Adding Up the Cost of Tax Breaks for Big Tech’s Data Centers (2016)
nextcity.org
nextcity.org
But this ignores one important fact. For plumbers, welders, electricians, bricklayers and crane operators, every job is a temporary job. Building that pipeline or datacenter employs them only for a couple of years, but pays them good money for work that is satisfying to them. When these reports choose to look only at permanent jobs, it explicitly ignores blue collar workers in favour of white collar ones.
The calculus for politicians is different from those who write white papers for think tanks. The blue collar workers vote. Simple as that.
If the US doesn't want it, it will get pipelined to the Pacific coast and tankered to Asia or sent by rail within North America or to the Pacific.
I think Keystone XL's real detractors are US oil producers. It's real proponents are oil consumers that (clearly!) could not care less about where the oil comes from.
That's not necessarily true. The point of the capital investment in the pipeline is that the overall cost will be lower than shipping it from the pacific. If the pipeline doesn't exist, it may not be economic to mine the tar sands (this is especially true for tar sands oil which is very expensive (== itself consumes a lot of energy) to extract, so is only viable when oil prices are quite high.
> I think Keystone XL's real detractors are US oil producers.
Some of them, but the majors are integrated and having an alternative supplier to feed their refineries is good for them.
The other source of opposition is people who don't want to deal with the externalities: the pipleline itself, of course but more importantly leaks. Keystone's other pipelines leak and there's no reason to believe this one should be any different.
Lower, maybe. But transoceanic shipping is cheap and gives you far more flexibility in sending to whichever customer will pay the most.
> If the pipeline doesn't exist, it may not be economic to mine the tar sands
The current problem is that the capital investments in the extraction infrastructure have already been made. It's cheaper to continue operating them at a loss than to shutdown entirely. If the operations go bankrupt, they'll continue operating when a buyer can take over without any of the previous debts.
It's at the point where it's taking government intervention to get the extractors to reduce production. The most economical decision for them is still to flood the market with production.
It's like the Worldcom fibre infrastructure constructed in the 1990s. It was a terrible investment, but once it's built, it's not worth turning off.
> the majors are integrated and having an alternative supplier to feed their refineries is good for them.
If they're integrated and have a balanced production and consumption, a pipeline from somewhere else throws a wrench into that.
> externalities: the pipleline itself, of course but more importantly leaks. Keystone's other pipelines leak and there's no reason to believe this one should be any different.
Pipelines will always be the best way to move bulk liquids from A to B. There are also externalities to oil-trains and more expensive oil.
While that is true, the think tanks have the perspective right: the local government is spending (foregoing) millions in taxpayer money to channel thousands to a small set of people. I'm all for those people being paid, don't get me wrong. But it's an insanely inefficient and destructive way to do so.
A data centre's output is then piped anywhere in the world for near-zero cost, providing near-zero local value.
Remember: These aren't datacenters that wouldn't be built were it not for tax cuts, and they're often not even datacenters that would be built somewhere else were it not for tax cuts (see: Google pitting two states against eachother when they were going to build 2 data centers anyway) they're datacenters that are going up one way or another, but the private companies push for ridiculous tax incentives regardless.
I don’t think the officials handing out the tax breaks have bad intentions, but the system itself seems corrupt.
Sometimes in the discussion about this I get counterarguments about how it’s a “win win” (company gets subsidy, area gets jobs) or how it’s a net gain for the area (without the subsidy you get nothing, and with the tax break you get the jobs so at least it’s something).
But yes, anything more than the minimum required to perform public functions is inequitable.
Governments obviously will always need to enter contracts with businesses to provide the services it wants to provide.
For example, people will sometimes use "subsidy" to describe the government purchasing defense research and products.[1]
But it's apparent you weren't considering all forms of government paying private companies to be "subsidies".
https://www.thenation.com/article/heres-where-your-tax-dolla...
Anand Giridharadas recently gave an a great talk[1] (at Google!) in which he explains how "win win" is a charade used to set the framing of the conversation.
Framing a plan (like a subsidy) as something that benefits everyone has good optics, but it implicitly creates a framing that only considers that plan. (it's either this plan or "you get nothing"). Without the restricted framing, the choice isn't a binary "subsidies or nothing"; there are many ways that money could be spent. (e.g. maybe going without that business and investing in education or infrastructure would provide a greater benefit).
It seems part of the problem is we're in a new world where such subsidies are counter productive because too many people rely on them. In this case, it shouldn't even be legal to use taxes to subsidize any singular private businesses -- and those that require subsidy to function should be nationalized (they're not functioning on the market system).
Does this apply to green industries as well? How about industries that pollute? Should there just be one flat tax for every business regardless of revenue/income? How about valid business deductions? Should all capital equipment depreciate the same as well? Should payroll taxes be the same regardless of the number of workers and their incomes?
It's nice to say there should be no subsidies on businesses or industries and I agree with the sentiment, but in actuality there is a lot of complexity in the tax code and a "level playing field" would be a drastic change to what we have now.
For instance, you could think businesses should be taxed progressively on income. So now you have to define revenue and expenses, which can leave a lot of arbitrary distinctions and vast differences among businesses and industries.
> Allowing it just means businesses can play states out against each other and it becomes a race to the bottom
There's already competition among cities, states and countries and its generally a good thing. Some states offer differences in taxes (e.g. rates, income vs property, etc), regulations (e.g. zoning, employment), benefits (e.g. state sponsored insurance), infrastructure (e.g. roads & bridges). This is thought to be a great benefit as smaller political entities can experiment to lure people and businesses. Not to mention it makes. Having a top down approach doesn't really make sense. I don't think its a race to the bottom, it's competition and states and cities should have to compete to provide its residences and businesses the best deal.
The best form of charity is luggage. People escape poverty and leave places with poor governance to greener pastures.
This is just legalized corruption, but of course people in developed countries don't like to use that dirty word, so they call it "tax breaks" or "campaign contributions".
After spending 2.5 years through 30 countries in Africa, I can tell you there is no difference. It's corruption.
It's legal because the people making the laws are the people making the laws.
It's a "who watches the watchers" sort of situation.
Besides electing people that just don't do this, how might you imagine this being "illegal"? Some constitutional item that can't be overridden by the legislature?
(That said, they're not perfect - witness Irish tax law as a prominent example)
As an outsider, it makes exactly 0 difference to me whether there is a data center in Wisconsin vs. Illinois, the only difference is that some corporation will be more profitable and pay less tax overall, which they are supposed to be paying to offset externalities (at least in a perfect world).
Right but these tax breaks are offered by representatives of people who live there and want the company to be there - not outsiders.
You’re saying ‘as someone who doesn’t live in the area I see no benefit to me in spending money to improve the area’ well duh thanks for the insight.
It’s no different to cities offering higher salaries to hire a good administrator - normal competition to bring in beneficial things.
The area is worse off, but specific people get rewarded.
The issue is that designing tax changes for specific companies is ridiculous. If the local area can net $5M by charging lower taxes in this specific case, why is that not just the general rule so they can net $5M a hundred times from a hundred other companies without having to negotiate separately with each of them? And $50K a hundred thousand times from smaller companies?
So, in some imaginary realm where the math worked out sure. But, we don’t live in that world.
That cities run near breakeven is no surprise because if they were running a surplus then the citizens would immediately demand that it be used to fund programs or lower taxes. But that doesn't tell you anything about whether the programs are necessary or efficient. New York has been well known for massive government waste and corruption for decades and it hasn't made them uncompetitive because of their other advantages (a huge one being population density). Which means the number of tax dollars needed to cover the incremental business is much lower than the amount the average business is currently paying, since the remainder is going to waste and corruption.
Or, for that matter, to other programs that aren't correlated with or are inversely correlated with the number of local businesses. If a new business comes in, the amount the government has to spend on subsidies for low income people doesn't increase, so so the new business imposes no incremental cost. And if the new business hires local people, people who were unemployed or underemployed may get better jobs and reduce the cost of such programs by reducing the number of people who require them.
There is certainly a point where lowering taxes below it means that companies aren't paying their own cost, but the idea that less than half of what they're currently paying is actually going to the additional services they require the government to provide is not at all ridiculous. Especially in places with higher tax rates to begin with.
That’s irrelevant, if a city spends more money on services for a company than it collects from that company it’s a net loss. Sure, you can argue that they should be more efficient, but collecting less money is not going to help.
> so so the new business imposes no incremental cost.
Every business adds incremental costs associated with transportation etc. Infrastructure is expensive to maintain and becomes more expensive with increased useage. On top of that you have things like food safety inspection which directly relate to business. Suggesting the incremental cost is zero simply demonstrates you don’t understand the specifics.
Town A gives tax breaks to Company that pollutes environment. Town B doesn't. Company moves to Town A. Citizens of Town A are better off in the short term, locally speaking, but Company simply pays less for their pollution externalities, creating a net negative from the viewpoint of society as a whole.
You're arguing against something nobody in this thread suggested that we should do.
Politicians benifit from concentrating upsides while defusing downsides. They can point at X jobs, while ignoring the long term issues.
But why just Amazon?
What about hundred Joe's Car Shops and and a hundred Betty's Diners and a hundred Sue's Tech Startups?
Does not the same calculus apply to them?
What about an up and coming competitor to Amazon that would have provided even more jobs, had the government treated them fairly?
Should we not be equals under the law, having the same requirements, receiving the same punishments, paying according to the same tax code?
If Amazon can negotiate different tax laws, should it be able to negotiate more lax employment requirements, or lower speeding tickets, or more voting rights?
I'm as staunch a low-tax and pro-business libertarian as they come, but for everyone, not just for the government favorites.
Equality under the law.
Then everyone knows the rules and the outcomes.
This onsies twosies business of choosing who pays one on a case-by-case basis is ripe for bribery and inequity.
It'd be one thing if New York passed a law that any company that does ABC can get XYZ.
They didn't.
They said one company, and one company only, can get XYZ.
The issue is that this is true of every company. It's much more efficient (and fair) to just have a lower tax rate to begin with and allow that to attract businesses in general than to negotiate with each of them individually and screw over any that aren't big enough to get that level of attention.
The question is not "was this a useful use of money", it's "was this one of the better/the best use of these funds".
But if you can get any gain at all then why is it being done for only one company rather than in general as a matter of policy?
And now you're in a race to the bottom with every other city in the USA.
You're lowing the standard of living for every normal person (less tax revenue to spend on schools, roads, etc.) and you're increasing the standard of living for big companies (more profit)
Rather than doing that, NO city should offer any tax breaks, and that company will come to some city and pay $150M in taxes, thus improving society overall in the USA.
It's amazing how often you guys work against your own interests, degrading your own society in the name of increasing private profits.
Cities that can provide the necessary services to their citizens for less money “win”.
That’s how it should be and how it works today.
> Cities that can provide the necessary services to their citizens for less money “win”.
I think you would find the vast majority of citizens in OECD countries would not say America is providing necessary services to it's citizens.
Though your explanation certainly explains why so many government services are so terrible in America compared to OECD countries. Thanks.
It’s well known that Singapore has a very high functioning govt with plenty of social services for its citizens and very low tax rates. I say good on them and if a company tells another country they are moving there then that country should take that as a hint to get their shit together.
And as for OECD countries not being satisfied with the US govt services who cares? The only opinion that matters is US citizens. Should Sweden care if the US complains about their system?
Because America has proven what happens when you let competition dictate - the quality of services goes to crap. Look at your public schooling, healthcare, roads and rail. They are seriously below standard.
> And as for OECD countries not being satisfied with the US govt services who cares? The only opinion that matters is US citizens
I once read a report that said "If Americans knew what Europeans get for their tax money Americans would riot in the streets". I don't think you can ask US citizens, because they have no idea what the rest of the world is doing. It's not in their culture to look or compare themselves to other countries.
> Should Sweden care if the US complains about their system?
I've lived and worked in Australia, Canada, USA. My sister lives in the UK. In my experience, it's extremely common for Australia/Canada/UK to compare itself to other countries, and point out where Australia/Canada/UK is lacking. As one example it made massive headlines across Australia when it came out that school kids in Kazakhstan had higher Maths results than Australian kids. So in answer, yes, other developed countries do care and notice and use that comparison to improve their own country.
They could have used the money to help bootstrap small entrepreneurs but instead, most of that money ends up directly in the pockets of large shareholders and executives. Those few workers who do get some of that money are basically enslaved to these corporations. If a company pays you so little and there are almost no other employment options available for you and you can't afford to lose your job with that company; that's basically slavery.
A couple of possible explanations:
1. There are beneficial effects other than tax revenue - maybe these municipalities are hoping the new data centers will help turn them into hubs - draw other businesses, talented workers, etc.
2. The decision-makers' incentives aren't well-aligned with those of the municipality. Maybe the local business owners who fund their campaigns benefit disproportionately from these big projects. Maybe the headline of "brought Apple to North Carolina" outweighs the actual, harmful effects of the deal they signed when the next election comes around, etc.
In this view, money spent now to ensure a successful deal, which may have eventually happened anyway, is a worthwhile boost even if the costs are never recouped. It sounds bizarre, but deals like this send a signal to other businesses that the state is "open for business", which is both a substantial psychological boost and a signal that generous incentive packages may be on the table, but this doesn't always mean that taxpayers get taken for a ride. Smaller businesses have less negotiating power. That's where a "business-friendly" jurisdiction recoups some of the costs of subsidies.
And I can’t see that as positive. Take taxpayers money, gift it to the richest companies, then try to recoup a part of losses from the small players.
As the society we shoild somehow strive for being able to correct such cases.
What keeps happening is that you have an area which has a successful economy because it has a climate open to entrepreneurship.
Then it becomes trendy to hate businesses and not worry about regulatory burdens or high tax rates because businesses are currently doing well.
Then the new regulatory burdens and taxes harm the local economy, especially small businesses, and the local politicians become desperate to show a turnaround. But you get more jobs faster to get them all from bribing a huge corporation to swoop in than to actually clean up your regulatory environment and wait a decade for small businesses to recover, so that's what they do.
Then the huge corporations are still making huge profits, so you still get calls for more regulations and more taxes, even though that's exactly what's killing your small businesses and making you dependent on huge corporations to begin with.
You have to break the cycle in the beginning. Once you're already on the back foot, the huge corporations have the leverage because your choices are to give them whatever they want (and one of the things they want is for you to be more dependent on them), or to suffer short-term government budget cuts as you lower taxes to save your small businesses but then have to wait for the lag time between when you reduce the taxes and when the local businesses come back. Assuming you're not already in the death spiral of economic decline leading to crumbling infrastructure leading to economic decline.
Take the Apple deal. Of the $321m the article quotes, $300m comes from a single source: a highly technical tweak of North Carolina's corporate income tax, to use what's known as "single sales factor apportionment". But most states apportion corporate income tax this way, so it doesn't necessarily make sense to count the entire amount Apple saves as a handout. Apple would argue, entirely reasonably, that North Carolina was just modernizing their tax code to be more fair.