Report: Tech Giants Gaming the Systems for Tax Breaks

Dan Price
AP Photo/J. Scott Applewhite

According to a study by non-profit Good Jobs First, our nation’s biggest tech companies have managed to wring billions from state and local government subsidies while providing very little in return.

North and South Carolina’s bidding war to attract Google ended with North Carolina providing $254 million in tax subsidies in exchange for a data center that provided an estimated 210 jobs. That’s $1.2 million per job. Further, those few jobs it created were low-wage, low-skill positions, covering janitorial and maintenance duties for a building full of remotely-controlled computers. After the competition was over, Google built in both states anyway.

This isn’t even the biggest example of tax subsidy abuse by our nation’s most lucrative technology corporations, merely one of the most obvious. Smack dab in the middle of our Great Recession, North Carolina paid $6.4 million in tax breaks to Apple for each job the company brought to the state. Apple’s $1 billion data center has done next to nothing for the town of Maiden, in which it was built.

Despite obscenely one-sided dealings, it remains an easy sell. State and local governments believe that bringing facilities from companies like Amazon, Apple, Facebook, Google, and Microsoft will help them tap into the enormous wealth potential of Silicon Valley. Instead, the states have been feeding their money into a “cloud” from which they will almost certainly never recoup their substantial investments.

Tesla is one of the least egregious examples of this tax incentive abuse, only costing Nevada about $200,000 per worker so far. When that kind of loss on an individual job is at the low end of the spectrum, it paints these abuses in stark relief.

Good Jobs First Director Greg LeRoy believes that capping tax subsidies to $50,000 per projected job would, if nothing else, stem the flow of crucial state income. But people like Facebook Director of Western Data Center Operations Ken Patchett told MarketWatch that the study’s findings were “disingenuous at its core.”

He argued, “Nobody’s writing a check to Facebook,” and that the study is only reporting the bare minimum of what his company has actually done for the communities in which it has installed facilities. He, of course, cited a Facebook-commissioned study for his counter argument.

Good Jobs First Analyst Kasia Tarczynska, who authored the Money Lost to the Cloud study, isn’t buying that argument. She contends that because of varying levels of disclosure, the information provided is, if anything, “conservative.” And most of the worst offenders, according to Tarczynska, are playing both sides against the middle, saying, “Companies will have a list or even a final location in mind, then they will go to the locality and ask for tax breaks saying, ‘If we don’t get this, we’ll consider another location.'”

The study concludes by imploring state and local officials to be “absolutely stingy” when dealing with these massive corporate entities. After all, they “have to grow the cloud,” regardless and will already be basing their decisions on “stable areas with cheap electricity.” It suggests that the strength of companies like Facebook in these negotiations is illusory at best:

They will barely benefit your local economies because they create so few jobs and often import top-wage labor. If tech corporations also demand $2 million per job in subsidies, taxpayers will incur huge losses. No private party would agree to a bargain with such high costs and such low benefits and you would be wise to refuse such demands.

Follow Nate Church @Get2Church on Twitter for the latest news in gaming and technology, and snarky opinions on both.