Well it may seem fine, however considering that taxes are funding the city's purchases, then it is a bit unfair to the other bidders who are therefore at a disadvantage.
I think that would be true if all potential locations had the tax. As they are just parking their money, the exact city they buy into doesn't matter too much to them outside of the economics.
This can be very misleading. Say a city gives Amazon a big tax break to encourage it to move there. So instead of paying $5 million in taxes it pays $2 million.
The city didn’t lose $3 million, it gained $2 million + ripple effects of economic growth - increased costs to administer the city resulting from that growth . So it’s almost certainly better off.
> taxes go to the local government, but the non-resident buyer does not really consume government services, so that benefits the rest of the local population
The non-resident might not spend any money on goods or services in the municipality resulting in less tax revenue for the city/state. Especially bad if they don't even rent it out to anyone.
The tax gains would always outnumber the tax cost for any business, which is why the city government is favoring corporate over small business, that employ way more people for a lot less monopoly rents.
Or, you'll lose out on all the businesses that won't start or expand there because the baseline level of taxation is too unfavorable for the economy (in either sense of the word) that the city offers.
It's almost like taxing easily-moveable economic activity is a bad idea.
Pretty much must be, because the city is spending the money on something. If the city isn't using the money on something essential, they could reduce taxes.
Might be a struggle to get tax reductions past the voting public. But I think a bit of political elbow grease could get it done.
Won't this degenerate to a pure bidding war, with people sending their money to the town that gives them the largest fraction of cash equivalent returns, transforming into only a tax reduction ? like, cities will bid to something like ninety-something% cash equivalent, to the very limit of their margin because it's winner takes all.
That depends on what the alternative is. If it’s that all the current businesses say “Whelp; we can’t do anything. Let’s just stay here…” and all the same other businesses say “Considering everything, San Francisco is the best place to open up; let’s do it!”, then yes this plan would yield lower city tax revenues.
If another scenario is true that some businesses would be retained and others attracted who would otherwise end up somewhere else, city revenues could even be increased over time by this plan as compared to the baseline.
I'd see it as cities charging more taxes than they are actually willing to collect. I.e. the city is happy collecting less % of taxes already, just that most dont have bargaining power.
This is really tragic and foolish. The taxes generated will far far outweigh the tax incentives offered. The local city politicians reversed their positions because they didn't get to bring up their pet projects in the negotiation phase. There is absolutely no reason why the city couldn't use new revenue to protect low income residents from dislocation. It's not a corporate scam -- this is real economic progress for a city with a 43% poverty rate.
No, because then it's a race to the bottom and all other companies start expecting these same deals (or even better), and eventually you do end up with a situation where the city does not get back more in tax revenue.
It's simple negotiation; you may lose some money on that one deal, but you'll gain more in the end by not decreasing the value of all subsequent deals.
Yep, I was driving at that. Cities have very little leverage in dealing with commercial operators (I suppose the bigger the city is and the smaller the vendor is, the greater the leverage), therefore no city councilman spends their time fretting over potential revenue losses from commercial property taxes.
It's far easier and time-efficient for the city to chase sales tax revenue (by attracting large retailers), residential property tax revenues (by building denser housing) and revenue from various licensing and permitting activites.
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