Iowa's handout to Apple illustrates the folly of corporate welfare deals • Hacker News Board

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#201

Post by eridius » Thu, Aug 31, 2017, 5:23 PM UTC

tpxl wrote: post #163

eridius wrote: post #131

Earlier quoted context omitted.

> If there is a greater than 0% chance Apple would have built on that site anyways, then Iowa is directly losing that money. That doesn't make sense. Perhaps you meant to say if there's 100% chance Apple would have built there anyway?

It does make sense if you take the expected value of the money Iowa would get, ie probability * money = money gained. So if the probability was greater than 0, the expected value of the tax gain was greater than 0, which Iowa now lost.

That would only be true if that tax gain was literally the only benefit of having Apple pick Iowa (and if that were true, nobody would ever offer the tax breaks because there'd be no point in having the company pick your state anymore).

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#202

Post by AnthonyMouse » Thu, Aug 31, 2017, 5:31 PM UTC

Retric wrote: post #200

AnthonyMouse wrote: post #199

Earlier quoted context omitted.

> But states (at least in the USA) can't fail as they are back stopped by the federal government. No they aren't. A failing state doesn't look like Mad Max, it looks like Michigan or West Virginia or Mississippi. The federal government has no constitutional obligation to bail them out. > So failed states become a drain on everyone & at the same time the most economically challenged within the state pay the brunt of t…

If you compare inflow vs outflow of federal funds, WV and Mississippi are being bailed out. https://www.theatlantic.com/business/archive/2014/05/which-s... Michigan actually does not look bad on a wide range of metrics. It's unemployment rate is right at the national average and it get about as much money from the federal government as it gives back. People pay attention to it because it's close to average not becaus…

It's not so much Michigan as a whole that's failing as it is Detroit.

And wealth transfers from richer states to poorer ones are the inevitable (indeed intended) consequence of federal income redistribution. They're a problem if they're disproportionate, i.e. two states are equally poor but one gets more money because it somehow has undue political power. Obvious example is Florida. Other than that it's no different than redistribution from richer people in California to poorer people in California, except that they happen to be in different states.

Another problem is the state-level consequences of some of the income cliffs the feds have in place, i.e. six independent subsidies phase out at the same time with higher income.

The states need the incentive to improve. Increasing average income by $4 shouldn't cause the feds to take away $5 from the state.

But if that happens, the cause is flawed federal policy, not state-level diversity.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#203

Post by eridius » Thu, Aug 31, 2017, 5:31 PM UTC

quadrangle wrote: post #191

eridius wrote: post #132

Earlier quoted context omitted.

Sure, but why would all states refuse tax breaks? It's a pretty obvious means to convince a company to choose that state. This is "nothing more" than the free market at work.

> This is "nothing more" than the free market at work. Exactly! And by their very nature, free-markets are susceptible to races-to-the-bottom. https://en.wikipedia.org/wiki/Race_to_the_bottom So, yes, here they are at work doing one of the examples of free-market behavior that work against the public interest. Here's another variant of my comment above: If all the workers refused to work in abusive conditions for low…

> Exactly! And by their very nature, free-markets are susceptible to races-to-the-bottom.

I was actually thinking that this was an example of a Nash Equilibrium. It's basically like the prisoner's dilemma. If all the states cooperated and refused to offer tax breaks, that would be good for all states. But if a single state "defects" and offers tax breaks, that state reaps the rewards of its defection. Unfortunately this leads to all states "defecting" and offering tax breaks, which leaves the states in a worse position than if none of them offered tax breaks.

> So, yes, here they are at work doing one of the examples of free-market behavior that work against the public interest.

Yep, that's true, but there's not really any way around it in this case.

> Here's another variant of my comment above: If all the workers refused to work in abusive conditions for low pay, the companies would still need to hire workers. And you could reply "Why would workers refuse that? Accepting abuse and low pay is a pretty obvious means to convince a company to hire you over others — the free market at work."

And that's why unions exist. But that won't work when we're talking about states.

> Are you one of those people who blindly thinks that the algorithm of "free market" necessarily (tautologically) results in the best situation for everyone?

Haha no (but thanks for asking instead of silently assuming!). But the "free market" is what we have (even if it's not always, or even often, really "free"), and it results in consequences like states offering tax breaks, and there's no real way around it beyond tearing up our government and starting over because I seriously doubt you could ever convince all 50 states to outlaw tax breaks for companies.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#204

Post by Retric » Thu, Aug 31, 2017, 5:56 PM UTC

AnthonyMouse wrote: post #202

Retric wrote: post #200

Earlier quoted context omitted.

If you compare inflow vs outflow of federal funds, WV and Mississippi are being bailed out. https://www.theatlantic.com/business/archive/2014/05/which-s... Michigan actually does not look bad on a wide range of metrics. It's unemployment rate is right at the national average and it get about as much money from the federal government as it gives back. People pay attention to it because it's close to average not becaus…

It's not so much Michigan as a whole that's failing as it is Detroit. And wealth transfers from richer states to poorer ones are the inevitable (indeed intended) consequence of federal income redistribution. They're a problem if they're disproportionate, i.e. two states are equally poor but one gets more money because it somehow has undue political power. Obvious example is Florida. Other than that it's no different…

We both agree it's a wealth transfer and intended, so why do you object to the term bail out?

This is a wealth transfer to failing states to prevent complete collapse or an a massive exodus of the population.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#205

Post by AnthonyMouse » Thu, Aug 31, 2017, 6:18 PM UTC

abalone wrote: post #193

AnthonyMouse wrote: post #165

Earlier quoted context omitted.

> By this logic, corporate pressure to eliminate environmental regulations is "good" because they are "ineffective programs". Environmental regulations prevent a harm. A dollar value can be attached to the harm, the cost to compensate victims and clean up the damage. If a company is polluting but not providing enough value to compensate for that pollution then they're a parasite and the state does not benefit from av…

You're again wrongly assuming that the public costs of all pollution can be tied back to the bottom lines of individual corporations within a timeframe that affects their decisionmaking, or even at all. If this were the case, global warming wouldn't be happening. Not all externalities can be internalized; that is the fundamental flaw in your reasoning.

I am in no way assuming that.

The externalities that cannot be internalized at the state level are the exception. That is why, as I explained, environmental regulations have to be national -- pollution crosses state lines. And if you go above the national level, climate change is one of the only examples.

Most of the things a state does has minimal effect on other states. If people are homeless in Miami, that may be bad, but it has minimal effect on people in San Francisco.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#206

Post by AnthonyMouse » Thu, Aug 31, 2017, 6:35 PM UTC

Retric wrote: post #204

AnthonyMouse wrote: post #202

Earlier quoted context omitted.

It's not so much Michigan as a whole that's failing as it is Detroit. And wealth transfers from richer states to poorer ones are the inevitable (indeed intended) consequence of federal income redistribution. They're a problem if they're disproportionate, i.e. two states are equally poor but one gets more money because it somehow has undue political power. Obvious example is Florida. Other than that it's no different…

We both agree it's a wealth transfer and intended, so why do you object to the term bail out? This is a wealth transfer to failing states to prevent complete collapse or an a massive exodus of the population.

> We both agree it's a wealth transfer and intended, so why do you object to the term bail out?

Because a bail out is normally a cliff and cliffs are moral hazards.

Suppose Level 10 is great, Level 5 is mediocre and Level 1 is a disaster. Now suppose that there is a federal policy that says if anybody gets down to Level 1, we shower them with money until they get up to Level 5. What incentive does this create for a state currently at Level 3?

Compare this to something like a $12,000/year federal UBI with a 30% flat tax rate. In that case an unemployed person gets $12,000 and someone with a $20,000/year job gets $26,000 ($12,000 + 0.7*$20,000), which is obviously better than just $12,000. Moreover, the UBI is unconditional regardless of which state you live in, so if your state is terrible, the level of assistance isn't conditional on you continuing to live somewhere unsustainable.

> This is a wealth transfer to failing states to prevent complete collapse or an a massive exodus of the population.

But that's what's supposed to happen. WV has negative population growth. There is nothing wrong with that. It doesn't need to be stopped. It's completely natural for unsustainable places to be abandoned.

Places aren't people. There is no need to save them through external intervention.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#207

Post by mrguyorama » Thu, Aug 31, 2017, 6:36 PM UTC

dsfyu404ed wrote: post #158

lend000 wrote: post #127

Earlier quoted context omitted.

> When they bid countries or states against each other I have nothing to say specific to this case, but there is a market for governments (very distorted since options are very practically limited for most people, although corporations have an advantage here), and we should encourage competition in this market, as well as political markets. Competition results in better products. Washington already won me over [parti…

This. Every time you see a trailer registered in Maine there's a very good chance that it was registered there to skirt high registration prices and onerous requirements in it's own state. Maine's making money because other states are such a pain to deal with that people would rather skirt the law. Google "NH state liquor store" for another good example.

I would disagree with "Maine is making money"

Our state struggles to pay for road upkeep. Obviously we are not making that much money on trailer registrations. Also, IIRC, we were the first state with trailer weight limits and similar laws, meaning we couldn't possibly be THAT concerned with stealing business from other states on trailer registration.

Maybe Maine's lax trailer laws come from everyone and their mother owning a trailer for camping, ATV's and the like? No average Mainer wants to pay huge fees just so they can hit the trails on the weekend.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#208

Post by r00fus » Thu, Aug 31, 2017, 6:38 PM UTC

MattSteelblade wrote: post #7

quasse wrote: post #2

Luckily Wisconsin figured out the solution to this problem... Make the corporate welfare deals an order of magnitude larger and give 3 billion to Foxconn instead of a piddly tenth of that. Even in the best case for "jobs created" (10,000) pushed by our politicians the state might as well just give 10,000 people $30,000 a year for 10 years. Realistic estimates are saying the new jobs might be more in the range of 3,00…

This hits home as a Wisconsin resident. Best case scenario, we're looking at 2042 to turn a profit[1]. [1] http://docs.legis.wisconsin.gov/misc/lfb/bill_summaries/2017...

By then Foxconn would almost certainly have moved on.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#209

Post by weberc2 » Thu, Aug 31, 2017, 6:41 PM UTC

Aaargh20318 wrote: post #155

Aaargh20318 wrote: post #136

Earlier quoted context omitted.

> they can't even start families? You say that like it's a bad thing. Humanity is a plague, we breed uncontrolled and our population keeps growing and growing. There is no need for anyone to start a family, there is no shortage of humans.

Would the people who down-vote care to explain why they support unbounded population growth ? That would be great.

I downvoted because this seems likely to start a tired, ideological digression from the topic. Also, your snarky implication of a dichotomy between "humans are a plague" and "unbounded population growth is favorable" didn't help.

I actually agree that population growth will likely need to be regulated one day, but the wording is unnecessarily inflammatory and it's too far off topic for this thread.

Re: Iowa's handout to Apple illustrates the folly of corporate welfare deals

#210

Post by alexanderstears » Thu, Aug 31, 2017, 6:41 PM UTC

fulafel wrote: post #59

colechristensen wrote: post #24

These are property tax abatements. I don't see the big deal. Apple has to pay the property tax equal to the farmland for the next 20 years instead of the much higher tax on the datacenter property. Who cares? Unless someone is arguing the datacenter is going to use a lot of tax funded city services (police? fire? ... ?), Waukee isn't giving Apple anything. On top of that Apple is pledging to give them $100M for vario…

Companies are supposed to pay taxes so we can have schools, healthcare, basic income etc. When they bid countries or states against each other to get tax breaks and governments play the game, citizens lose. Yes, it happens in other cases too, and citizens should also protest against those other cases.

You're right to identify tax revenues as the source of funding for local services but there's a strong case to be made for taxing people and not corporations.

Corporations don't pay taxes, they simply pass the burden on to customers/employees/shareholders. It would be simpler (and arguably it would allow the market to allocation resources more efficiently) if corporations paid 0 tax and people paid taxes. Consider this:

https://www.theatlantic.com/business/archive/2010/10/why-we-...

And you're right to point out that companies bid jurisdictions against each other. But many bid winners wouldn't get the facility without a special accommodation. I'm sure Apple chose this town because of the benefits, and this town is better off for it. I'm also sure this town wouldn't have been selected if there weren't any 'wooing' process, so this town is strictly better off.

If the town can serve its citizens with fewer tax revenue, then they're doing something right and hopefully they can expand and more people will choose to live there.

This helps incentivize communities to operate more efficiently and that's a good thing.

IMO the bigger problem is corporate free loaders. All the local walmarts use way more police time than the targets, but Walmart doesn't pay additional fees for the intensive use of police. The simple solution is a corporate tax but that isn't good because it doesn't incentivize more or less use of the police, ideally we'd charge them according to use which is different from a tax and more closely aligned with our preferences (e.g preference for less police work at walmart).