A non Political question about Apple

[$tevie]

Spock wrote:
[quote=$tevie]
My question is, why would a $7.4 million tax break entice Apple? That's like offering me a 24-cent tax break.

24-cents here, 24-cents there and pretty soon you are talking real money.
Thanks for understanding what the means.

[J Marston]

mattkime wrote:
I can't understand how we, as a whole, benefit from this sort of thing.

The theory is that even if the state forfeits some fraction of the corporate tax revenue, they'll make up for it in increased state and local taxes on employees. Texas has no state income tax, but does have a 6+ percentage sales tax; in addition, there is the multiplier effect, because employees need tires, groceries, and Taco Bells. Sometimes this works out, sometimes not. But it happens all the time, all over the U.S.

If you want a more jaundiced view, it's a way of shifting taxes from capital to labor.

[mattkime]

Black wrote:
[quote=mattkime]
I can't understand how we, as a whole, benefit from this sort of thing.

What sort of thing? Financial incentives to corporations? Stipulations regarding hiring practices?
negotiating tax rates with large corporations.

[hal]

J Marston wrote:
[quote=mattkime]
I can't understand how we, as a whole, benefit from this sort of thing.

The theory is that even if the state forfeits some fraction of the corporate tax revenue, they'll make up for it in increased state and local taxes on employees. Texas has no state income tax, but does have a 6+ percentage sales tax; in addition, there is the multiplier effect, because employees need tires, groceries, and Taco Bells. Sometimes this works out, sometimes not. But it happens all the time, all over the U.S.

If you want a more jaundiced view, it's a way of shifting taxes from capital to labor.
Let's not forget that city council/mayor etc get to claim that they 'brought apple and all of it's lovely jobs' to the area when they run for higher office.

[Black]

mattkime wrote:
[quote=Black]
[quote=mattkime]
I can't understand how we, as a whole, benefit from this sort of thing.

What sort of thing? Financial incentives to corporations? Stipulations regarding hiring practices?
negotiating tax rates with large corporations. I'm guessing it's become commonplace and even expected because it's one of the few things local politicians can actually influence in order to provide incentives and "win" manufacturing.

[Jimmypoo]

More often than not, they are about property taxes (for which states with no income tax make up their shortfall) because 6% is pretty average for a state sales tax.

Also part of it is contracted energy rates and even unemployment insurance rates - as well as state subsidized training at local community colleges which is typically free, 12 weeks long (avg) and then the company gets to pick the best of that newly educated crowd.

When this happens, you’ll see a core of businesses start to flock around this kind of thing - because they are getting non-college graduates with an education (see… China and Hon Hai technicians) that have a new/refreshed/previously unknown set of skills and knowledge in a worker that has proven the ability to learn and supporting industries will jump in to take advantage of this.

I saw it work in the Carolinas where the core workforce was tires, food packaging film, micro-electronic parts, turbines and plastics/chemicals… then turn to automotive (and suddenly I-85 from NC to MS becomes a corridor for all those things - including BMW, Kia, Hyundai, GM (previous Olds plant), Mercedes, tires from General to Michelin, and auto parts suppliers from Bosch to… you name it.

It’s an incredibly good model - and when companies like GE, Lockheed, Michelin, WR Grace, the autos, 3M, etc., are all part of that bandwagon, what the companies get are non-union workers (typically) that are working for less than northern wages, but not so much less — especially when you consider there were no $20/hour jobs available previous to that, especially when there were no jobs willing to pay for those people to also get Bachelors and Masters degrees as well, if they are capable.

As noted above, that spending causes everything in the area to go on the rise.

In one case, the ex worked with a guy who did the Friday/Sat, Sun 12 hour thing, that counted as 40 hours. He lived 800 miles away. But happily flew in on Friday afternoon, had a roommate thing at low cost, left Monday morning, slept for a few hours, ran a carpet cleaning business where his wife also had a really good job, just a few days a week, and returned. Rare, of course, but it happens.

Back in 1995, I remember the Burger King’s were so short of people (yet the no-income, welfare “disadvantaged" crowd would NOT take these jobs!!!) were over $8/hour — SEVENTEEN YEARS AGO!!! Unemployment was less than 2% there.

From what I’ve seen and heard, by way of proximity from Atlanta (which I-85 is 12 miles north of me), that has spread rapidly (to here, of course, by way of Kia/Hyundai) but also on the northern GA border, with cities like Anderson, SC that were virtual ghost towns of 25k people, except for a few companies (Bosch, Owens-Corning barely surviving, Schmid Labs, making balloons and rubber gloves) to some kind of new population center of sorts.

The fact is, there has long been expected a connection from Charlotte to Atlanta - as one giant urban area stretching 250 miles, and that is indeed bearing out. One could make a case for it including Greensboro all the way to Research Triangle (Raleigh/Chapel Hill, the pharma there, Duke, Univ of NC, etc.) still on that I-85 strip.



The truly high end textile companies like Milliken (that also are specialty chemical companies in their own right) round out what is a highly skilled bunch of people - about half of whom started out as imports, because there simply WERE no such people here like that in 1980 except in the concentrated areas, where the steel and auto refugees had already headed to.

[JoeH]

The model does work sometimes, there are many examples though of when it doesn't. It can also start breaking down when the large companies move on to the next "hot" area with its tax incentives, low land costs, etc. Sometimes lasts for a decade or two, other times this can last for longer. But once companies start jumping off the bandwagon, look out.