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Loss of Federal Corporate Taxes is Small Potatoes Compared to Local Property Taxes

April 30, 2019

Profitable Giants Like Amazon Pay $0 in Taxes. Some Voters Are Sick of It“, a recent NYTimes article by Stephanie Saul and Patricia Cohen, provides a series of human interest stories that reflect the way members of the public view the impact of corporate tax loopholes. Unsurprisingly, the majority of voters find it appalling that they are required to pay their fair share of taxes while a long list of corporations not only avoid taxes altogether, but also receive rebates. Amazon, the poster child for this reality, issued a factual but appalling fact to defend themselves:

In a statement, the company said it “pays all the taxes we are required to pay in the U.S. and every country where we operate.”

Left unsaid is that Amazon also works hard to ensure that the taxes they are “required to pay” are as low as possible. Mss. Saul and Cohen also offered this tidbit on GM, another company that paid no taxes, a tidbit that perfectly displays the deep flaws of the concept of shareholder primacy:

General Motors, one of the companies on the zero-tax list, recently idled a large plant near Youngstown that produced the Chevrolet Cruze, a decision that helped increase the company’s stock price even as G.M. paid no federal taxes on $4.32 billion in income.

The article makes no explicit mention of another problem of corporate taxes: not only do these large profitable corporations like Amazon and GM avoid paying FEDERAL taxes, they also receive huge tax breaks to locate their operations in cities that are struggling to fund basic services but who need the low-wage high-stress jobs to keep their cities and towns afloat. Here’s a paragraph on Akron, Ohio, whose mayor is taking to keep unemployment low and attract business:

Akron, about an hour west, is faring better economically. Mayor Daniel Horrigan won’t confirm or deny it, but Amazon is believed to be the company he has recruited to move into the old Rolling Acres Mall, which closed in 2008. Amazon would not comment on whether it planned to open a facility there.

An article by Doug Livingston in the Akron Beacon Journal describes some background on the deal struck by the mayor to secure Amazon, a deal that is described as “shrouded in secrecy“:

To acquire the land, the project developer used a private equity firm to pay $600,000 for 40 acres owned by the city and $16.5 million for seven privately owned lots, some of which sold for as much as $3 million an acre, according to county property records. In a deal negotiated by Mayor Dan Horrigan’s economic development team and approved by everyone on City Council but Zack Milkovich, Akron has agreed to refund the developer the $17.1 million cost for all the land through property tax rebates.

The net impact on taxpayers and government services is difficult to calculate. Essentially, the developer would be made whole over the next 30 years with reduced tax revenue from the property for the city’s schools and diverted tax revenue for the county’s libraries, developmental disability board, children’s services, metro parks, zoo and more.In exchange, Amazon promises $30 million in annual payroll for at least 10 years. The Beacon Journal/Ohio.com calculates that it would take 24 years to amass $17.1 million in income taxes from that minimum level of payroll, assuming Amazon’s corporate profits are paid somewhere other than Akron.

In the end, it’s a trade of property taxes supporting countywide services for income taxes and new jobs directly benefiting the city, plus the revitalization of a once bustling mall that sat empty and blighted for a decade.

Readers of this blog know that FoxConn offered essentially the same kind of “deal” in Wisconsin and after receiving the deeply discounted property prices and property tax cuts decided it wouldn’t be brining in the jobs it promised. And this seems to be standard operating procedure for corporations: they secure tax breaks in exchange for jobs and when those jobs don’t materialize the tax breaks remain in place.

I hope Akron has a different experience in the long run… but it is evident that for the short run they will have a spiffy new Amazon warehouse where a shopping mall once stood and less money for their “…city’s schools and diverted tax revenue for the county’s libraries, developmental disability board, children’s services, metro parks, zoo and more. Maybe the schoolchildren can take field trips to the warehouse and play in the empty parking lots when the jobs fail to materialize.

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