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Just wondered what the general consensus is on raiding the public coffers to throw cash at large corporations? Corporations that usually take most of the profits of their operations back to their home base.
Samsung will still consume large quantities of services and has to pay no taxes to receive those services. Even the Statesman article about the giveaway sounded a little guilty about the whole thing, they noted that Samsung will still pay millions in utilities and water.
The problems I have with approaching business this way:
1. The burden to provide Samsung services is taken off Samsung and placed on the backs of every Travis county resident.
2. City government is creating two sets of rules one for influential corporations and one for everyone else. This isnt feudal Europe surely the rules must apply to all or be useless.
3. Allowing people and corporations to weasel out of Texas' high property tax burden through ag exemptions, property tax abatements, and undervalued property keeps the discussion about property taxes off the table unfairly. If corporations and the rich were paying the same rate of property tax as the middle class you can guarantee there would be more robust discussion about it.
Overall the city of Austin reminds me of 'those' people who are more worried about image than reality. Those people who lease BMWs and run up expenses on their credit cards to have the appearance of success. Hoping that somehow if they project the image of success that success will magically happen for them.
The city is so unrealistically attached to the notion of Austin as some tech mecca that they are spending our money to achieve it, thats not business its crap. $220,000,000 for 500 jobs how in the hell does that make mathematical sense?
If all city residents are being forced to pay for these enterprises why not spend the money on things that all residents will potentially benefit from? Cultural attractions, more lake attractions, zoo, things that will also bring in tourists?
Austin likes to give tax breaks to big companies.
I think that is why I am here (my employer got a tax break).
Yes, when a company is given a tax break, others pick up the burden.
So why do the citizens allow it?
The problem goes way beyond Austin, it is becoming enough of a trend, that companies expect it, and then refuse to stay where they do not get such breaks.
So maybe it should be against the law, for any entity to offer tax breaks to some without offering the same break to all?
That way cities would not be competing for employers via giving them tax breaks, but instead by lower taxes through better money management.
Just wondered what the general consensus is on raiding the public coffers to throw cash at large corporations? Corporations that usually take most of the profits of their operations back to their home base.
Samsung will still consume large quantities of services and has to pay no taxes to receive those services. Even the Statesman article about the giveaway sounded a little guilty about the whole thing, they noted that Samsung will still pay millions in utilities and water.
The problems I have with approaching business this way:
1. The burden to provide Samsung services is taken off Samsung and placed on the backs of every Travis county resident.
2. City government is creating two sets of rules one for influential corporations and one for everyone else. This isnt feudal Europe surely the rules must apply to all or be useless.
3. Allowing people and corporations to weasel out of Texas' high property tax burden through ag exemptions, property tax abatements, and undervalued property keeps the discussion about property taxes off the table unfairly. If corporations and the rich were paying the same rate of property tax as the middle class you can guarantee there would be more robust discussion about it.
Overall the city of Austin reminds me of 'those' people who are more worried about image than reality. Those people who lease BMWs and run up expenses on their credit cards to have the appearance of success. Hoping that somehow if they project the image of success that success will magically happen for them.
The city is so unrealistically attached to the notion of Austin as some tech mecca that they are spending our money to achieve it, thats not business its crap. $220,000,000 for 500 jobs how in the hell does that make mathematical sense?
If all city residents are being forced to pay for these enterprises why not spend the money on things that all residents will potentially benefit from? Cultural attractions, more lake attractions, zoo, things that will also bring in tourists?
Could you please link the article you are speaking about? Or some kind of proof that they recieve hundreds of millions of dollars in tax breaks for only 500 jobs?
It's saying $200M in property tax breaks over 16 years. Samsung will basically have to pay only 20% of their property tax bill each year. Of course, the land probably wouldn't have been taxed anywhere near what it would be after Samsung built their plant, so... it's kinda like an ag exemption.
I'm no fan of paying people to move here, but we have been doing this sort of thing for a long time.
It's saying $200M in property tax breaks over 16 years. Samsung will basically have to pay only 20% of their property tax bill each year. Of course, the land probably wouldn't have been taxed anywhere near what it would be after Samsung built their plant, so... it's kinda like an ag exemption.
I'm no fan of paying people to move here, but we have been doing this sort of thing for a long time.
So then it ISN'T as alarmist as the OP made it sound. I knew there was a reason the original post was not passing my smell test.
To make it sound like the city of Austin is writing a 200 MILLION dollar check to Samsung on Dec 31st is a bit misleading. Also the OP said that Samsung only employees 500 people, and that is NOT mentioned in the article. The only mention in the article is that Samsung has left some or their property vacant and plans on adding 500 additional jobs NEXT year. That is ADDITIONAL to what they have now and what they might add in the future. Once again, misleading on the OP's part. The article also clearly says that this is just a projection, they have no idea how much in taxes Samsung will actually be exempt from, or how much the city would have recieved in taxes if the property had remained an empty lot. I don't have the numbers, but I would hazard a guess that 100% taxes on an empty lot are a LOT less that 20% taxes on 3.6 billion dollar facility. But maybe I am wrong.
I am not a huge fan of tax exemptions myself, but I am a huge fan of facts. When a person is completely informed of all the facts, this doesn't seem like that big of a deal.
Everyday I read on the news that government is useless, that they should focus on creating jobs. Well, how does a government create jobs? They make it attractive for buisnesses to settle down and employee people. This deal has guaranteed that Austin will have a major tech employer, probably offering well paying technical jobs, for at least the next 10 years. Some would call that job security.
It's not like they traded the family cow for magic beans.
Like I said, I am not a huge fan of tax exemptions, whether they be for agriculture or buisness. But I am also not a fan of paying $14 a pound for ground beef. Or not being able to buy ground beef at all because I don't have a job. You are going to pay for it some way. Either up front at the register, or on the back end on your property taxes.
I don't understand this "have my cake and eat it too" mentality of some Austinites on this board. "Tax expemptions for buisnesses is CRAP!" but if Austin had the unemployment rate of let's say, Detroit, then we would be screaming at the government for not attracting buisnesess to Austin.
You want companies to come to your community this is what's required now. You could argue that a similar thing should be done for small businesses but their property tax bills are a very small fraction of their expenses.
Incentives are distasteful. They don't feel good. They usually help corporations, something lots of people dislike.
But I think some people should remember:
- That $220M isn't in any budget or bank account anywhere now. The city of Austin is not writing checks to Samsung. $220M over 16 years means $13,750,000 per year of property tax not collected - but not tax lost vs. what is being collected now.
- If Samsung does nothing new tax revenues remain the same.
- The Samsung expansion will increase property tax revenue, but heavily discounted.
- If the 500 new employees earn $75K per year the payroll impact to Austin is $37,500,000 per year. I don't have a methodology to estimate the indirect impact.
- I have no idea how much the services are worth annually that Austin (etc.) provides to Samsung. I'm sure it is non-trivial. But I bet only a small percentage of Samsung's employees attend Manor ISD schools. Manor ISD will benefit immensely, even with discounted property taxes.
I would bet a lot that many cities and states competed for Samsung's expansion. Maybe Austin could have won the expansion with a smaller incentive - but I have no idea what the competing offers were.
Government shouldn't create jobs. It should provide services like fire protection, police protection, and national defense. Building roads is ok too. I suppose I'll let it run the justice system. It can also jump in where there are TRUE market failures, like in the case of environmental protection. But otherwise, it needs to let markets decides what jobs should be located where.
Of course the problem is that because other jurisdictions give tax breaks, if a city doesn't it is at a disadvantage. But that's all short term. Think about how many perks GM (eminent domain for GM plants and lots of tax breaks) got from the cities in Michigan and look where Michigan is today.
A few years back, Austin was going to give Borders a sweetheart deal to develop a big store downtown that would have been across the street from Book People. Local residents were up in arms. I am not sure how it was stopped but it was (We were just moving away at the time). So Borders didn't build there. Had it done so it may have been able to offer slightly lower prices than book people because Book People wouldn't have enjoyed the same lower tax rate. Book People could have been put out of business because of what would have amounted to an unfair competitive advantage provided by the city. Thank goodness this didn't happen because we wouldn't have book people (a wonderful locally owned business) and we likely wouldn't have a Borders there any longer either because the company is now headed for bankruptcy. Sure Borders would have created a few jobs when it opened but probably not enough to offset the jobs lost at book people. Not to mention corporate operations for Borders are out state so in addition to the book people employees losing their jobs, you'd also have book people's CPA, attorney, and other business support personnel, probably all local, lose that work.
See, government just shouldn't get involved in "creating" jobs.
See, government just shouldn't get involved in "creating" jobs.
Well, you raise some good points. Some I agree with, some I don't. But what do you think of the original topic? Samsung is not competing with any locally owned buisness, so the Borders example doesn't really apply here. And Samsung developed land that otherwise may never have been developed, thereby not just creating jobs for Samsung employees. But myriads of jobs from contstruction crews to cleanign services, etc etc.
If one of the big arguments about taxes is that it hurts buisnesses, isn't giving tax breaks to buisnesses a good thing? Not that I agree with giving exemptions at all. I am just interested in what you are advocating. I understand your philisophical point of view towards exemptions, but I don't see how it works when it moves from theory to practice.
- That $220M isn't in any budget or bank account anywhere now. The city of Austin is not writing checks to Samsung. $220M over 16 years means $13,750,000 per year of property tax not collected - but not tax lost vs. what is being collected now.
-.
You make a good point here. Regardless of how you feel personally about incentives, let's not pretend they are something that they are not.
An incentive is not real money. It is a decreased tax burden. It is not like the City of Austin has given any money to Samsung.
You could argue that "well, technically they are b/c now Samsung doesn't have to pay as much" but that is simply not true.
AMOUNT IN TAXES SAMSUNG PAYS WITH INCENTIVES: Around $13 million (according to hoffdano's math, I didn't check)
AMOUNT IN TAXES SAMSUNG PAYS WITHOUT INCENTIVES: Around $0, because without incentives they wouldn't have built here.
Posters are acting like City of Austin or Samsung are robbing them blind. That is not true. These posters assume that the tax burden on Samsung is a choice between 13 million and 220 million, when in reality it is a choice between 13 million and zero.
City of Austin made a good move getting us 13 million versus zero. IMO.
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