Apple Expressing Frustration as Tax Incentives for Austin Expansion Remain in Limbo

[Breckenridge]

Originally Posted by spiney

Why give tax breaks to the most profitable corporations in the world? The local authorities have to provide infrastructure, etc., and get no revenue?

If You don't, big corps will move elsewhere including overseas.

[Dmunjal]

According to this, the Feds would have received an additional $2.4B this year if Apple didn't move their offices to other countries. Even California loses out in tax revenue.

http://www.nytimes.com/2012/04/29/bu...d-nations.html

[kdarling]

Originally Posted by RVdave

Of course you did. You asked for breaks for childcare, college tuition, home ownership, the tax collector's appraisal of your house, etc., etc., etc. You just went through an agent (your congressperson, etc.) instead of negotiating directly.

Sure, but those tax breaks affected more than just a single person or company.

Any company that wouldn't consider the best deal would undoubtedly have to answer some difficult questions from their shareholders.

Any company? We're talking about Apple.

Cheers!

[lilo777]

Originally Posted by Dmunjal

According to this, the Feds would have received an additional $2.4B this year if Apple didn't move their offices to other countries. Even California loses out in tax revenue.

http://www.nytimes.com/2012/04/29/bu...d-nations.html

Apple makes mockery out of the tax system. They have 20 employees in Nevada and claim the majority of their profits there (where the tax rate is low). At the same time the majority of their employees live in California, use California resources (schools, roads etc.) but Apple avoid paying California taxes. Does anyone think that this is fair? Please speak up!

[Flyerflyer]

I will be remodeling my home soon and demand a government handout along with Apple. I am entitled to taxpayer subsidy because I will be putting local contractors to work and will therefore make the community a better place. Since my remodel will enhance the local economy, the only way to fix underfunded schools, police, highyways, etc. is for the city to immediatly approve the tax incentive plan proposed by my lawyers. Or else I will move.

[beachtrader]

Originally Posted by tschull

Estimating the gain to Travis county's tax base is not speculative. There will be an increase of approximately $304 million in improved property. Travis county's property tax rate for the city of Austin is 0.4811/$1000. That's about $1.47M/yr. The center will employ approximately 3600 people. If the majority of the employees are call center representatives their average salary will be something near $30K. That's about $108M/yr coming into the county from Apple. There is no income tax, but the local sales tax is 8.25%. If we estimate that one-third of peoples salaries is spent on goods and services, i.e. the local economy, then approximately $8.9M/yr in sales tax will be collected, although I have no idea what part of that will go to the county. These two factors alone suggest that Apple's presence will add somewhere in the neighborhood of $10M/yr in tax revenue to the state and county.

Incorrect. You are assuming that everyone there will be purchasing new property adding new property tax. 30k a year and they are buying houses? Many people will live in apartments paying no real estate tax and many will move into existing homes displacing others moving out resulting in no new property tax. Plus, you are assuming people will live in the same county--many will live outside of the county they work in and commute.

Moreover, you are also assuming people will spend all their money on taxable goods in the same county--you can't assume that either.

Your assumptions are extremely favorable and high. And when you drop out all the favorable assumptions it becomes much less clear and more murky.

[Picka]

Incredible that a company that makes so much money every quarter is forcing the state to accommodate it's own tax demands, or else...

No wonder this country is going downhill. Can I negotiate my own tax arrangements with the state, or do I need to be making Billions every quarter in order to be able to pay less tax?

[IJ Reilly]

Originally Posted by tschull

I have read several of you posts and you have a hard time getting around this concept that the county's tax revenue base is not fixed, it can grow or shrink, depending on the amount of improved property, or sales tax.

Read all of my posts, it might help. I don't have any conceptual difficulty with this subject. I'm probably the only person in this discussion who actually has local government experience, and I am telling you that the supposed revenue benefits of tax give-backs do not pan out. They are based on too many speculative calculations. The only thing we do know is that property taxes are being rebated as an "incentive" for a business to expand -- something they were very likely going to do anyway, for reasons that have nothing whatsoever to do with property taxes. So all we know for certain that property tax revenues the local government uses to provide services will be reduced (by 50% in this case, for ten years).

You are confusing salaries paid to new hires with local government revenues. One does not mean the other, at least not in any way that you can readily quantify. Coming up with an economic benefit number requires engaging some very speculative theories about how many of those new hires already live or will live in the jurisdiction, how much more disposable income they will spend in the jurisdiction, and how much of that disposable income will be returned to that local government in the form of taxes. You can come up with a number, but it will be based on so many loose variables that it's essentially meaningless for economic purposes. But it does make good political cover, and that as I have already said, is the point of the entire exercise in the end.

Once you realize that this process is not driven by actual economics, then you will become more appropriately skeptical of these sweetheart tax deals. These corporations get special tax treatment not because they necessarily deserve them, but because they can scare local government people into handing them out. And, as is always the case, lunch is not free. Somebody else will be making up the difference, and you should already know who that is.

[RVdave]

Originally Posted by kdarling

Sure, but those tax breaks affected more than just a single person or company.



Any company? We're talking about Apple.

Cheers!

What unusual comments you make. The purpose of most companies is to make as much money as possible for their owners, their shareholders, and one way they do this is by minimizing their expenses. Since this seems immoral to you, perhaps you should make sure your skirts are clean. Do you have a pension fund, an IRA, any Mutual Funds? If so, you probably own and are benefiting from the growth of Apple stock, which reflects their cash and cost controls. You can solve this problem by investing in other companies. Have a prosperious future.

[jonnysods]

Originally Posted by spiney

Why give tax breaks to the most profitable corporations in the world? The local authorities have to provide infrastructure, etc., and get no revenue?

It's the jobs that are the big deal. 3200 with such a high unemployment rate in America = pure gold for Texas. And they will get their money back when those 3200 people start spending money!

[Rocketman]

Why give corporations deductions?

Here are some of the more common deductions:

Cost of paying labor
Cost of providing benefits to labor
Cost of credit
Cost of buying materials
Cost of professional services
Cost of non-professional service
Depreciation for goods that wear out to encourage more rapid replacements
Costs of taxes actually paid to other layers of government, state, county, local

Now which of those do you want to eliminate last? I want to eliminate that first.

BTW the Ryan plan lowers rates for everyone and eliminates "most deductions", except for 5, and results in a LARGE tax increase for the "rich".

The "rich" are fine with that because the marginal rate is the primary basis business decisions are made on. Simplified tax treatments substantially reduce reporting costs and eliminate mostly tax motivated decisions, making the business more efficient overall.

I was in the financial industry the last time this happened in the mid-80's and it was really interesting to watch all the wacky things fall out of favor, like cattle ranch credits and a hundred other similar schemes, and see money flow into traditional investments. That oft ignored fact was the actual source of the duration and scale of the recovery IMHO.

Econ 101: Investment preceeds/causes income and growth.

Rocketman

[daleremote]

Originally Posted by gotluck

Texas is in a better economic position than much of the US right now. Maybe they don't need to bend over for Apple?

...and Travis County is a better economic position than much of Texas.

[a.jfred]

Originally Posted by hobo.hopkins

I do have an honest question though - if an employee leaves their current company to go work for Apple, doesn't the now vacancy of their job mean another person is hired in their place? That is, after they have moved to Apple, won't their former job be filled by someone else? The net effect, it would seem, is still increasing jobs. This would mean a fair bit of increased revenue to the state, even if it is bit by bit.

Not necessarily - in some cases, the company may decide to cut hours or staff altogether. Where I work, all my direct reports are part-time. When I first got here, I had 105 hours to work with. Now I have 65. Every time someone left, it was decided (higher up) that we didn't really need all those hours. My 40-hour person was replaced with a 20-hour person. My 35-hour person was replaced with another 20-hour person. One wasn't replaced at all. Instead, I'm the one (because I'm exempt) who's left to fill the void in the hours (which is apparenty every time I go on vacation, and there's a nice 40+ hour hole in the schedule).

So that "3200 jobs" for Apple may end up costing a few positions in the long run.

[a.jfred]

Originally Posted by X Cruz 187

Texas doesn't pay state income Tax 0%, property tax is only around 1% once a year and auto is like $75 less than 1% a year! So I think Austin will be ok, Texas has one of the best unemployment %'s in the country.

Property tax is ONLY around 1%? You better tell that to Travis County then, cus I WAY overpaid for my 2011 property taxes (just under $1600 for $75k)

[lilo777]

Originally Posted by X Cruz 187

Texas doesn't pay state income Tax 0%, property tax is only around 1% once a year and auto is like $75 less than 1% a year! So I think Austin will be ok, Texas has one of the best unemployment %'s in the country.

You can check current unemployment rates here. Texas with their 7% is doing OK but it still trails a lot of other states including high tax rate state of Massachusetts (6.5%) which means that Texas actually is worse off than many states - so so unemployment rate combined with low taxes translates into sucky life for many.

[LethalWolfe]

Originally Posted by a.jfred

Not necessarily - in some cases, the company may decide to cut hours or staff altogether. Where I work, all my direct reports are part-time. When I first got here, I had 105 hours to work with. Now I have 65. Every time someone left, it was decided (higher up) that we didn't really need all those hours. My 40-hour person was replaced with a 20-hour person. My 35-hour person was replaced with another 20-hour person. One wasn't replaced at all. Instead, I'm the one (because I'm exempt) who's left to fill the void in the hours (which is apparenty every time I go on vacation, and there's a nice 40+ hour hole in the schedule).

So that "3200 jobs" for Apple may end up costing a few positions in the long run.

I've run into the same thing recently. Full time staff person leaves and are 'replaced' by a part-timer or no one at all.


Lethal

[Spiritgreywolf]

Originally Posted by lilo777

...At the same time the majority of their employees live in California, use California resources (schools, roads etc.) but Apple avoid paying California taxes. Does anyone think that this is fair? Please speak up!

What are you saying? Those same Californians pay California state income taxes which is one of the highest in the known universe, most of whom have homes and therefore pay property taxes as well. They also pay sales taxes on things they buy (also extremely high), and Apple itself pays for the water, lights, sewage, etc., of everything they run in that state. Your statement is patently FALSE. The PEOPLE that work and live in CA pay their fair share of taxes.

Please state how the 40 people in Nevada who do not pay California taxes affects California in any way?

Oh - wait a second - are you saying that APPLE should pay BILLIONS more to California so the local government there can sponge off people who actually WORK? Ahhh, I see... "Wealth Redistribution to the Masses" is what you really want, right? Then just come out and say it!

And before you even THINK of coming at me saying, "oh, he's just another Republicrat or something that thinks the poor should be beaten" - just lay off. I have 3 jobs and wound up having to pay Uncle Sam more than $10,000 in Alternative Minimum Tax being one of the ones whose income puts him in the 35%+ tax bracket. Just salaries alone and no investments. So as far as I am concerned the government gets enough of MY money.

Maybe when the GOV starts being more fiscally responsible will I start caring about the BILLIONS they lose from companies. Just because they'll try and rape the large companies more doesn't mean they won't keep pounding me any less...

----------

Originally Posted by a.jfred

...I'm the one (because I'm exempt) who's left to fill the void in the hours (which is apparenty every time I go on vacation, and there's a nice 40+ hour hole in the schedule)...

I feel for ya brother - do like I did and be a consultant and work for yourself. I got out of the corporate programmer cubical and took my talents out there to get paid for.

Bottom line - you should get paid for every single hour you work, and tell anyone who tries to get you do more than that and settle for what the company feels is right "because, you know - the economy is bad and we all need to tighten our belts" should be told to pound sand.

At some point, one of three things will probably happen:

1 - The entire economy will simply collapse from the disparity of those who have and those who don't.

2 - The economy will eventually correct itself when the people who actually DO THE WORK get the MONEY FOR DOING THE WORK and corrections from over-inflated C-level salaries will come back down to earth (unlikely)

3 - The disparity will grow so large that the people who do not have, will start putting the heads of those who do have, on pikes.

...Let's hope it starts with the very next CEO that joins a company and says "The first thing we must do is cut jobs!" and part of their bonus package is tied to doing that and it's in the millions of dollars range.

[tschull]

Originally Posted by beachtrader

Incorrect. You are assuming that everyone there will be purchasing new property adding new property tax. 30k a year and they are buying houses? Many people will live in apartments paying no real estate tax and many will move into existing homes displacing others moving out resulting in no new property tax. Plus, you are assuming people will live in the same county--many will live outside of the county they work in and commute.

Moreover, you are also assuming people will spend all their money on taxable goods in the same county--you can't assume that either.

Your assumptions are extremely favorable and high. And when you drop out all the favorable assumptions it becomes much less clear and more murky.

I did not even address the purchase of property by individuals. The $304M was the value of the expanded call center.

The sales tax is collected by the state, so I referred to this revenue as state and local. The tax incentives are being paid by both state and local (Travis County, and city of Austin), so I did not feel it necessary to distinguish where the sales taxes were collected. Most of the money spent on goods and services by call center employees will be in the state of Texas.

[IJ Reilly]

Originally Posted by tschull

I did not even address the purchase of property by individuals. The $304M was the value of the expanded call center.

The sales tax is collected by the state, so I referred to this revenue as state and local. The tax incentives are being paid by both state and local (Travis County, and city of Austin), so I did not feel it necessary to distinguish where the sales taxes were collected. Most of the money spent on goods and services by call center employees will be in the state of Texas.

So many flaws in your reasoning, starting with the fact that the property tax loss (50% for ten years) is local but the tax gains are to the state.

[tschull]

Originally Posted by IJ Reilly

So many flaws in your reasoning, starting with the fact that the property tax loss (50% for ten years) is local but the tax gains are to the state.

Oh. My. God. This is really getting tiresome. Firstly, the state does not collect local property taxes. Secondly, even if they did, there are no "tax gains" to the state if the assessed value of the thing being taxed decreases in value. Thirdly, I was talking about sales tax distribution between local and state governments, not property tax. That's it, I'm done. We will have to agree to disagree about this. Good evening to you, sir.

[IJ Reilly]

Originally Posted by tschull

Oh. My. God. This is really getting tiresome. Firstly, the state does not collect local property taxes. Secondly, even if they did, there are no "tax gains" to the state if the assessed value of the thing being taxed decreases in value. Thirdly, I was talking about sales tax distribution between local and state governments, not property tax. That's it, I'm done. We will have to agree to disagree about this. Good evening to you, sir.

Exactly. I think you are finally getting it. The city and county give up half of their property tax and get nothing in return. So there is nothing to disagree about, unless you simply want to be disagreeable.

[Medic278]

These tax incentives are insane, coportations pay next to nothing while the little guy get hits with all sorts of taxes.