Just about everyone who watches news media is calling it the Story of the Week, and it’s probably going to be one of the top stories of the year, my (informal) nominee for a Pulitzer: Louise Story at the New York Times exposes how corporate America shakes down state and local governments — who often get little in return. The biggest perp over the years has been the automotive industry, which Story says first perfected this kind of blackmail (though Southern Pacific Railroad did pretty well in its day). But now just about every big company tries to demand a tax break or threatens to leave town.
In in the end, there’s no evidence that tax breaks, or the lack of tax breaks, is the most important factor in corporate relocations. There’s even less evidence that all these billions of dollars in public money actually help create jobs, pay for themselves, or are the best way to invest in economic development:
One corporate executive, Donald J. Hall Jr. of Hallmark, thinks business subsidies are hurting his hometown, Kansas City, Mo., by diverting money from public education. “It’s really not creating new jobs,” Mr. Hall said. “It’s motivated by politicians who want to claim they have brought new jobs into their state.”
It’s hard to imagine any sane person reading all the way through the story and now wanting to feel like this poor guy:
“I just shake my head every time it happens, it just gives me a sick feeling in the pit of my stomach,” said Sean O’Byrne, the vice president of the Downtown Council of Kansas City. “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”
Story even weighs in on San Francisco’s deal with Twitter, which, she notes, was hardly a struggling startup at the time:
Twitter was not short on money — it soon received a $300 million investment from a Saudi prince and $800 million from a private consortium. The two received Twitter equity, but San Francisco got a different sort of deal. The city exempted Twitter from what could total $22 million in payroll taxes, and the company agreed to stay put. The city estimates that Twitter’s work force could grow to 2,600 employees, although the company made no such promise. … Like many places, San Francisco has been cutting its budget. Public parks have lost about $12 million in recent years, though workers at Twitter will not lack for greenery. The company’s plush new office has a rooftop garden with great views and amenities. Enjoying the perks, one employee sent out a tweet: “Tanned on Twitter’s new roof deck this morning as some dude served me smoothie shots. This is real life?”
Randy Shaw, who loves and worships Twitter and the tax break it demanded, takes the Times to task on this section, arguing that Story got the deal wrong. Actually, neither of them has the true story — what Twitter was most freaked about was the prospect that the city’s payroll tax might apply to the huge wealth in stock options it will be dispensing when it goes public. That’s about a $40 million tax break.
So what if the city just said that it wasn’t going to tax stock options as payroll? Wouldn’t that have satisfied Twitter — without the city giving up payroll taxes on a large swath of mid-Market and surrounding areas? Could we instead have used some of that payroll tax money to protect the vulnerable small businesses that are getting forced out by the Twitter tech boom?
In the end, considering the pluses and minuses (displacement of existing small businesses and their jobs is a minus), will this dead really help create net new jobs for unemployed San Franciscans? (At least automotive manufacturing jobs are unionized and people without advanced degrees can qualify.)
I bet when the numbers are all crunched a decade from now, we’ll learn that this local tax break, like the others Story discusses, did nothing good for San Francisco.