Apple incentives are the largest in NC history | Hacker News Reader

Apple incentives are the largest in NC history

newsobserver.com

58 pointswatchdogtimer62 comments

This is over 39 years. $845.8M / 39 = $21.68 million per year.

> Apple is promising $1 billion in investment across the state, as well as 3,000 new jobs with an average annual salary of $187,000. All told, the state estimates more than $1 billion in economic benefits annually from the project.

Does Apple need that kickback? Probably not. But it's also pretty negligible at only $21.68 million per year when they're providing $1 billion of economic benefit annually. These are all high paying jobs so the state and local governments are going to get a massive amount of new taxes, even net of these rebates.

Although the “$1 billion in economic benefits” is from an economic model assuming some multiplier effect from Apple’s spending. It’s possible for these types of projections to be wildly optimistic. I wouldn’t put much stock in it without more details, or a review of the model from other economists.

That article is working really hard to say that Apple is getting paid $845M. Are they not getting refunded that amount, or do they get paid that no matter whether they bring the jobs or not? There really is a difference. A refund as a percentage amount indicates some positive increase in taxable income (though not necessarily enough to cover additional expenses).

Calling a rebate a payment is just a deliberate attempt to fan the flames. I'm all for not playing favorites, but articles could at least make an attempt at being accurate.

> I'm all for not playing favorites

The real way to not play favourites is to reduce the tax rate. Then everyone is getting a rebate.

Everything else is just playing favourites.

It's not favorites, it's bringing in net new revenue vs existing revenue.

Much easier to give a discount to get something you don't have, then to give a discount to your existing base. Ask your revenue teams in whatever company you're at. No different for state taxes.

This actually looks like a pretty good deal for NC, unlike when Amazon went about it in a distinctly Amazon way and pissed everyone off.

Well in which case you write the tax law as "Tax is 5% for the first 5 years of the company in the state, and 10% after that".

Then all companies, both big and small can take advantage.

Obviously there are loopholes that would need to be closed before such a plan would work... But it's better than lawmakers striking deals with only their friends.

Surely you can see that reducing tax rates is itself playing favorites? The poor pay no taxes and many require the assistance those taxes provide.

By reducing the tax rate you have negatively impacted the services those folk may require and given them no direct benefits.

Some folks chant "taxes are theft" and others chant "austerity is theft", both deeply convinced that the other side just can't see the whole picture.

A rebate is literally a payment (as opposed to a discount, which is not.)

In this case though, I believe Apple is actually getting cash payments from their JDIG grant given how JDIG is officially described (neither rebate nor discount but literal kickbacks to apple from their employee taxes). [0]

While those payments are conditional on Apple fulfulling their end by investing, they are just as much a real payment as any bonus based on performance.

[0] https://www.nccommerce.com/grants-incentives/competitive-inc...

Average without median doesn't really tell me much. Not that it's likely (more or less playing devil's advocate), but could just as well be 2999 minimum wage jobs and a single person doing millions.

There is plenty of research on such tax breaks; much of it says that they don't pay off (except for the company), though I don't know it well enough to say that's a consensus.

Note that taxes per job, and thus community investment and services per job, will be lower. In that sense, these jobs are less valuable to the people of NC. Think of it this way: They are reducing education funding - future prosperity for the entire state - as a trade-off for a certain number of current jobs.

The fact is every state brings these incentives to the bargaining table with large firms. A region that doesn’t participate won’t likely get a seat at the table. There are state-funded economic development agencies whose role it is to field RFPs from growing firms and complete for the location of their new facilities.

  This particular one is rather innocent as it is indexed to employee pay, ensuring that employment is required for any future tax breaks. Many of the failed packages have not been crafted so well, for instance with flat sums or without performance requirements. 

 The best thing that could happen would be that states collectively agree to stop playing that game together, but barring a federal ban that seems unlikely that all parties would walk away from that bargaining tool.

I thought education was funded via local property taxes in most states? If Apple brings in a bunch of tech workers who then bid up property prices in the areas around Apple offices, wouldn't that increase money for education (since property tax increases as property value does) rather than decrease it?

I don't know about the research. But the idea is you reduce the tax for the corporation in exchange for more jobs. These high paying jobs in turn generate more jobs. All of these people will pay taxes on various things. The idea is that three taxes will generate more revenue than the last tax from the corporation. It should be a net positive for the state and area, not a trade-off.

Agree with the math, but since the amount is so “small” then one could also argue it’s fine to just not give Apple incentives. Corporate welfare is always controversial, but now that we’re talking about a company at the very top of the K-shaped recovery, perhaps it’s worth pushing the discussion.

I wonder if there’s an opportunity to make incentives performance-based, in the same vein as how Apple executive comp is. For example the incentives could be tied to local business revenues and property taxes. I’m sure there are a lot of ways to game any such metrics, but for a company like Apple that really does not need cash benefits, perhaps there’s some other mechanism to ensure local economic contribution.

> Apple is promising $1 billion in investment across the state

$1 billion according to whom? It sounds like it is according to Apple. Maybe that is an accurate number, but Apple is certainly incentivized to make it seem larger than it is. There are all sorts of ways to artificially inflate that number and some are as simple as adjusting the multiplier beyond what it would be in the real world. You see the same thing happen whenever public money goes to fund a new sports stadium. The company receiving the money puts out a fancy study that shows a huge economic benefit to the city/region and it almost never materializes like the study says. There needs to be an independent (of both Apple and the people in government who agreed to this) study before I am willing to accept that $1b as truth.

> These are all high paying jobs so the state and local governments are going to get a massive amount of new taxes, even net of these rebates.

The article makes it sound like 50-90% (increases over time) of the state income tax will be paid to Apple.

> These payments are recouped from the income taxes Apple’s new employees would normally pay to the state. Starting in 2023, the state will start issuing payments to Apple worth a little more than half of those employees’ annual tax payments. In 2032, if all goes as planned, that percentage increases to 90%.

I don't think this is great policy. For one example, public education is usually paid for by some combination of property/state/federal taxes. Some percentage of the future NC Apple employees will have kids in public school. Some portion of the state revenue from the future NC Apple employees could be used to pay for that. Instead, citizens will need to make tough decisions about cutting the school budget to keep the rate the same, or increasing the rate to support the increases in student population.

This would make me extremely uncomfortable as an employee. I expect my state taxes to go to help cover expenses across the state, pay for social programs, emergency expenditures, etc. Knowing that my tax dollars were being kicked back to my employer would make me feel like I wasn’t putting in my fair share. I understand that money is fungible and companies get tax breaks often but the way this is phrased puts a bad taste in my mouth.

Maybe I'm in the minority but I would feel absolutely fine. Income tax is just one part of the pie. In fact, many states (such as Texas, Washington, and Florida) have no income tax at all, yet they manage.

Property taxes will go to fund schools and state governments, not to mention localized sales tax and cash infusion.

> In fact, many states (such as Texas) have no income tax at all, yet they manage.

https://en.wikipedia.org/wiki/2021_Texas_power_crisis

>https://en.wikipedia.org/wiki/2021_Texas_power_crisis

Now do California. Clearly high taxation doesn't correlate to stable electrical power.

There's a handful of states without income taxes. They mostly manage just fine. Or about as fine as the states with income taxes. They raise similar revenues in other ways.

> Now do California.

https://en.wikipedia.org/wiki/2000%E2%80%9301_California_ele...

All I could find was this, the wikipedia article doesn't mention any deaths however, whereas it appears 70 people died during the Texas crisis this year. I'm aware of the rolling blackouts in the bay area least year as my employer was impacted but it seemed more or less livable due to their rolling nature.

I live in a state without income tax. Its actually quite a shit show: https://www.bizjournals.com/seattle/news/2020/10/22/mark-har...

Believe it or not that was not due to taxes.

If there was a greater tax base in Texas a more robust energy infrastructure could have been in place. However; their votership preferred to keep things as is. They suffered the consequences. This is very, very simple.

> many states (such as Texas) have no income tax at all, yet they manage

That's debatable. Just because they do it doesn't mean it's a good idea.

What if $company, for whatever reason, decided every employee in $state would have their salary reduced by X% across the board and $state announced they would step in and use taxpayer money to make up the difference in $company employee paychecks. Would you be absolutely fine with your taxpayer money being used to subsidize labor in that way? What if $company is highly profitable and sitting on more cash than $state government has available? What if you're a business owner in $state and have to compete in the market for labor where one big player with tons of money gets to pay less for the same work?

It's not about income tax so much as it is about the government subsidy being granted and whether or not it's the best use of the government's limited financial resources.

Texas, rather than having income taxes, just has relatively high property taxes compared to other states. It's not like you don't pay any taxes living in Texas.

In fact, I would consider high property taxes with zero income tax to be a rather regressive form of taxation that strongly benefits high income earners.

> Property taxes will go to fund schools and state governments, not to mention localized sales tax and cash infusion.

And poor areas become poorer because the local municipality collects less taxes than the one with more affluent residents.

Ultra-locality of spending isn't efficient, it just maintains the status quo, it makes counties compete between each other for companies or residents and not all can attract the rich people or companies to fund themselves.

Schools should be equally funded regardless of how rich the people who live in the area are. This is the most basic component for an equitable society: a level playing field on education.

The title was altered by the submitter. "Kickback" isn't a word Apple or the NC .gov would touch with a 10ft pole. It appears nowhere in the article. I suspect it was altered that way to promote exactly the reaction you had.

Does it matter that they say kickbacks when the article implies it is?

>These payments are recouped from the income taxes Apple’s new employees would normally pay to the state.

What confuses me is the wishy-washiness of "would normally pay to the state".

Are they not paying the money to the state?

From the North Carolina Dept of Commerce: “JDIG grant payments are determined using a formula that takes into consideration the new taxes generated by the new jobs that are created. A percentage of those newly generated funds are reimbursed to the awarded company, for the limited term of the grant and as long as the company meets its performance target.” I’m not really worried so much about the nomenclature used, but the principle of reimbursing my taxes to the company makes me uncomfortable.

It smells of state funding with a bunch of extra steps...

Also - how is this remotely fair to all the other software and hardware companies in NC that employ people and provide similar benefits but still have to pay state income tax?

If there's anyone who /doesn't/ need a competitive advantage, it's Apple. They are utterly smashing their competition in every regard already.

I think the Amazon brouhaha of 2019 proved that most cities and states are ready to roll out the red carpet and give big sops to FAANG if they hint that they're considering an office in their state.

Whether that is a net positive for the state and it's residents remains to be seen. It can be enough if it's a feather in the cap of a governor who's up for reelection.

Small businesses are at a big competitive disadvantage, trying to compete with big companies that get these massive handouts. At least NC should apply the tax breaks evenly to any newly created jobs.

I wonder if it violates the prohibition against a bill of attainder or similar laws that benefit/harm a specific party.

Corporate States of America. No better example to show the fleecing of our country's governments than this. Absolutely disgusting at the dearth of integrity in lawmakers.

It's interesting states or cities are allowed to give deferential tax treatment for specific companies. I thought that would be considered discrimination if you consider corporations as people.

Essentially they're stealing money from their own employees. That's what it amounts to.

I have some bad news: The competition is on an international stage. Raise taxes in New York? Billionaires flee to Singapore. No juicy incentives in Pittsburg? Welcome to Guongdong! Labor laws suck in California? Hope you like some asamlaksa and durian, off to Malaysia!

It's a race to the bottom. Let those other places harbor the biggest tax avoiders. Those companies will have to risk the chance of regretting that decision in the future.

This should be illegal. First off, it is deeply immoral to tax employees and give the money straight to their employer. But also, you don’t want to have this situation where states are competing with each other to see who can give the most corporate welfare- it creates a race to the bottom that forces all the tax burden onto the middle class in every state. It ought to be a level playing field by federal law.

Planet Money did a good episode on this[0], looking at businesses in Kansas City (which straddles two states), and how they would pit Missouri and Kansas against one another for tax breaks, without having to move their operations very far.

[0] https://www.npr.org/sections/money/2018/11/16/668769284/epis...

I agree about the consequences about governments competing on taxes. The problem is that this: "It ought to be a level playing field by federal law." would darn near mean we wouldn't have states. One of the defining things about a government is they set their own tax rates.

Doing it federally wouldn't even mean a level playing field. Countries compete on tax rates, too.

I wouldn't mind seeing the federal government say if a business gets a better tax deal than any other business in the locality, the federal government raises taxes to wipe out the difference. (That said I don't know in practice if this can be implemented)

This wouldn't prevent states from competing on tax rates, but they couldn't compete on special tax incentived to large businesses.

Countries competing on tax rates is exactly why Janet Yellen has floated the idea of a 'Global Minimum Tax'. Countries competing gets in the way of the grand vision she and her ilk share for how they want to organize society.

The difference is that on the national level you can use tariffs and other such tools to make things more fair, but there are no state level tariffs.

But this isn't really about setting tax rates, is it?

This discussion seems more about states purposely going around their existing tax rates and structures in order to create sweetheart deals for corporation.

You could change what I said to governments setting their own tax laws.

As unsettling as this is, the article doesn't seem to specify whether it's all employee income tax, or just state income tax. I doubt NC could afford to pick up the tab on federal income tax. North Carolina has a flat income tax of 5.25% -- other states, like Washington, have no income tax. Leveling the playing field, as you say, would be a significant infringement of state rights.

> Leveling the playing field, as you say, would be a significant infringement of state rights.

States don’t have rights, like any other level of government they jave powers granted by the people.

Further, when it comes to acts affecting interstate commerce, the federal government has been granted preemptive powers, since the adoption of the Constitution, for the exact purpose of levelling the playing field. So even if one makes the terminological error of referring to states powers reserved against the federal government as “rights”, this very much would not violate those “rights”.

By the numbers, 3,000 employees at $187,000 for 39 years. At 5.25% tax, that is $1.15B which already exceeds the kickback. Of course, Apple gets 90% starting in 2032 and only "a bit over 50%" for the first 10 or so years. Those numbers should work out exactly to $845.8M.

> you don’t want to have this situation where states are competing with each other to see who can give the most corporate welfare- it creates a race to the bottom that forces all the tax burden onto the middle class in every state.

This right here needs to be emphasized.

It's easy for everyone to look at this and go "20MM/year for billions of investment? Yeah, that makes sense, right?"

Not right. This is overlooking externalities beyond those in the local area, such as the race-to-the-bottom possibility mentioned in the parent comment.

The thing about states is that they make their own laws.

So it is illegal -- until the state legislature makes it legal. Then it is legal!

That is how democracy works.

Yeah but if the country votes on the national level to not allow corporations to play states off against each other, that is also democracy.

Edit:

I cannot reply since my original post generated too much controversy. I do not believe I am engaging in flame war behaviors of course.

But: to answer your question, first off, democracy is the process by which groups of people make decisions together that they all abide by. In any situation involving more than one person sometimes it won’t work to have every individual do their own thing; sometimes people have to coordinate. If they need to coordinate, but don’t want to be simply ruled by a despot, then they use democracy. Democracy is especially needed when some group of people is facing an organized enemy. Trying to fight an organized enemy as an uncoordinated mass is foolhardy.

Your more specific question is: should there be any sort of international cooperation to prevent transnational corporations from playing countries off against each other?

Yes! obviously. It would take treaties, negotiations, and so forth, but yes, we should absolutely do something about that.

Is it?

What if China, having 1.3 billion people, votes that the US should not allow corporations to play off different countries? Is that democracy? They've got way more votes, it would work.

We're drawing arbitrary lines on what group of people should set impose rules on a geographic minority. In the absence of _very_ compelling reasons to move up the decision, it seems eminently more ethical to leave the decision at the lowest plausible level.

It is immoral to have a longer term vision than a corporation? North Carolina gets the economic proceeds after 40 years and until Apple ceases to exist. Also, this particular way of doing things aligns Apple's promise for employment numbers because they don't get the kickback without the employees and high salaries.

Sure, it might seem that the employees are paying their employer, but the nature of taxes is that you can't equivocate taxes one to one even if they are set up like that. Suppose the government came up with an appropriate tax credits for Apple that replicates/approximates this agreement. The flow is still employees -> state -> Apple. In my opinion, this is much more transparent and simpler to implement than negotiating a bespoke agreement. Personally, I think this is a great job by the state of North Carolina and now would consider moving there as the government seems like they have some aptitude.

But pretty soon every state has to do this to retain their businesses, and the net result is that the stockholder benefits and the middle class picks up the tab. Someone has to pay those taxes you know.

Edit: you’re right! Working class is the more correct terminology. It is a labor vs capital conflict in the end.

> But pretty soon every state has to do this to retain their businesses, and the net result is that the stockholder benefits and the middle class picks up the tab.

The working class, really. If you aren’t dependent on your capital as much (in broad terms) as your labor for support, you are in the proletariat no matter how well paid and educated you are, not the petit bourgeoisie.

You say that with so much certainty. It is very expensive for a company to just get up and leave. Especially how Apple likes to get their IP so closely guarded, I can't imagine them to not balk at potentially thousands going across the street. Can you point to any example in history where a company moved an entire office out of spite of the state not willing to give them tax breaks after having a presence for 40 years? I'm sure you can't point to an example where it has happened twice.

I haven’t thought this through enough to say whether it’s good or bad. But who should make it illegal? The federal government? The state government?

But anything to encourage tech companies to build offices and spread good paying jobs across the country seems like it would be a net positive.

> First off, it is deeply immoral to tax employees and give the money straight to their employer.

I think another way to look at it is that North Carolina wants good jobs -- if Apple isn't providing good jobs. that is the kind of jobs that generate a good tax base -- Apple doesn't get anything.

If you're going to offer sweetheart deals to lure companies to your state, I think this is a pretty good way to insure the deals pay for themselves.

Again, the big issue is that every other state has to do the same thing to compete, so the net result is that taxes on the middle class have to go up to make up the difference and the wealthy stockholders once again benefit at the expense of the middle class.

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