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Comment by jjawssd | Hacker News Reader

Tax incentives are not the same as cash payments

> Tax incentives are not the same as cash payments

They are exactly equivalent to cash payments without the special tax treatment, so, yes, they are very much the same.

Not based on what the article says. If the factory never would have been built in the first place, the taxes never would have been paid.

Before: 0 jobs, $0 taxes (factory doesn't exist)

After: 13,000 jobs, $100M taxes (down from $300M if no tax concessions were given, as per article)

The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said.

Also the $3B is the cost over a decade, not in a single year.

> If the factory never would have been built in the first place, the taxes never would have been paid.

That does not make the incentives any difference than a cash payment in exchange for building the factory.

> The incentives would cost the state about $200 million a year but Foxconn's payroll in Wisconsin could reach $700 million a year, Walker's office said

The relationship between “would” and “could” in that sentence is quite important.

> That does not make the incentives any difference than a cash payment in exchange for building the factory.

Sure it does. A state writing a check for, say $100 million dollars requires spending $100 million dollars (possibly borrowing it to do so). Giving $100 million dollars in tax reductions requires spending $0. The former may not be feasible, while the latter generally is, so the two are not equivalent.

Giving $100 million in tax incentives, conditioned on a specific act, requires just as much spending (or more, if the income from the cash payment itself would have been taxable) as giving a $100 million cash payment, with the same conditions, with no special tax treatment.

That people can fail to see this may explain why these deals are politically popular, though.

There is no cash payment. The alternative to not giving the tax concession is not getting any tax revenue from the company.

Now, if you wanted to complain about companies taking the tax break and not following through, I'd agree with that.

I don't see it that way.

Let's create another scenario. We are family members. Whatever I earn, I give you half.

Scenario A: I never get a job, you end up with $0.

Scenario B: I get a job, but only if you agree to take 25%, not 50%. I take the job paying me $100 and you get $25.

It's not cash out of anyone's pocket.

If you keep more of your money through a change in tax policy, you are suggesting that the government gave you money? I'd argue that you are keeping what was yours all along.

Being bled less isn't the same as receiving a blood donation.

> If you keep more of your money through a change in tax policy, you are suggesting that the government gave you money?

That's a complicated question in the case of generally applicable changes in tax policy, like a new tax credit available to anyone who posts on internet discussion boards.

It's a simple, straightforward “yes” when the change in tax policy only applies to me, and only for a specific action (post on HN about the Foxconn factory deal, and get $5000 of your federal income tax.)

The latter is more like a government contract (but without the competitive aspects and other controls designed to assure fairness and public value.)

Forgoing revenue is the same as forgoing a payment.

Is there a way to find out how much Foxconn pays in U.S. taxes right now? Or how much revenue they earn in the U.S.? If Apple has Foxconn make phones in Taiwan, and Apple then ships phones to the U.S., then Foxconn doesn't pay any taxes to the U.S. on those transactions, right? Only Apple would right? If Foxconn doesn't pay any tax to the U.S. right now (???), and they build a factory in the U.S. and don't pay any taxes in the future, then it is a wash (except for now the U.S. employees would be paying income tax, etc.). Or am I missing a piece of the puzzle? (As in, maybe Foxconn is currently paying a lot in U.S. taxes from whatever operations they have in the U.S. currently?)

i assume theyre talking about payroll tax

Let's say you want to take a portion of my income in exchange for career services that has a cost of 1,000 dollars a year for you to provide.

You say "pay me 20% of your 100k job" netting you 19k, I refuse to pay that steep of a fee and counter with "take 10% or nothing" netting you 9k.

I don't believe its fair to say that you have lost 10k if you accept my terms as the alternative is receive nothing. You have increased your revenue by 9 thousand dollars as opposed to earning 0 dollars. The option you proposed is simply not on the table and can't really be considered.

I think you are offering up a false alternative.

It really is a choice between three outcomes. (1) No factory is built, no taxes collected. (2) Factory is built, company pays full sticker price on the taxes. (1) is unappealing because nothing is created. So we arrive at (3), where the company understandably wants to renegotiate the sticker price on the taxes and the taxing body doesn't want to end up in scenario (1), so they come to an agreement somewhere in the middle.

Why is this translated into the company received cash from the taxing entity?

Those taxes are a cost of doing business in the state - akin to the rent on a property. If nobody wants to rent your property at your asking price, you can let it sit empty and get zero, or lower your price and get more than zero. You are not "forgoing" anything by lowering your price in that case. You never had that revenue to give up in the first place.

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