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Comment by cbsmith | Hacker News Reader

$15.3 million for 300 jobs. That's $51,100 per job. Not counting what no doubt are significant tax incentives as well.

Free markets are awesome eh? ;-)

I recently read about a study of these sorts of programs in the US and it concluded that the average price to get jobs to your State is $100,000 pr job.

Governments are so hard on employers... ;-)

Did the study conclude these deals are a cost to the states that provide them? I guess what I mean is are these tax incentives a net negative over 20 years?

Yes, over 20 years they probably are a net positive for the states (though perhaps not always in direct revenue for the employers). However, that's looking at the deal in isolation, rather than the the impact this has on the market as a whole. It becomes a huge competitive advantage for larger, national & international companies, not to mention a huge distortion on the market and in the end substantially cuts down state revenues (the company was going to set up shop somewhere even if they weren't offered a cent).

I guess I'm not so sure it's a negative for the market as a whole. It allows for some sort of company-buying-market where a non-attractive-location-state can really pull in valuable employers which they otherwise they would not have.

You mean if we can funnel tax friction on local businesses to distort the market enough so that the national & international employers they compete with have reduced friction if they make otherwise suboptimal decisions for locating parts of their business, everyone wins? ;-)

In isolation maybe, but in aggregate it means national & international employers have an additional advantage over local employers, state coffers are thinner, and far more jobs lack long term prospects (because hey, if it only made sense to set up shop when there was a big windfall attached to it, sooner or later it makes sense to go after another windfall somewhere else and shut down what you are doing there).

Haha yeah pretty much your first paragraph sums up what I was thinking. I wouldn't word it so drastically, but I like the point you make at the end: if there's no real investment by business in the community, then why not just relocate when the conditions are optimal? (e.g. another tax break)

they also pay for prestige too, there is going to be a good amount attached to this endeavor

The market isn't very free. Aside from regulatory burdens (some of which are onerous, some not) there is a significant tax burden to any business. The US actually has one of the highest corporate income taxes in the developed world. In a saner system a lot of these burdens would be significantly lighter and the pace of business creation would be a bit (perhaps a lot) faster. Instead the negatives caused by these burdens are often attempted to be counteracted through various incentives and in the extreme with corporate welfare.

Usually the benefit of having a particular business sited in your state / metro area more than makes up for the cost of incentives. The $51k per job incentive is a one time cost, whereas the jobs (and the new jobs from growth of the facility) will keep bringing in revenue (and taxes) year after year. SpaceX currently operates at over $200k revenue per employee. Additionally, the cost of constructing the new factory and launch site will vastly exceed the cost of the incentives.

>The US actually has one of the highest corporate income taxes in the developed world.

The highest, but that isn't the whole story. There are so many deductions and loopholes that companies end up paying far less than that rate.

http://www.nytimes.com/2011/05/03/business/economy/03rates.h...

Yeah, the highest nominal tax rate ends up being only a slightly-above-average effective tax rate, and probably a bigger deal than the slightly-above-average effective corporate tax rate is the significantly-lower-than-average benefit that US businesses get for what they are paying...

Having to pay for (compared to other developed countries, both expensive and inefficient) health care for employees on top of paying taxes for instance. Or the comparatively poor transportation, telecommunications, etc. infrastructure -- sure, its an annoyance to individuals, but its also a cost to businesses.

Its probably not a coincidence that the US has both a popular ideology which holds that government is fundamentally horrendously inefficient and an actual public sector that does far worse than other developed countries at providing value for the money customers are paying. Whichever happened first, the two obviously feed off of each other.

>Free markets are awesome eh? ;-)

Care to make your point here more clear?

That was sarcasm. It's anything but a free market if governments are subsidizing business to such an extent.

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