.S., provides a model: there, local entrepreneurs became local champions, creating early incubators, reinvesting their gains and working with local government.
The second alternative takes this same approach and applies it to very young companies and to emerging technologies with more speculative prospects. This was North Carolina's successful strategy from the 1950s until the mid-1990s. Making no big bets on any one company, the state invested in all levels of education, created its community college system and upgraded the state universities. It also focused on highway upgrades and other infrastructure investments. [...] Austin, Texas, currently the hottest tech-led economy in the U.S., provides a model: there, local entrepreneurs became local champions, creating early incubators, reinvesting their gains and working with local government.
Really? (Score:2)
Re: (Score:2)
Re: (Score:2)
I think the likes of Microsoft, FaceBook, Amazon, Shell Oil, Koch Brothers, Apple, Google, et.al. are beyond help from mere city, local, county, state, and even federal subsidies. Then, again there is General Electric.
Did you not just see the North America-wide pandemonium as Amazon pitted cities and states/provinces against each other to host their second HQ?
IMHO, it should be illegal (Score:5, Insightful)
You've got a mom and pop store run by the grandkids of the founders. They play by a set of rules. Some $megaCorp comes in, they want tax breaks that apply only to them. How is that fair to mom&pop?
You might be able to negotiate with mom&pop. They probably have an advantage as they know the market and their customers, where you know how to raise money and get elected. Now it's time to negotiate with $megaCorp. You think that's a level playing field? You're a hayseed from a community college going against someone who not only went to an elite university, but ended up graduating in the upper 50% of their class. You spend your time getting re-elected. They spend their time figuring out tax laws, local laws, and various jurisdictions. You don't stand a fucking chance.
Re:IMHO, it should be illegal (Score:5, Informative)
The whole incentive cities give to get businesses to move in gets abused to hell. It needs to stop. My city had been doing it for years while current businesses in the city got completely screwed over, get absolutely no tax breaks or anything. It's completely unfair for everyone that's currently in the city while new businesses were receiving 5 year tax breaks and their buildings half payed for by the tax payers of the city.
It completely had a negative affect on the city where all the old businesses just go up and left for better places.
Re:IMHO, it should be illegal (Score:4, Informative)
Re:IMHO, it should be illegal (Score:4, Informative)
First you pay them to come. Then you pay them not to leave.
Yup. We played that game in my country, and have paid Hollywood something like $575 million [nzherald.co.nz] over the last few years.
Everytime anyone makes any noises about no longer paying the Danegeld, the workers protest in the streets, despite being forced to give up all sorts of worker protections just to keep their jobs.
Re: (Score:3)
Re: (Score:2)
Re: (Score:2)
How is that fair to mom&pop?
Mom&Pop employs how many? 5?
MegaCorp employs how many? 1000?
Who is paying for the unemployed? The city. The tax payer, that is you.
While a "deal" is not fair, it still has its benefits for everyone.
Even mom&pop: because now they have more customers that can spent their money at them.
Re:IMHO, it should be illegal (Score:5, Insightful)
Mom & Pop invest their profits back into the local community and tax base.
MegaCorp just pockets the money in an offshore bank and demands more subsidies while the CEO calls his workers parasites for wanting a living wage.
Even mom&pop: because now they have more customers that can spent their money at them.
Unless Mom & Pop were put out of business by the MegaCorp, or if they were lucky enough to sell their products to MegaCorp, MegaCorp has told them to offshore in China.
Re: (Score:1, Troll)
The 5 employes of mom&pop pay taxes: X.
The 1000 employes of megacorp pay taxes 200 * X.
You seem to be bad in math and business.
If the megacorp was not there, the 1000 employes would pay ZERO taxes, and probably would be unemployed and the city would pay the social aid for them.
The offshoring is a different issue and has nothing to do with the local policy of a city.
Getting 1000 jobs or more is HUGHE difference ... the ripple effects are astronomic big.
Re: (Score:2)
If the megacorp was not there, the 1000 employes would pay ZERO taxes, and probably would be unemployed
We are in a full employment economy. Labor availability is the limiting factor for the growth of many companies. So the megacorp doesn't add jobs, they just shift them from other businesses. So tax paying companies shrink, while the freeloader grows. How is that good for the community?
The 14th Amendment says everyone must be treated equally by the law. Special sweetheart tax deals are unconstitutional, and should be banned.
Re: (Score:2)
We are in a full employment economy. ... strange that half of the US definitely is on a 3rd world level and you as a nation are not able to fix that.
According to Trumps agenda, in fact half of the US regions have an unemployment rate up to 30%, Ohio e.g. Sure, those are low populated and don't hurt much
Re: (Score:2)
And in a full employment economy, those workers should be able to demand higher wages, and yet, we keep hearing that people aren't making a "living wage". Then, why the fuck don't they go to a different company?.
Re: (Score:2)
If the megacorp was not there, the 1000 employes would pay ZERO taxes, and probably would be unemployed
We are in a full employment economy. Labor availability is the limiting factor for the growth of many companies. So the megacorp doesn't add jobs, they just shift them from other businesses. So tax paying companies shrink, while the freeloader grows. How is that good for the community?
So why would somebody work for the megacorp if there are "enough" jobs? Must be because megacorp pays better or gives benefits like paid healthcare. So megacorp results in workers having more spendable income. Which is worse for a city how?
Re: (Score:2)
Mom'n'Pop shop might just earn enough to pay the lease and a salary to cover food and property tax on their home. Multiply that by 1000 shops.
MegaCorp pays executives, directors, managers, employs engineers, admins, interns, does collaboration with the local university, pays tax on a corporate campus. Then those highly paid senior management also spend megabucks at high-end department stores.
Re: (Score:2)
Re: (Score:2)
Mom & Pop invest their profits back into the local community and tax base.
If it weren't for the 10,000 employees of MegaCorp shopping at the Mom&Pops, those Mom&Pops would have no profits.
Re: (Score:2)
It should be illegal for cites and states to offer special advantages to anyone. You make a level playing field. Companies want to play in your sandbox, that's all good. Companies decide your sandbox has the wrong kind of sand and go elsewhere, that's good. Don't like it? Change the rules for everyone, not just $megaCorp. Do it in open sunlight, not in the dead of night with special rules that only apply to $megaCorp tomorrow.
But there will never be a level playing field, even if you take money out of the mix. Certain cities will always have perks, tangible or intangible, that make companies want to build there instead of somewhere else. Perhaps it's low property taxes, or proximity to a university that specializes in the company's industry, or a nearby airport, or cities close by that have the demographics that would make the most of the new company's product. If you remove the ability for cities to incentivize businesses, y
Re: (Score:2)
If you remove the ability for cities to incentivize businesses ...
They can incentivize, they just need to do it fairly. If Amazon gets a property tax break, then so should Joe's Carwash.
Re: (Score:2)
Re: (Score:2)
Re: (Score:2)
Re: (Score:2)
"The thing is that often large companies will suck the life out of local businesses."
Let me FTFY. The thing is that often large companies will suck the life out of competing local businesses.
They frequently create all kinds of supporting industry, quite the contrary of sucking the life out.
Re: (Score:2)
Re: (Score:2)
You're making an assumption that this new business is simply replacing local business, which simply isn't the case in the vast majority of these situations. When Boeing moved to SC, what local business did they replace? When the automotive industry was in the shitter in Flint, MI, and moved factories to Mexico, were they replaced by local businesses?...no, and they caused a wave of supporting businesses to go bankrupt. When new sports teams move into a city, what local are you suggesting that no new loca
Re: (Score:1, Flamebait)
It should be illegal for cites and states to offer special advantages to anyone.
It is in the EU. That's why the EU is so great, and why the UK wants out. British businesses want to abuse British workers and taxpayers in the same way as they see happening in the US, and need to get out of the EU to make it happen.
Re: (Score:2)
The problem with your idea of making it illegal is that it will always be legal somewhere, even if it's not in this country (U.S. here). Businesses are always going to do what's financially in their best interest, and if your city, state, or nation isn't competitive, they'll take their ball and go elsewhere...witness Boeing moving to S.C., and many that have moved large portions of their business to places like Ireland (while the EU may nail the Irish over taxes, there will always be other places to go).
Wh
Re: (Score:2)
Typical Tech Bro (Score:5, Interesting)
Re:Typical Tech Bro (Score:5, Interesting)
Re: (Score:2)
The sadder part it that it's the best system that we've found in practice.
Living with people is hard, whether in a family, or in a group of a hundred million. It took thousands of years to come this far.
Re: (Score:2)
Re: (Score:1)
Try throwing them a party instead (Score:3)
Everyone loves parties.
It's bribes folks (Score:1, Redundant)
Nobody thinks they needed to give Foxconn $4 billion anymore than anybody in Kansas thought that bloody Ark think was really going to pay for itself with tourism and jobs. It's just corruption. Want this to stop? Stop voting for people who take corporate money. Here's one now. [google.com] Here's a whole bunch of them [justicedemocrats.com]. Not sure if there are any on the R side tho
It's a race to the bottom (Score:5, Insightful)
If it's cheap for your city to do, it's probably cheap for some other city to do too. Then they will do a little more. Then you will have to do a bit more than that again. It's like an auction, you don't win until all the other bidders quit. Whatever incentives you offer they'll just recalculate it in $$$ and pick the highest bidder.
Re: (Score:2)
Your city can offer up incentives because it will create additional jobs and tax revenue from that, along with revenue from supporting industry that pops up. But the city needs to do the math, and determine where the tipping point is. What's the cost/benefit, and do the risk/opportunity analysis. At that tipping point, it's no longer fiscally lucrative to offer up any incentive. And, these tipping points will vary by industry, size company, etc. We see this with sports teams all the time. Many cities
How to make your city great again (Score:5, Interesting)
Pass that exam and have workers ready for brands. Brands should not have to accept workers with no education and then support people who cannot do the work set.
2. Highway upgrades. Make sure road, rail, ports are ready for imports and exports. A good new paved road that can support transport sets a local government apart from many in the USA. New roads for exports and so new equipment can be moved in.
3. Power costs. Dont make power expensive. Power costs are what keeps a brand. Find a way to reduce power costs and have power that works 24/7.
Not just when the sun is up, the wind is at a set speed. A 24/7 power supply.
Power working 24/7 at a cost lower than most of the USA.
4. Law and police. So the engineers, academics and investors feel happy in your part of the USA. No crime and enjoy more investment.
5. Clean up your city. Clean roads. Clean streets. Nice well educated people. Nice shops, good food. No drugs, no crime, no tent city, no years of parked RV.
No political tensions, no city permits for riots stopping workers from getting to work. No blocking the free flow of transport and workers for hours.
6. Be open to building the best internet the US can offer. Don't back NN and expect to build a network for everyone. Build the fast internet for new business use.
Ensure parts of your city win in US internet speed rankings.
As other parts of the USA catch up, make networking in your city more attractive again.
7. Find out what early incubators want. Low cost power, a good university that can offer educated workers. Fast internet . Nice food, nice gym, no crime areas to live in.
Things to do for fun. Walks, sport, trails, art, history, food, internet. Make sure its some of the best in the USA and ensure no crime.
8. Fund your police every year. Attract the best police from other parts of the USA. Pay the police very well and ensure their wages go up every year. Clean up your city. Stop the city from attracting drugs, crime. Hire police only on merit and the skills they bring not demographics. Don't hire new police from other failed cities.
Give the police the tech, laws and support they need to keep the city safe for all.
9. Rent. Make sure poor people can get from their low cost dwellings to work. Look after wealthy areas, middle class and low rent areas as different parts of a city. Each part of the city is safe and productive with working services. Don't try and move poor people into areas with rent they cant afford. They will just need more city money to look after.
10. Use city money to keep the city working. Collecting tax should pay for improvements. Paying to support a person in a part of the city they cant afford to rent in is not a cost a city can keep supporting. Look after poor people in low rent parts of the city. Control spending so the tax rate brings in brands escaping the cities that demand high tax rates to support their huge spending on new social programs.
11. Tell the USA about your city. Low crime. Educated workers. The best police. Fast internet with a low cost and working power connection.
Clean streets and clean water. Paved roads. Poor people getting the support they will always need in parts of the city they can afford.
No having to worry about NN for everyone if a new network is needed. Community internet is supported all around the city. The city will not say no to any good new network design.
12. Study the states and city govs that have failed all over the USA. The crime, the drugs, the supporting of poor people and their cost of rent.
Cities with tents and parked RV and a police force that wont enforce laws. Cities supporting non citizens who should not be getting any city services.
Study the city tax rate that makes brands look at other parts of the USA. Dont let your city become like all the other failed cities.
13. City service for citizens and people allowed to work/study in the USA.
Re: (Score:2)
Power costs in the US are dirt cheap. ... which is most likely because it is so cheap.
It is not plausible that it has any influence on business, unless you waste power
Re: (Score:2)
Some parts of the USA can still win on more attractive power prices.
Other parts just want to tax everything to cover more and more social projects.
Its all about making a city more attractive to invest into. Less tax, less cost to get power connected. Less cost of power over the years. A better quality of supply and no strange pricing structure to support changes to supply from wind, so
Re: (Score:2)
Think of what innovative gated communities, gentrified neighborhoods could support in 2018 if finally released from federal NN rules AC.
Re: (Score:3)
Re: (Score:2)
Workers selected on demographics not merit? Thats not going to be a skilled workforce.
Hire 5 workers and wonder how many passed on merit and how many have the skills to work?
How much money does it cost to take on new workers with no skills at full pay?
Having bad transport is going to cost more to bring in good and do exports. A city that cant pay for road work might not be doing other services?
Paying more for power when competitors in better cities don't have to.
Police not enforci
Re: (Score:2)
Re: (Score:3)
Someone is still paying for their startup. Investing in their idea. The money invested goes to pay taxes in a party city.
How many more years can the cost of working in a party city be hidden from investors?
Before investors work out they can get the same quality with the same level of education in other cites?
A diploma mill that graduates everyone on demographics will not provide the results expected. With Honors just for attending.
The smart money is going to work out what was
Re: (Score:2)
Re: (Score:2)
The attraction of SF for workers is that it is somewhere where they can walk out of an office and within a block have a half dozen places where they can eat. Similarly with job interviews. Other corporate campuses in the Bay Area only have their own in-house cafes/restaurants and anywhere else is at least a half-hour drive away. Just going out for a one hour lunch takes two hours.
Re: (Score:2)
Re: How to make your city great again (Score:1)
cities (except for a few... Seattle, Tacoma...) don't control or regulate their power prices. They're captive to their regional power companies.
A few areas in the US have a slight advantage because of regional federal power systems- BPA, TVA, etc. that help mitigate electrical power pricing. Yep our brilliant president is making noise about putting them up for sale.
This regional power pricing imbalance was beneficial for industries in the past, like aluminum smelting, but how much aluminum smelting is still
Re: (Score:2)
All your suggestions are only of concern for executives that are interested in the long term. Unfortunately our current corporate structure incentivizes behavior that maximizes short-term stock spikes. As a result, squeezing as much as possible out of communities is a no-brainer for companies, even though the result is a community that is less desirable for the employees of those companies.
tax break != subsidies (Score:1)
Tax breaks are not subsidies. Tax break means the government will not confiscate some of that company's money (good). Subsidies means the government will confiscate money from other people and give it to that company (bad).
That said, the government should not pick winners and losers, if it is going to give a tax break, it should give it to everyone.
Re: (Score:2)
Re: (Score:2)
So how are your Libertarian fruit cake ideas going in North Dakota?
Any measurable improvement in service to its residents?
Re: (Score:2)
if it is going to give a tax break, it should give it to everyone.
Then it would have no influence on on what kind of business you want to promote.
Re: (Score:2)
if it is going to give a tax break, it should give it to everyone.
Then it would have no influence on on what kind of business you want to promote.
Well, you should evaluate whether promoting a specific kind of business really is beneficial to your constituents' interests and if after doing that, you determine that it is, then you should offer tax breaks for the kind of business, not to a specific company that is in that kind of business. Any businesses of the kind you want to promote should be able to take advantage of your incentives.
Incentives of that sort will still encourage businesses to come to your city, but without disadvantaging your already-
Re: (Score:2)
the government will not confiscate some of that company's money
If companies want roads, etc., someone has to pay for it. If you have a limited resource (land to build roads on) then unconstrained development by private entities does not necessarily result in an efficient network, as it is not in the interests of any individual player to build an efficient network. In some markets competitive pressures will ultimately result in optimal solutions for people, but it's not a given, as optimal solutions are only a byproduct of the process, and in some markets the competitiv
Re: (Score:2)
It's complicated.
1) Sure, part of the incentive package is a reduced tax rate, which doing thie math, 50% of taxes on X income is better than 100% of taxes on 0 income. This is mostly straightforward, though if the presence of the company attracts population growth and part of the calculus for affording infrastructure and emergency services and such would be the taxes you opted out of, that could be bad.
2) Frequently included in these incentives are *refundable* tax credits. Such a tax credit will probab
Re: (Score:2)
https://en.wikipedia.org/wiki/Subsidy#Tax_subsidy
Tax subsidy
Government can create the same outcome through selective tax breaks as through cash payment.[3] For example, suppose a government sends monetary assistance that reimburses 15% of all health expenditures to a group that is paying 15% income tax. Exactly the same subsidy is achieved by giving a health tax deduction. Tax subsidies are also known as tax expenditures. Tax subsidies are one of the main explanations for why the American tax code is so complicated.[8]
Tax breaks are often considered to be a subsidy. Like other subsidies, they distort the economy; but tax breaks are also less transparent, and are difficult to undo.[9]
NFL, NBA (Score:2)
Stick the Citizens with huge tax debts then move when greener pastures are available. Implode stadium, repeat.
Cities are competeing with each other (Score:2)
especially because some tech companies have become very aggressive about demanding big tax breaks
The Guardian article seems at odds with the reality it reports. It suggests that politicians should learn how start-ups are formed and mature. It suggests there is a difference between "old" and "new" technology firms.
The article then go one to say that local areas should be "selling" their area on the attractiveness of its other (small) industries and level of education.
But the article doesn't understand that once a mega-corp is considering moving into an area it has already considered those things and
Re: (Score:2)
Hello Captain Obvious (Score:2)
If you want to attract tech companies, the by far best incentive is to have an educated workforce that provides them with hiring opportunities. Also all kinds of companies like good infrastructure.
There are people you have to spell that out to? Can't be.
nobody will do that (Score:2)
great ideas, but they won't ever be implemented.
why? because they are long term plans and no politician is interested in long term.
Indeed (Score:2)
They could do it like Ireland, Luxembourg or The Netherlands, just tax them only 1% and they'll come, then the other countries around sue you and as punishment, you'll get sentenced to have to accept billions from those companies.
That will teach you.
Why is this on slashdot? (Score:1)
Why would a city want to kill all the jobs?
I'd rather have a job than a municipal government.
Or ANY government for that matter.
They need to stop doing it in the first place (Score:2)
I have *never* seen a case where the lost tax revenue is made up. Not once.
And a lot of us DO NOT WANT Amazon in Mongomery Co, MD: traffic's bad enough, and by tax subsidies, the county and state will have less to fund public transit, and improve roads, just to start out.
For that matter, show me ONE case where the company's going to guarantee that some majority of their employees will live in the county the company's located in, and so improve the tax base? Hell, no, the better paid ones will live a good di