Saturday, August 11, 2007

Local Greens to protest gargantuan tax giveaway

The US is a country where big business yammers on about 'the free market' and whines whenever government 'oppresses' them. But when government messes with the free market in their favor, big business is always appreciative of such corporate welfare.

A computer chip fabrication company called Advanced Micro Devices has promised to build a huge factory in Saratoga County's Luther Forest Technology Campus, about half an hour north of Albany, NY.

The company claims that plant would not have been built without a gargantuan tax giveaway. The state promised AMD a $1.2 billion incentive package that includes capital grants, tax breaks and infrastructure improvements. The building would cost only $600 million.

By comparison, $1.2 billion is more than the gross domestic product of 29 independent countries.

The factory will allegedly employ 1200 people.

That's $1 million per job.

$1 million in subsidies paid by the ordinary taxpayer.

I've never been a fan of tax breaks for businesses. I can tolerate such programs for small businesses, because mom and pop stores aren't going to up and move after a few years because another state offered them a sweeter deal.

But big corporations location shop all the time. They play one locality/state against another to extort the best deal.

The purported justification of these tax breaks is that they allow for job creation... even when it's merely job relocation.

Even if the new jobs in Luther Forest represent entirely new money, a questionable premise, how long is it going to take to recoup $1 million per job?

For the sake of argument, let's say the jobs offer a generous average annual salary of $50,000. And let's say all of the money is spent locally. Even under these two conditions, it's going to take 20 years before the local and state governments (taxpayers) break even.

Of course, this doesn't factor inflation, which will raise salaries. But it also doesn't factor that much of the money will be leaving the region in federal taxes. And it doesn't factor in further costs to maintain infrastructure for AMD's, such as roads, water and electricity.

It's going to take an entire generation for the state and local taxpayer to break even.

And that's assuming AMD actually sticks around. That it'll do so without cutting jobs. And that chips will still be a relevant technology in 20 years. None of these is a given.

This is also not factoring the future costs based on AMD's poor environmental record.

The Tri-County (Warren, Washington, Saratoga) Greens point out that 'AMD has had several superfund sites.' Such as in Santa Clara County in California. The different sites, in fact.

The corporation's filing with the Securities and Exchange Commission has a long section on its legal proceedings. It has a good summary of how it screwed up Santa Clara County's environment and the incredibly intrusive steps it had to take as a result.

New York state is not the only government AMD is leeching off. It recently sucked 262 million Euros (US$359 million) from the teat of the German taxpayer.

The same economic development myth was used.

'I am pleased to approve aid for an important investment project in a high-tech sector which will contribute to regional development and job creation in a disadvantaged region of Germany,' competition commissioner Neelie Kroes said in a statement.

But as North Country Public Radio has reported in the last few days, the job creation myth is often just that.

Some years ago, New York state created the Empire Zone program, which is designed to give tax breaks to companies who create jobs in disadvantaged areas. Or rather, promise to create jobs. There's been little accountability until very recently, when a newspaper investigation has shamed officials into action.

The program's cost has exploded from $30 million to around $550 million in only seven years. But of thousands of programs who signed up for the job creating Empire Zone, as many as 3000 may have failed to meet their goals for... creating jobs, according to Gov. Eliot Spitzer's office.

The Syracuse Post-Standard has done a long series of good articles detailing abuse and inefficiency in Empire Zone tax giveaways.

Maybe if the state closed all these corporate loopholes and stopped all the giveaways, it would have enough money to lower tax rates for EVERYONE. Isn't this a far more sensible economic development program than throwing money with no strings attached toward big companies that don't need it?

$550 million was judged by the legislature as sufficient economic development seed money for the state (and bloated and corrupt at that amount). How could taxpayers possibly benefit from a giveaway to a single environmentally dubious corporation in a single town that's more than twice as generous as a program for the entire rest of the state combined?


Note: The Tri-County Greens are organizing a protest against an AMD summit hosted by local Rep. Kirsten Gillibrand. Opponents of this environmentally destructive corporate welfare scheme will be congregating outside the Gideon Putnam hotel in Saratoga Springs at noon on August 14. Contact me at popeyeckn @ yahoo.com if you need more info and I'll either answer you or pass it along to the organizers.

2 comments:

Mark said...

I think it all depends on the scale. Tax breaks of that size and proportion are obscene. $1m per job nearly makes the midwestern agrobusinessmen look respectable!

Ceenoevil said...

We Saratogians simply must show the government of Abu Dhabi ($622 m in AMD stock, 8.1 percent of AMD, at 12.70 a share 11/16/07 that we are sincere in our efforts to protect their investment and to encourage them to make more investments in U.S. corporate welfare companies (whose leaders earn a spot on CNBC's Cramer's "Wall of Shame.") Obviously we can't do it on our own. But what about closed or closing chip-fab plants (in Colorado, for example?) Can't they simply move into one of those? BTW -- Don't blame me for Spitzer -- I voted for the Green Party guy.