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Cities Don't Have To Offer Huge Subsidies To Companies Like Apple and Amazon (theguardian.com)
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.
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.
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.
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.
"Yeah, I'm a Libertarian, the government shouldn't pick winners unless it's me, and the market should decide because I'm a market disruptor..at least until I control the market and then everything I said about disrupting the market was misquoted. Remember taxes are theft! Now excuse me while I drain all your local taxes into my Lear jet and then maybe I'll consider throwing you parasites a few underpaid jobs to replace all the local businesses I disrupted. Capitalism!"
Everyone loves parties.
SJW: Someone who has run out of real oppression, and has to fake it.
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.
Live today, because you never know what tomorrow brings
1. Education. Make sure your city has education thats about merit not demographics. Ensure everyone who is educated passed on merit.
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.
Domestic spying is now "Benign Information Gathering"
Counterpoint, tax breaks are subsidies. Tax breaks for one corporation means that the local small businesses and individuals must be taxed more to pay for the roads and government services that the corporation receiving the subsidy is taking advantage of.
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.
Cost free eBook I read (by iBook/Kobo/Amazon/ObookO/Gutenberg etc.): "The Green Odyssey" by Philip Jose Farmer.
Stick the Citizens with huge tax debts then move when greener pastures are available. Implode stadium, repeat.
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 rejected many cities that don't meet its needs. It has already surveyed the local workforce - either to see if they are smart enough to work for it, or desperate enough to accept the low pay it is offering. A mega-corp has already checked up on the supply-chain and availability of local services.
By the time the executives get to sit down with local politicians, they already have a short-list of a dozen or more suitable locations: any of which would do the job. It is then down to those local governments to compete with each other to make the best offer. To gain the benefit of the jobs the company will bring. To see the injection of money: investment and wages into the area. And the possibility (if it is handled right) to attract follow-on companies after the big guys.
There are very few possibilities where the power lies with the local government. Where it can say "take it or leave it" to incoming large companies offering thousands of jobs. Generally it is only once there is an established, recognised, sector already established - so that new arrivals can benefit from the proximity of other, similar, companies.
The article seems like a rather naive description. More written to appeal the the "boo-hoo it's not fair" collection of children and idealists who read The Guardian. Rather than being a mature and informative description of life's realities. The authors are an academic (no surprise!) and a non-profit. So it is not surprising that their views are anti-business and are just a reflection of how they wish the world was run.
politicians are like babies' nappies: they should both be changed regularly and for the same reasons
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 competitive pressures do not necessarily lead to a solution that is optimal for people, as opposed to the companies .
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.
Assorted stuff I do sometimes: Lemuria.org
great ideas, but they won't ever be implemented.
why? because they are long term plans and no politician is interested in long term.
On a long enough timeline, the survival rate for everyone drops to zero.
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 probably materialize as straight out giving them money (else why bother making them refundable tax credits, non-refundable would be the same).
3) Another fuzzy one is they often include "infrastructure" spending. In theory, infrastructure spending is presented as elevating conditions for *everyone*, but even if that's true it's spending money you thought you wouldn't otherwise spend. In practice those improvements are going to be done in ways the company would appreciate.
It's hard to tell at a glance, reporting focuses on 'X billion dollar incentive packages' with very little effort made for breaking down how much of that is hypothetical forfeit revenue, and how much is actually money that would come out of the government. Also why the numbers look so much higher in some places than others. A locality with high tax rates can be seen to offer a larger cut because their nominal rate is high, and a low tax rate location will have a smaller *looking* number in the headlines, but the company may be paying lower taxes than the 'big' incentive package elsewhere.
XML is like violence. If it doesn't solve the problem, use more.
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.
So how are your Libertarian fruit cake ideas going in North Dakota?
Any measurable improvement in service to its residents?
New Zealanders are well balanced with a chip on each shoulder. One represents Australia, the other the rest of the world
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]
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-present businesses in that field to the newcomer, and more importantly, your local businesses taking advantage of the incentive will have more resources to grow into your goals. The downside is that there aren't any ribbon cuttings for 1000 local businesses ogranically adding 10,000 employees, like there would be for getting a single new 1000 employee business to move in.
Can you be Even More Awesome?!
This is just pushing a political agenda here by means of deliberately conflating subsidies with tax breaks.
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.
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 distance away, where there's lower housing costs, and make the commute worse.