
Adding Up the Cost of Tax Breaks for Big Tech’s Data Centers (2016) - dontreact
https://nextcity.org/daily/entry/report-tech-data-center-subsidies
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nindalf
This is similar to the criticism of a pipeline that's been planned for many
years in America called Keystone XL. It's proponents claim it will create
thousands of jobs. It's detractors say that most of the jobs will be temporary
and once the pipeline is built, only 50 employees will be required to run it.

But this ignores one important fact. For plumbers, welders, electricians,
bricklayers and crane operators, _every_ job is a temporary job. Building that
pipeline or datacenter employs them only for a couple of years, but pays them
good money for work that is satisfying to them. When these reports choose to
look only at permanent jobs, it explicitly ignores blue collar workers in
favour of white collar ones.

The calculus for politicians is different from those who write white papers
for think tanks. The blue collar workers vote. Simple as that.

~~~
Scoundreller
One way or another, that landlocked oil in Alberta will make its way to
market.

If the US doesn't want it, it will get pipelined to the Pacific coast and
tankered to Asia or sent by rail within North America or to the Pacific.

I think Keystone XL's real detractors are US oil producers. It's real
proponents are oil consumers that (clearly!) could not care less about where
the oil comes from.

~~~
gumby
> One way or another, that landlocked oil in Alberta will make its way to
> market.

That's not necessarily true. The point of the capital investment in the
pipeline is that the overall cost will be lower than shipping it from the
pacific. If the pipeline doesn't exist, it may not be economic to mine the tar
sands (this is especially true for tar sands oil which is very expensive (==
itself consumes a lot of energy) to extract, so is only viable when oil prices
are quite high.

> I think Keystone XL's real detractors are US oil producers.

Some of them, but the majors are integrated and having an alternative supplier
to feed their refineries is good for them.

The other source of opposition is people who don't want to deal with the
externalities: the pipleline itself, of course but more importantly leaks.
Keystone's other pipelines leak and there's no reason to believe this one
should be any different.

~~~
Scoundreller
> The point of the capital investment in the pipeline is that the overall cost
> will be lower than shipping it from the pacific.

Lower, maybe. But transoceanic shipping is cheap and gives you far more
flexibility in sending to whichever customer will pay the most.

> If the pipeline doesn't exist, it may not be economic to mine the tar sands

The current problem is that the capital investments in the extraction
infrastructure have already been made. It's cheaper to continue operating them
at a loss than to shutdown entirely. If the operations go bankrupt, they'll
continue operating when a buyer can take over without any of the previous
debts.

It's at the point where it's taking government intervention to get the
extractors to reduce production. The most economical decision for them is
still to flood the market with production.

It's like the Worldcom fibre infrastructure constructed in the 1990s. It was a
terrible investment, but once it's built, it's not worth turning off.

> the majors are integrated and having an alternative supplier to feed their
> refineries is good for them.

If they're integrated and have a balanced production and consumption, a
pipeline from somewhere else throws a wrench into that.

> externalities: the pipleline itself, of course but more importantly leaks.
> Keystone's other pipelines leak and there's no reason to believe this one
> should be any different.

Pipelines will always be the best way to move bulk liquids from A to B. There
are also externalities to oil-trains and more expensive oil.

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jrnvs
How come this is legal in the US? It’s extremely unfair toward other
businesses that are too small to coerce the government to make a tax exemption
for their individual business. To me, it seems to create inequality before the
law.

I don’t think the officials handing out the tax breaks have bad intentions,
but the system itself seems corrupt.

~~~
alkonaut
It keeps amazing me too. A state (or any other local government) shouldn't be
allowed to subsidize individual businesses, nor whole industries. Allowing it
just means businesses can play states out against each other and it becomes a
race to the bottom. The EU solved it. The US could too.

Sometimes in the discussion about this I get counterarguments about how it’s a
“win win” (company gets subsidy, area gets jobs) or how it’s a net gain for
the area (without the subsidy you get nothing, and with the tax break you get
the jobs so at least it’s something).

~~~
rytor718
Yeah I agree. This seems to be a corruption that's been with the US since our
inception tbh. There's been this generalized idea that "government = bad,
business = good" and to that end we've relied heavily in our development on
companies to build the country. One can take railroads in their early days as
a prominent example or frontier settlers who were literally paid to go build
cities out west.

It seems part of the problem is we're in a new world where such subsidies are
counter productive because too many people rely on them. In this case, it
shouldn't even be legal to use taxes to subsidize any singular private
businesses -- and those that require subsidy to function should be
nationalized (they're not functioning on the market system).

~~~
alkonaut
It's probably illegal to subsidize directly (?), but by using a negative
subsidy through "tax breaks" or other incentives it's circumvented I assume.

~~~
rhizome
The legality possibly derives from it not being directed to a specific company
directly, but by offering a tax break to _any company_ who satisfies the
criteria that has been tailored to fit only one or a few companies.

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jlangenauer
Examples like this make me appreciate the European Union's strict rules around
state aid - which do a lot to eliminate beggar-thy-neighbour competition
between countries, preserve tax bases to actually provide services and
infrastructure to citizens, and hinder companies from playing off country
against and city against city.

(That said, they're not perfect - witness Irish tax law as a prominent
example)

~~~
goliatone
Worst than the Irish tax system is Luxembourg’s and that one has been around
since the 70s. Plenty of US corporations- like Wall-mart, Amazon- have
subsidiaries in Luxembourg

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refurb
If I give a company $100M in tax breaks to come to my city, and they end up
paying $50M in tax (instead of $150M), the outcome was financially positive as
the alternative was that they don’t come and my tax revenue is $0.

~~~
paulddraper
Okay.

But why just Amazon?

What about hundred Joe's Car Shops and and a hundred Betty's Diners and a
hundred Sue's Tech Startups?

Does not the same calculus apply to them?

What about an up and coming competitor to Amazon that would have provided even
more jobs, had the government treated them fairly?

Should we not be equals under the law, having the same requirements, receiving
the same punishments, paying according to the same tax code?

If Amazon can negotiate different tax laws, should it be able to negotiate
more lax employment requirements, or lower speeding tickets, or more voting
rights?

I'm as staunch a low-tax and pro-business libertarian as they come, but for
everyone, not just for the government favorites.

Equality under the law.

~~~
SpicyLemonZest
It's not just Amazon. Tax incentives are very common and lots of companies get
them. It's very, very uncommon for a tax break to apply only to one specific
company.

~~~
paulddraper
Alright. Then (1) write that rule down and (2) call those writings "the tax
code".

Then everyone knows the rules and the outcomes.

This onsies twosies business of choosing who pays one on a case-by-case basis
is ripe for bribery and inequity.

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jondubois
Government policies related to job creation don't help workers.

They could have used the money to help bootstrap small entrepreneurs but
instead, most of that money ends up directly in the pockets of large
shareholders and executives. Those few workers who do get some of that money
are basically enslaved to these corporations. If a company pays you so little
and there are almost no other employment options available for you and you
can't afford to lose your job with that company; that's basically slavery.

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morpheuskafka
The local government seems to disagree:
[https://www.newsobserver.com/news/business/article214062219....](https://www.newsobserver.com/news/business/article214062219.html)

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jerkstate
Are municipalities really this stupid, or are these articles missing part of
the picture?

~~~
dleavitt
Yeah, not a great article and doesn't seem concerned with the "why."

A couple of possible explanations:

1\. There are beneficial effects other than tax revenue - maybe these
municipalities are hoping the new data centers will help turn them into hubs -
draw other businesses, talented workers, etc.

2\. The decision-makers' incentives aren't well-aligned with those of the
municipality. Maybe the local business owners who fund their campaigns benefit
disproportionately from these big projects. Maybe the headline of "brought
Apple to North Carolina" outweighs the actual, harmful effects of the deal
they signed when the next election comes around, etc.

~~~
puzzle
I knew people at Google that travelled to data centers very frequently. There
are all sorts of indirect extra business and tax revenues from these
operations that aren't tied to local employees alone. Mine is just a small
example, but there are more. Even with good baseline data, it might not be
trivial to assess the full economic impact of one of these sites.

