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Comment by stjohnswarts | Hacker News Reader

They are trying to strong arm the locals into basically saying they (Samsung) pays zero property taxes to the next 25 years. https://www.statesman.com/story/business/2021/02/04/samsung-... . I hope Austin passes on it if Samsung can't do any better than that.

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I hope then you can face the desperate residents who don't have the luxury of having a cushy data collection yuppie job like most of us here do then for missing out on a decent wage like and tell them "no it was for your own good, trust me!"

No it sets a terrible precedent. Businesses need to support their community. I would willing to bet that the city council will not let it happen. They may cut a deal but it ain't gonna be 100%. More like on the order of 10-25% like other companies get. Corporations are too greedy. I contract for a living and through local contacts never go more than a month between contracts. The job market here is still pretty great for people who have solid backend/embedded skills, in general it's solid for most people. Those other people can go work for the other big guys or the new Tesla plant who actually cut a reasonable tax deal.

Look at it from the local government prospective, they could get 0 in tax income or they can settle from the tax income of thousands of new high income jobs.

> or they can settle from the tax income of thousands of new high income jobs.

There is no income tax in Texas. Even if there was, it would go to the state, not the county or city.

Property and sales taxes, then.

Dude, the whole thread started with a comment about Samsung trying to pay no property taxes.

OP means Property tax from employees. Because it creates a ton of jobs

There are plenty of businesses that create tons of jobs and pay their taxes.

Tax deductions aren't meaningful for most companies. Samsung is pretty limited on where they can actually build this plant. It's not like Hattiesburg, Mississippi is awash with people experienced in silicon fabrication. So the company would have to pay a lot of money to import people from other regions. But Hattiesburg isn't exactly top on the list of places where experienced technical professionals wish to live.

The city counsel should play hardball with Samsung, since they will cave. This is one of those situations where it doesn't hurt to ask, but the decision is already made.

But what says those people will live within Austin city limits (ba dum tiss) and pay property taxes to the government that gave out the tax break?

Surely a sizeable number would commute?

Also, collecting new property taxes from a corporation would allow the city to keep rates lower for residents.

Do gigafab manufactures like that really create high income jobs? I assumed it was mostly low income close to minimum wage kind of thing.

On a similar tangeant, how are these able to compete with similar manufacturing done in Asia or Africa?

Average salary is probably around $100k. Even the techs with high school educations can make in the range of $40-60 an hour and generous overtime.

>On a similar tangeant, how are these able to compete with similar manufacturing done in Asia or Africa?

Because it is all high skill labor. Techs that are able to strip down a 10 MM machine and identify the source of sub micron particule contamination are worth their weight in gold.

They may be costing the company the equivalent of $40–60/hr, but more realistically, techs are starting at < $20/hr and have to spend years on the payroll of a third-party staffing company.

That's a good point, $40-60/hr is the pay for seniors level techs. Entry level techs are making much less and are employed through staffing companies.

>>Average salary is probably around $100k. Even the techs with high school educations can make in the range of $40-60 an hour and generous overtime.

Do you have a source for that? I'm surprised as when I contracted at the Intel fab in PHX, the workers in the actual fab were not making anything close to that. Management maybe, but not actual line workers. The standing joke was "they were working for the stock"...

I found this which has a manufacturing plant section. No idea how accurate: https://www.zippia.com/intel-careers-6055/salary/#by-job-tit...

Hmm - that's interesting. If the "Intel Plant/Manufacturing Salaries" section is true, process technician and production operator (which I guess are the people that run the line?) make quite a bit below $100K. Oddly enough, it seems like the software jobs are better paid then the hardware ones?

Thanks for the link!

How is that odd? Software salaries have been outpacing hardware ones for at least the past 1-2 decades. When the big tech companies are paying over $100k for software developers fresh out of college, supply and demand is probably forcing this state of affairs.

I just would have figured a hardware company would be focusing on the hardware personnel.

After all, there are plenty of places that don't pay FAANG level salaries for software developers. I still regularly see < $60K software jobs advertised from smaller companies.

Were they working for the stock?

In Taiwan, an average semi technician salary is $38-$40k a year

I don't know anything about how they are run, but I would assume you need a large number of on-site engineers and process overseers. What are the low-income jobs? Security?

I thought it was mostly assembly line workers putting parts together, with machines doing the rest. Kinda like what this photo shows: https://bit.ly/3a8uRFM

This is how it looks like now: https://www.extremetech.com/wp-content/uploads/2018/12/TSMC-...

Machines feed each other via conveyor belts, everything automated, tight control loops check/move things around.

Notice the difference in human presence.

That’s board assembly, not chip fabrication.

So you admit you were ignorant. That's a rarity on here. People will defend their wrong views here because they don't want to hear they aren't a polymath.

Someone has to build the roads, run the schools, pump the water, etc.

A tax cut for Samsung is effectively a tax hike for everyone else.

Companies can and do build their own roads -- we aren't exactly talking about building interstate highways. Schools would be paid for by SAS employees and contractors' paycheck and additional local property taxes (for those who have to relocate from another place). I highly doubt that SAS is going to get free water.

Parmer Lane, the road that SAS sits off of, is a parking lot in the morning and evening. I have to think that Austin is planning on expansion eventually if yet more people are driving on it, because that's what Texas does - build wider and wider roads, public transportation be damned.

> A tax cut for Samsung is effectively a tax hike for everyone else.

That is a remarkably zero sum way to think about it.

Negative sum. Corruption destroys wealth. The vast majority loses a lot so that a few can benefit a little.

The difference between creating wealth and merely transferring wealth (aka theft, grift).

zero sum implies everyone loses in the long run.

Samsung benefits. Texas state benefits. Workers benefit. Community benefits.

Please enumerate all the ways the community benefits. Be mindful to include externalities in your ledger.

These business can act as anchors to attract skilled talent to the region. If that happens, then a small no-name town can really prosper.

But the reality is that companies don't really want to be the ones anchoring a small town. The sacrifice is too great in terms of limited talent pool, and lack of amenities necessary to attract talented people. Maybe after 20 years, the town grows into something significant, but at that point, the market has shifted so much that it probably doesn't matter.

In this situation, the decision is made, regardless of tax incentives. Samsung can't just plop one of these plants anywhere. The plant needs to be in a place that has a large enough pool of talent, the amenities (schools, restaurants, housing, etc) that attract new talent (ideally without Samsung having to pay for relocation), and have the logistics infrastructure to support business.

I've seen plenty of large companies negotiate for aggressive tax breaks locally, only to up and move to places like NYC, LA, or another high-tax locale a few years later because they either can't attract talent, or senior executives don't like living in cheap midwestern cities.

The local government can lose money on this deal even if it leads to more jobs.

texas doesn't have income tax.

The precedent was set long ago, and if Austin does not take it I can assure you some other city will..

Why, it is easy... a new factory (or a factory expansion) means more jobs, more jobs means more people, more people means more Home and more secondary businesses all of which the local government will get taxes from.

In principle I agree, but in reality Austin will make more tax revenue from these other properties and business than the amount of the abatement

Samsung has been around Austin, TX since the late 1990's and invested well over $15B. I think the state and county officials have enough dataset to evaluate whether Samsung's new expansion would benefit their community or not.

Source? Just like this comment in the story - " Nonetheless, the deal still makes a lot of sense for the state". Numbers, please?

doesnt samsung create thousands of jobs in the community with this? not sure I share your outrage. this isnt about some one trick pony YC startup hiring a dozen backend devs

Why should labor pay for all the externalities created by capital?

It's an interesting question: incentives. Samsung can't negotiate away wages like they can land taxes.

Did you not read the title? It's $17 billion dollar investment creating thousands of high paying jobs which in turn will create more jobs and create more capital in community. Why are you so against this?

This isn't some VC backed zombie healthcare software company hiring a couple of developers per year and not getting to pay taxes. This is a major corporation investing billions with profound impact on the community.

The investment is creating the jobs. The tax discount isn't creating jobs. It's just moving them around. Do you really think Samsung will give up if no city gives them a tax break?

Sure, the tax thing is probably one of the maor component here. In addition to local taxes, my understanding that SAS's current plant is in free trade zone where they also receive exemption for import/sales taxes, etc.

The whole US semi industry is worried that the lion share of semi production is stlil occuring in Asia, not in the US -- which is probably why Trump admin started twisting TSMC and Samsung's arms few years ago:

https://www.semiconductors.org/wp-content/uploads/2020/06/20...

without investment there would be no jobs or taxes to collect in the first place. With this single move, texas gov will be able to collect more taxes from thousands of people making 100k+ and downstream suppliers also hiring and making more money.

Samsung can easily find other cities to produce in at lower cost outside America. Why is being competitive for once such a big issue here? Without the tax benefit Texans won't have thousands of high paying high skill jobs.

The tax break adds up to about $40 million a year which pales in comparison to the benefits Texans will receive.

> Samsung can easily find other cities to produce in at lower cost outside America.

No they can't. Austin and the surrounding area are key silicon fabrication regions. There are very few places in the world that can compete, and it is possible that they are forced to produce within the USA due to import/export restrictions on what they are manufacturing.

This is a situation where the decision is already made, but it can't hurt to ask for tax break. Because hey, free money.

Kind of like how Amazon "passed" on building out an NYC headquarters because the city wouldn't give them tax breaks (after locals protested), only to come back six months later and begin construction of their NYC HQ.

Who said I’m against it? I merely raised the question.

> This is a major corporation investing billions with profound impact on the community.

Sure. Is that impact the same for everyone in the community, though? Or is it ultimately better for some, and not others? Could it also be that it may be a net negative for some members of the community?

Also, as noted by others, Samsung already has strong incentives to build this facility in Texas, and has wanted/needed to build it for a while. This latest gambit is an effort to force local government to sweeten the deal.

> Why are you so against this?

Why should the people of Austin, Texas gift millions of dollars to a company that made a profit of over $8 billions in the last quarter alone?

I've seen places refuse to budge and lose out the investments

I've also seen Intel refuse to negotiate price for chips with Apple for the original iPhone and look how great that turned out for them and TSMC

This is a company asking a city, that will see no income taxes from the at most 2,000 employees, permission to pay zero taxes at all to the city in exchange for the honor of housing a future EPA Super Fund site. Sure, the city will get some sales tax revenue from the 2,000 who will almost assuredly live outside of the city. So they'll get what, 6.25% of a $10 lunch from maybe 30% of workers per day? So they'll expect about $100k/yr in tax revenue in exchange for more road utilization and a future EPA Super Fund site. That doesn't seem like a good deal for the city. And that's assuming 100% of the sales tax goes to the city which it doesn't. Most of that goes to the county and state.

Why no income taxes on the employees?, they are part of the community, why arent they paying in? How does the city even fund itself then?

Texas does not have an income tax. Texas has property tax and sales tax.

The number of cities losing out does not change. If there are X competing cities X-1 cities will always lose out.

Its not just residents, its a complete violation of free market.

How are startups and family businesses meant to compete when the megacorps get special deals, pay no taxes and get bailouts? This is how you get monopolies and oligopolies.

In this case, it seems like a viable investment by the state. We're talking about a leading node fab, not a nebulous "LCD manufacturing center."

That's a bit harder to vaporware, and more importantly, why would you?

That worked out great for Wisconsin residents recently

For every one deal that went sour, there are hundreds of successes.

Additionally, comparing a rushed Foxconn plant to a Samsung fab facility, in an area where Samsung already has roots, is dishonest to say the least.

Source? How does one even begin to measure the opportunity costs of pitting politicians with short term incentives against each other? Many of the supposed benefits aren’t even able to be calculated.

The source is the hundreds of large corporations that have came to a remote location away the already larger and established metro areas with international airports nearby, so your usual suspects of LA, SF, NYC and ATL.

There almost always is some incentive package to attract the businesses. My city, Charlotte, has 10 examples alone. Neighboring Charleston and Columbia in SC have quite a few examples of theirs, namely in Aerospace and Auto Manufacturing.

How can one figure out if they would not have come anyway due to lower wages/land prices?

What benefits? Every fab becomes an ecological disaster over time. They should be assessed penalty rates not given discount rates to cover the future cost of cleanup.

Wisconsin's tax break was conditional on Foxconn meeting key hiring/production metrics. Foxconn had a long trail of failures building viable manufacturing business outside China where the CCP provided everything from free land, to free buildings, to unlimited supply of young, obedient, unskilled labor pool for rural China.

Samsung on the other hand has been in Austin, Texas for almost two decades, investing well over $15+B so far.

It’s a prisoners dilemma situation - cities would be better off if across the board they just applied the rules evenly, but there’s always a place that’s willing to sacrifice that for its own benefit.

I'd like to sell you a car, since you're not the negotiating type.

I worked at SAS a couple of years ago. The majority of jobs they will be offering are contractor positions with no benefits, and pay that in no way compensates for the crazy schedules they run. Starting pay was about $18/hr in 2018.

They aim for ~2/3 of their technicians being contracted positions. A tech might work there for YEARS before a conversion spot finally opens up. It's an absolute travesty and should not be allowed, IMO. Why should a company be allowed to have people doing the exact same jobs but only offering benefits to a select few?

How is that different from the deals that pretty much every other large company looks for when locating a new facility? Amazon pretty much had local governments humiliating themselves in their HQ 2 'contest' not too long ago.

It's not. And while there's opportunity to make a big construction more efficient by handling permitting/approval in a bundle (combined with some of the necessary developments in traffic/transportation, housing), that doesn't mean cutting corners and just crippling the state/city budget.

Isn't that like exactly the sort of thing the interstate commerce clause was originally meant to stop? There shouldn't be such competition between states or local governments, whether real or just negotiation bluff.

Then just have places like San Diego always win because they have nature on their side?

But really I think the taxes here would technically count as within-state commerce, as they would be taxing a resident business if it is built.

Eventually San Diego fills up. Why not let efficiency dictate these things?

Filling up is winning. The population will stop growing soon enough and it becomes a zero-sum game.

There are still people moving. Internal migration is bigger than external. Cities develop even if the population is roughly stable. Generations are not the same size, etc.

Also the economy changes.

It cannot really become zero-sum in my view. Could you explain how you think about this?

No, states compete on tax structures all the time. Look at the Amazon headquarters boondoggle a while back, states were falling all over themselves to offer the best tax/infrastructure packages.

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