Open Government Austin

Tax abatements weren't difference maker in Samsung move

Do tax incentives really make the difference when attracting corporate jobs? Not in the Samsung deal. New York offered double the incentives Austin did, but they're still moving here. Reported the Statesman:

State and local governments ponied up an estimated $233.4 million in tax abatements and other incentives for the project. The State of New York, which is trying to build up its chip industry, offered more than $500 million in incentives.

Samsung chose Austin because of its existing investment here and because Austin has a large high-tech work force and a network of support companies that New York's proposed site, north of Albany, lacked.

Central Texas has about 15,000 chip industry workers and is home to the main manufacturing center of Applied Materials Inc., the world's leading maker of chip manufacturing equipment. Dell Inc. also is a key Samsung customer.

"If it was just based on actual dollars, we would probably be in New York, no question about it," Cryer said.

Lots of people disagree about whether tax abatements are necessary to recruit and retain businesses. According to this academic literature review (pdf, p. 10), "Many economists have been prompted to question why municipalities continue to offer abatements indiscriminately when they have been shown to be largely ineffective and resource-wasting."

By their own admission, Samsung's decision to build a factory here was primarily based on workforce and client factors, not tax abatements that amount to a pittance spread out over two decades compared to a $4 billion investment.For the most part, though, we cannot actively debate the value of these deals in Austin because they are secret until just before a public vote.

Austinites who'd like to participate more fully in discussions about tax abatements should support Prop 1 on the May 13 ballot. If Samsung would have moved here anyway (the New York option lacked the necessary labor pool and supplier network), why should homeowners and local businesses pay a disproportionate share of the increasing tax burden for our city's growth?

Whatever you think about the deal, Austin at least deserved to have that public discussion before city negotiators foisted Samsung's long-term tax burden onto average citizens.

posted by Gritsforbreakfast @ Sunday, April 16, 2006