Robbing a lot of Peters to pay… Steve Jobs

Tax breaks as “economic development” tools is a smoke and mirrors expression for making the rich richer, and the poor poorer.

If there is one thing that needs to be changed nationally, it’s the outlawing of all tax breaks for business by any state or local agency for the purpose of relocation assistance. In other words, the only tax breaks offered should be ones that keep the playing field level.

A textbook example of why this needs to happen is the current situation with Apple. North Carolina is changing its laws to give the computer and iPod maker $46 million over the next ten years to attract a server farm that will employ only 100 people.

In the meantime, Apple is far from struggling, with a cool $25.01 billion cash on hand. This isn’t about having the infrastructure, the people, the quality of life- this is just flat out extortion, taking money from a state suffering from high unemployment, and giving it to a wealthy corporation. Sort of like paying the good-looking popular guy to take the ugly girl to the prom. This has become standard operating procedure in North Carolina, according to the article, since the lawmakers did it last year to woo Google, a company with a mere $17.78 Billion in cash.

RALEIGH, N.C.—North Carolina lawmakers are pushing to give Apple Inc. a multi-million dollar tax break should the company bring an East Coast computer server farm to the state—an estimated $1 billion investment, according to a state official with knowledge of the recruitment efforts…

While it has been known that North Carolina lawmakers were working on changing tax rules to benefit one company, the name of the outfit has been kept secret. The state official said Catawba and Cleveland counties are potential sites.

The tax changes would affect the way corporate income taxes are calculated by giving breaks to companies with a relatively small share of U.S. sales in North Carolina but which have large shares of their nationwide property and payroll in the state.

The House Finance Committee on Thursday altered the proposed tax change so companies could qualify only if they locate in one of North Carolina’s poorest counties, provide health insurance, meet a wage standard, and forgo other state grants or tax breaks.

“The bill ensures it’s going to go to an area of high unemployment. This reflects concerns many of us have had about economic development policy, that priority should be given to the neediest counties,” committee chairman Rep. Paul Luebke, D-Durham, said Friday.

The tax breaks could be worth about $46 million in the next decade, assuming the company reaches its $1 billion investment target within nine years of starting, according to a memo by legislative fiscal staffers that does not identify the company. The memo said no current company meets the criteria to receive the tax break and the Commerce Department knows of just one with the potential to qualify.

“It’s very specific to this project,” Luebke said of the tax breaks.

The conditions adopted Thursday, if approved by both legislative chambers and the governor, would push the project from the state’s urbanized corridor connecting Raleigh to Greensboro and Charlotte. In 2007, Google Inc. committed to spending $600 million for a server farm near Lenoir in the western North Carolina foothills. It opened last year.

State and local governments offered Google an incentive package worth up to $260 million over 30 years, one of the largest incentives packages in state history, to land the data complex. If the Apple project also remained active for 30 years, its server farm could save more than $300 million on its corporate taxes, based on legislative staffers’ estimates that the tax break would mean a savings of $3 million from 2011 to 2018, and then $12.5 million each year after that.

Google, Microsoft and other technology giants have responded to booming Internet use by building server farms: huge, climate-controlled computer warehouses that can store enormous amounts of information and process vast flows of data. They are heavy users of power and water and are usually spread over large spaces.

Though the Apple site is initially expected to employ fewer than 100 full-time workers, legislators said the potential prize was so juicy it justified changing the state’s corporate tax formula to benefit a single company. North Carolina’s unemployment rate remained at 10.8 percent in April, marking a third-straight month it was in the double-digits, the state Employment Security Commission reported Friday. Four non-urban counties have unemployment rates of more than 16 percent.

“Given our economic situation in this state, with the rising unemployment, this really is critical,” said Rep. Jennifer Weiss, D-Wake, before the committee approved the bill and its changes.

The bill, which passed the Senate earlier this month, is scheduled for a vote by the full House on Tuesday.

via Official: NC considers Apple for massive tax break | CharlotteObserver.com.

While the right wing cries a river over the “socialization” of the banking industry, the bailout of AIG and other insurance firms, the takeovers of GM and Chrysler, there is very little screaming going on about corporate welfare. This is because the very same politicians depend on corporate donors to raise huge amounts of money to fund their monumental campaign expenses.

Until we fix campaign finance, it’s unlikely we’ll stop corporate welfare.

Steve Jobs and Apple are doing what’s best for the company, but far from what’s best for the American people. When Apple began production of the Macintosh, Steve was proudly showing off his state-of-the-art manufacturing plant in Fremont, California (the same place that GM and Toyota were later to join forces to make the Toyota Corolla and the Geo Prizm).

Now Apple mostly subcontracts companies in China to build computers—and some Macs are “final assembly in USA.” As far as can be told, the last US Apple plants were closed in 2004.

Although it’s unlikely that I’ll be able to change this policy of buying jobs with your tax dollars, it’s my plan, if elected to do everything possible, to lobby, embarrass and educate anyone who will listen about the need to end this major screwing of the taxpaying public.

The guiding principle should be, the greatest good for the greatest number.

This North Carolina deal is good for Apple and a screwing of every American worker who used to work in manufacturing in this country. In fact, there should be laws forbidding tax breaks to any company that eliminates American manufacturing jobs for offshore labor. It’s also screwing every taxpayer in North Carolina- who expected services from government for their taxes paid, not to subsidize another corporate jet for Steve Jobs.

What do you think of tax incentives for relocation? Note that Mead abandoned Courthouse Square as its 20-year tax abatement ran out, and Iams/P&G is leaving Vandalia with an empty building while still enjoying a tax abatement that hasn’t run its course. GM shut down Truck and Bus, despite our investment in its new paint line via tax abatements- and now refuses to let anyone else build vehicles in it.

Your thoughts?

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19 Responses

  1. Drexel Dave Sparks May 31, 2009 / 8:32 am
    Moraine Assembly – Eminent Domain Now!

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  2. David Lauri May 31, 2009 / 10:24 am
    Tax abatements by local governments are particularly vile as often they don’t do anything to help the region as a whole but rather continually shift the same businesses from one local municipality to another, often contributing to on-going urban sprawl.

    I wonder if this kind of thing goes on in other countries.

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  3. tg May 31, 2009 / 10:51 am
    Timely – I just sent an email to Chris H. at the Coalition yesterday about another topic, but in it discussed that we need to stop the insanity with all of the tax credits and breaks for corporations.  I heard that Ohio can’t land a job right now because Indiana is so willing to drop their drawers and take one for the team (sorry to be so crass about it).

    Ohio in general, and Dayton in particular, needs to stand up and change the rules.  We need to say “we’ve got water, we’ve got a talented workforce, we are affordable, we offer a quality of life you won’t find anywhere in this country, you would be crazy NOT to locate your company here…so the bribes stop now.”  Do you know how many other places in the country would love to stop, but won’t because they don’t believe everyone will play fair?

    We’re not landing the jobs anyway, so why not make a stand?  Someone told me the NY execs from NCR told City officials “we’re not John Patterson’s NCR any more”.  Really?  Thanks for the update, I’m sure we couldn’t figure that out on our own.  Corporations were long expected to be good citizens in their communities, then they changed the rules of the game.  OK, then it’s time for communities to change the rules again in our favor.

    More than anything, we need to look after our entrepreneurs.  We have the home grown talent, but they are ignored for the large corporations that will only rape & pillage us in the long run.  As soon as they get a better offer, they’re gone.  Nuti is moving NCR to NYC because that’s where he lives.  Dell is in Austin because that’s where Dell is from; same reason why Microsoft is in Seattle, Iams was in Dayton because of Clay Matthile.  Does it not make sense to back the entrepreneurs who are from Dayton so that they will remain in Dayton? 

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  4. Jeff May 31, 2009 / 7:55 pm
    Here’s a good artilce on the server farm “industry” and Lenoir NCs’ luring of a Google server farm via tax abatment.

    http://www.governing.com/article/betting-farm

    More relevant for Dayton, high rises on Wilshire Blvd LA have been turned into server farms of a sort, called “telco hotels”…or maybe they are just big switching centers.

    http://www.audc.org/expensive/booklet/onewilshire01.html
    (you click through the presentation on this one)

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  5. tg May 31, 2009 / 8:06 pm
    Wow!  Just read the article about Google & Lenior.  What kind of stupid are those people to put up a package like that for few jobs and an excessive drain on utilities?

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  6. David Esrati May 31, 2009 / 8:21 pm

    And if you want to read about how Microsoft evades paying taxes in Washington State- it’s from 04- but well worth the read:
    http://www.seattleweekly.com/2004-09-29/news/citizen-microsoft/1
    We need to legislate that companies must pay taxes where either there is the bulk of their payroll- or the bulk of their employment- and if the two don’t match, some sort of equalization.

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  7. David Esrati June 1, 2009 / 12:06 am

    TG- Love that link. It’s going to be part of my platform. It codifies what I’ve been trying to say for so long – so well.
    Thanks

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  8. Gene June 1, 2009 / 11:39 am
    all forms of government sponsored welfare (corporate or personal) make me sick……..

    Government is too big, too ineffiecient, taxes too much. Government needs to get smaller, now. But Obama wants bigger – so much for a NEW Washington, with NEW faces. Same old shit, different Prez.

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  9. David Lauri June 1, 2009 / 12:07 pm
    If you’d been inaugurated as president this past January, Gene, instead of Obama, what would you have done differently?

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  10. Gene June 1, 2009 / 1:05 pm
    Obama may be on the right track, with some things. But he promised new faces, and a lot of Old Washington is still there – employed by him. He promised not to raise taxes on the poor, but the cigarette and soon to be beer tax for health care would be a tax on the poor and middle class. It is the nickel and dime shit that adds up to real dollars for the ones who can least afford it.

    Obama will have positives – but he is just like the Old Washington. So, in some ways, he has lied. He is considering taxing health care insurance recipients as some sort of “income.’ Bad, but McCain wanted to do the same thing and Obama laughed at it, calling it among other things not practical. Now he may do the same thing.

    Appointing Judges based on race and gender  is bs. We all know it.

    Government involvement in Business and bailout is all bs. Let ’em fail.

    Not stepping up vs North Korea – leaving the dirty work and unpopular stances to the administration (Hillary), while distancing himself. Kinda seems strange.

    I just think to pay for the things we need (health care) we need to shrink government in the non-essential areas to pay for important things like health insurance. Yet he just wants to grow the government.

    Think of the Federal Government as your own personal household. You make money (taxes by the government, work for the individual) and then you pay for the most important things first ( health care, defense, infrastructure for government and house, health and food for the individual) and not spend ANY money  on extras ( like wasting all sorts of money on silly projects, not needed projects – which is a lot by Obama’s administration or any other, including Bush, Clinton, etc.) (for individuals it would be vacations and eating out and buying too much shit that is not needed – we all know what that is for ourselves.) Our Presidents, our government, our elected politicians just want our money for pet projects that could go to important things, namely health care.

    Obama is doing things I like, but is still doing a lot of Old Time Washington bs, which he promised NEW and CHANGE and HOPE and not Old Washington, but new. But it really is not new. Same players, same connections, same back door deals and hand shaking and wink winking. You all know it is true. He promised otherwise.

    I know it is complicated, but cut spending on small time, bs projects, make our tax dollars go towards things we actually need, and otherwise have government out of our lives.

    Politicians are somewhat corrupt. I get that. I just don’t like it.

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  11. pizzabill June 1, 2009 / 1:29 pm
    What beer tax???  If that comes to be, we march on Washington!

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  12. Gene June 1, 2009 / 3:47 pm
    a proposed $2 per case ( if i remember correct) to cover health care – or cover part of health care. I’ve read various different amounts, $2 seems to be what was in the main stream media, (and the DDN :) )

    so, yes, this reaches all those who drink and retail and bar owners, distributors and high school kids looking for a 12 pack or a drunk college kid looking for a case or two.

    I wish I were joking, bc my tax alone on beer (if it were $2 PER CASE) would be $200 home consumption and who knows what at bars and restaurants. NO, I don’t drink 6+ beers per day at home, but when you factor in friends and family I would say I purchase around 100 cases of beer per year. Maybe more like 85,  but still a decent amount of money.

    It will cost a bar about $.085 per bottle/can more, so to maintain costs a bar will charge at least $.25 more per bottle/can. Draft beer probably is about the same.

    I know people who don’t drink will not care – but people will ALWAYS drink and therefore spend less on clothes or food or car or home improvements – so therefore it reaches most everyone.

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  13. Jeff June 1, 2009 / 3:57 pm
    From TGs “New Rules” site:

    When used to off-set the high costs of redeveloping blighted sites in poor neighborhoods, Tax Increment Financing (TIF) can be an effective economic development tool. However, all too often, cities are using TIF to underwrite projects in non-blighted, affluent areas, to subsidize construction on previously undeveloped land, and to finance big box retail.

    This is what galls me most about The Greene.  This was a prime greenfield development site and didn’t need any TIF subsidy.

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  14. Gene June 1, 2009 / 5:17 pm
    Something funny, I am sure some of you have read this before, but if not here goes:

    “A brilliant explanation of our tax system using actual percentages,
    the impact of a tax cut, and the public reaction that even Obama should be
    able to understand.

    Suppose that every day, ten men go out for beer and the bill for all
    ten comes to $100. If they paid their bill the way we pay our taxes,
    it would go something like this:

    The first four men (the poorest) would pay nothing.

    The fifth would pay $1.

    The sixth would pay $3.

    The seventh would pay $7.

    The eighth would pay $12.

    The ninth would pay $18.

    The tenth man (the richest) would pay $59.

    So, that’s what they decided to do.

    The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. “Since you are all such good customers,” he said, “I’m going to reduce the cost of your daily beer by $20.

    Drinks for the ten now cost just $80.

    The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free.

    But what about the other six men – the paying customers? How could
    they divide the $20 windfall so that everyone would get his ‘fair share’?

    They realized that $20 divided by six is $3.33.

    But if they subtracted that from everybody’s share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man’s bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

    And so –

    The fifth man, like the first four, now paid nothing (100% savings).

    The sixth now paid $2 instead of $3 (33%savings).

    The seventh now pay $5 instead of $7 (28%savings).

    The eighth now paid $9 instead of $12 (25% savings).

    The ninth now paid $14 instead of $18 ( 22% savings).

    The tenth now paid $49 instead of $59 (16% savings).

    Each of the six was better off than before.
    And the first four continued to drink for free.
    But once outside the restaurant, the men began to compare their savings.

    “I only got a dollar out of the $20,”declared the sixth man.
    He pointed to the tenth man,” but he got $10!”

    “Yeah, that’s right,” exclaimed the fifth man.
    “I only saved a dollar, too.

    It’s unfair that he got ten times more than I!”

    “That’s true!!” shouted the seventh man.
    “Why should he get $10 back when I got only two? The wealthy get all the breaks!”

    “Wait a minute,” yelled the first four men in unison.
    “We didn’t get anything at all.
    The system exploits the poor!”

    The nine men surrounded the tenth and beat him up.
    The next night the tenth man didn’t show up for drinks, so the nine sat down and had beers without him.

    But when it came time to pay the bill, they discovered something
    important.

    They didn’t have enough money between all of them for even half of the
    bill!

    And that, boys and girls, journalists and college professors, is how
    our tax system works. The people who pay the highest taxes get the
    most benefit from a tax reduction. Tax them too much, attack them for
    being wealthy, and they just may not show up anymore. In fact, they might
    start drinking overseas where the atmosphere is somewhat friendlier.

    For those who understand, no explanation is needed. For those who do not, or will not understand, no explanation is possible. ”

    Anyone want to drink beer if this were the case?

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  15. pizzabill June 1, 2009 / 6:12 pm
    David L.

    There you go, again.  It’s beer tax… not queer tax.

    (I hope you know I’m just having fun with you.)

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  16. David Lauri June 1, 2009 / 9:46 pm
    LOL, actually the march David Mixner proposes is in part about a queer tax, for example, the tax a same sex couple pays if one of them receives health insurance benefits through the other’s employer, a tax that a heterosexual couple doesn’t pay in the same situation.

    But back to the topic at hand, the news about NCR’s departure to Atlanta sucks.  And, although it’s not been completely played out yet, it looks like Strickland’s offer of $31 million won’t keep NCR in Dayton.  I wonder what law authorizes the governor to make such offers.  And I wonder what it would cost to poach some business from another state to replace NCR.

    Of course, trying to lure another business to Dayton and to Ohio with tax incentives is just continuing to play the game.

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