The author’s reasoning:
Cities and states longing to attract Amazon’s Second Headquarters will say, we can collect income and sales taxes from those 50,000 well-paid workers that will be added to its community.
Based on an average state income tax rate, income tax on HQ2’s wages might be $200 million a year. Sales tax on taxable spending by those 50,000 employees might produce another $150 million per year. $350 million per year, for twenty years, would be $7 billion in tax revenue.
With $1 billion already committed to property tax relief, it looks as if the total amount offered to attract HQ2 would have to be under $8 billion for a city and state to have any hope of breaking even if they won this contest. Yet $8 billion is only $160,000 per job, much less than what Boeing and Foxconn received.
Worse, that tax revenue cannot all be used to offset the tax breaks because those employees impose actual costs on the state and local governments. They drive on roads, they ride mass transit, they need police and fire protection, they require housing which needs inspecting and permitting, they even send kids to school—which is really expensive. In reality, state and local governments typically make no money on residents. They lose money on them or, at best, break even.
And how many of the employees will be locals who will get a pay raise to work there rather than new jobs?
This is worst than the argument that lower taxes do not generate revenue. First the states are not giving up a dime, they are offering tax incentives on revenue and income they are not currently collecting.
Fifty thousand employees is likely close to fifty thousand families with new home purchases, entertainment and restaurant expenses, groceries, new car purchases, and countless other things working families spend money on that will spur investment, lower unemployment, and keep local business thriving. All this extra revenue and business activity is at the cost of reduced tax revenue from Amazon to the state.
The flip side, is a city doesn’t get the Amazon HQ. No growth, no actual revenue gain, unemployment, and the same economy for local businesses. Nothing’s changed.
An extra fifty thousand upper middle-class, highly educated citizens is a godsend to most cities.
With Amazon present in the state ALL residents ordering through Amazon will be charged state sales taxes - bigger population = lots more revenue for the state ...
Most of those jobs will be filled by locals who are already contributing to the tax base
The only increases would be for the remainder who actually do come into the jurisdiction and any payroll increases for those already there
However, I believe that all of these tax break schemes violate the spirit of equal protection and should not be allowed.
Many of those folks will have to live far south, east, or north of there at least if they want to own a home.
So the tax breaks will be borne by one city and any tax increases will accrue to another.
Claiming this is a state by state competition is a bit naive as the costs and benefits won't be shared equally throughout the state that 'wins' the competition.
This would also assume that those 50,000 employees all came from out of state... if not, they were already earning 80-100k somewhere right now in the state, so you cannot count 100% of the income for sales tax... only the difference between 85 and 100k or 15k per job...drastically changes the numbers....