Twitter, tax breaks and the New York Times

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Just about everyone who watches news media is calling it the Story of the Week, and it's probably going to be one of the top stories of the year, my (informal) nominee for a Pulitzer: Louise Story at the New York Times exposes how corporate America shakes down state and local governments -- who often get little in return. The biggest perp over the years has been the automotive industry, which Story says first perfected this kind of blackmail (though Southern Pacific Railroad did pretty well in its day). But now just about every big company tries to demand a tax break or threatens to leave town.

In in the end, there's no evidence that tax breaks, or the lack of tax breaks, is the most important factor in corporate relocations. There's even less evidence that all these billions of dollars in public money actually help create jobs, pay for themselves, or are the best way to invest in economic development:

One corporate executive, Donald J. Hall Jr. of Hallmark, thinks business subsidies are hurting his hometown, Kansas City, Mo., by diverting money from public education. “It’s really not creating new jobs,” Mr. Hall said. “It’s motivated by politicians who want to claim they have brought new jobs into their state.”

It's hard to imagine any sane person reading all the way through the story and now wanting to feel like this poor guy:

“I just shake my head every time it happens, it just gives me a sick feeling in the pit of my stomach,” said Sean O’Byrne, the vice president of the Downtown Council of Kansas City. “It sounds like I’m talking myself out of a job, but there ought to be a law against what I’m doing.”

Story even weighs in on San Francisco's deal with Twitter, which, she notes, was hardly a struggling startup at the time:

Twitter was not short on money — it soon received a $300 million investment from a Saudi prince and $800 million from a private consortium. The two received Twitter equity, but San Francisco got a different sort of deal. The city exempted Twitter from what could total $22 million in payroll taxes, and the company agreed to stay put. The city estimates that Twitter’s work force could grow to 2,600 employees, although the company made no such promise. ... Like many places, San Francisco has been cutting its budget. Public parks have lost about $12 million in recent years, though workers at Twitter will not lack for greenery. The company’s plush new office has a rooftop garden with great views and amenities. Enjoying the perks, one employee sent out a tweet: “Tanned on Twitter’s new roof deck this morning as some dude served me smoothie shots. This is real life?”

Randy Shaw, who loves and worships Twitter and the tax break it demanded, takes the Times to task on this section, arguing that Story got the deal wrong. Actually, neither of them has the true story -- what Twitter was most freaked about was the prospect that the city's payroll tax might apply to the huge wealth in stock options it will be dispensing when it goes public. That's about a $40 million tax break.

So what if the city just said that it wasn't going to tax stock options as payroll? Wouldn't that have satisfied Twitter -- without the city giving up payroll taxes on a large swath of mid-Market and surrounding areas? Could we instead have used some of that payroll tax money to protect the vulnerable small businesses that are getting forced out by the Twitter tech boom?

In the end, considering the pluses and minuses (displacement of existing small businesses and their jobs is a minus), will this dead really help create net new jobs for unemployed San Franciscans? (At least automotive manufacturing jobs are unionized and people without advanced degrees can qualify.)

I bet when the numbers are all crunched a decade from now, we'll learn that this local tax break, like the others Story discusses, did nothing good for San Francisco.

 

 

Comments

Why is Tim re-fighting it over and over and over? It's like Republicans trying to repeal Obamacare again and again and again and again and again and again - move on already.

Posted by Lucretia Snapples on Dec. 03, 2012 @ 4:29 pm

For him to let go of that would be for him to lose his entire identity.

Posted by Guest on Dec. 03, 2012 @ 4:37 pm

Actually, when I was in college I was briefly in love with a drug dealer. She was pretty small-time (does buying weed by the quarter pound and selling ounces out of a dorm room count?) and it didn't last long, but still. 

I have no problem with hookers. None at all. Sex workers also create prosperity, just in a different way. A lot of them support families, send kids to college. What's your issue? 

I don't know where you get my hating wealth. Wealth is fine; I just think rich people should pay higher taxes than they do. I think society is better when there's more economic equality.

Anyway, the people getting displaced by the Twitter tech boom are not drug dealers, who are still very much in business in the Tenderloin. The ones we're losing are small businesses and nonprofits that can't pay tech-company rent.

I just want people to be aware that there are costs to this sort of thing.

 

Posted by tim on Dec. 03, 2012 @ 5:26 pm

One reason I keep coming back to the BG (sometimes in spite of your endorsements) is due to Tim's sensible commentary. He is often wise, very good-natured and rarely gets upset (even when the trolls are constantly baiting him). It's just strange how someone so sensible and good-humored can attract so much vitriol from people. I think that's because Tim is pretty damn brilliant, and the trolls can't stand it.

Posted by alp (longtime BG reader) on Dec. 03, 2012 @ 5:57 pm

expressed a political viewpoint and the voters agreed with him? Because, from where i am standing, that has just about never happened.

Oh, and it's not being a "troll" to take a different viewpoint. That is intolerance and bigotry talking.

Posted by Guest on Dec. 03, 2012 @ 6:15 pm

surprised you'd allow yourself to be quoted that way. They merely transfer wealth from one pocket to another.

Posted by Guest on Dec. 03, 2012 @ 5:59 pm

trainers, business consultants, laborers, lawyers... in fact, nobody. What kind of cockamamie intellect do you own, or are you simply trying to be obnoxious?

Posted by lillipublicans on Dec. 04, 2012 @ 7:47 am

It takes tax dollars to arrest and prosecute them.

Posted by Guest on Dec. 04, 2012 @ 9:14 am

have been displaced by Twitter or other similar tech companies?

Posted by D. Native on Dec. 04, 2012 @ 8:43 am

"The ones we're losing are small businesses and nonprofits that can't pay tech-company rent."

There's plenty of vacant storefronts in my neighborhood, the Richmond. Perhaps these small businesses and nonprofits should set up shop there?

Posted by Guest on Dec. 13, 2012 @ 11:13 am

like sweatshops and arts factories should never be downtown in the first place. So this process is actually a good thing, even apart from dealing with the chronic drugs/whoring/crime/homeless problems there.

Posted by Guest on Dec. 13, 2012 @ 11:52 am

Tim says:

"I don't know where you get my hating wealth. Wealth is fine; I just think rich people should pay higher taxes than they do.:

That is SUCH BS!

Is the problem with 8 Washington the fact that the people who live there won't pay enough taxes? Because that's not what endless Tim Redmond articles said. They said the problem was things like boring people flying their private jets back and forth from New York because of 8 Washington.

I love that line---'I just wat people to be aware that there care costs to this sort of thing'.

We know that, we're not stupid. Just because Tim is physically incapable of seeing that there are also benefits from wealth creation doesn't mean that everyone else is similarly handicapped.

Posted by Troll on Dec. 03, 2012 @ 5:53 pm

change the demographic of SF away from what he thinks it should be. Obviously he is fighting a losing battle since SF consistently attracts high-value knowledge workers and drives out bad artists, the poor and hopeless, penniless activists. But that doesn't stop him trying.

I cannot recall who that king of england was that tried to turn back the tide, but Tim is right up there with him. Hopeless, clueless and doomed.

Posted by Guest on Dec. 03, 2012 @ 6:18 pm

Under Prop 13, residential does not cover its cost of city services, not at occupancy time and not over time. New market rate housing is a drain on the general fund more than a contributor.

Posted by marcos on Dec. 03, 2012 @ 6:41 pm

You own one in San Francisco and surely you don't insist the city revalue it for tax purposes every year outside Prop 13's boundaries? Perhaps then its time to tell the city to do a revaluation and for you to pay more.

"City services" costs are artificially inflated by huge salaries and benefits paid to employes, especially pensions. Feeding the beast through greater tax revenues only encourages the beast to grow fatter.

Posted by Lucretia Snapples on Dec. 03, 2012 @ 6:51 pm

wishes to, but of course he hypocritically does not.

Posted by Guest on Dec. 03, 2012 @ 7:37 pm

Our home was built 70 years before Prop 13 passed. The Sacramento Democrats are fixing to rejigger Prop 13, not to worry.

Posted by marcos on Dec. 03, 2012 @ 8:15 pm
So?

That has nothing to do with your ability to pay more.

Sacramento Democrats are playing with fire with their attempts to repeal Prop 13. Tim and his pals can sit around and rhapsodize about the days before Prop 13 in the late 1970s when property tax increases sometimes reached 40% per year - forcing people to sell their homes to pay the government, but polls show Californians do not want Prop 13 repealed. Yes we voted for a 1/4 of a cent sales tax increase - but the idea that anyone wants to go back to the time when property taxes were out of control is laughable and if Dems persist they'll not only lose their super-majority they'll lose control of the legislature and governorship. Why do you think Jerry Brown isn't joining in this inanity?

Posted by Lucretia Snapples on Dec. 03, 2012 @ 8:38 pm

The Dem's might put some mild reforms together but we still get to vote them up or down. And 2/3 of voters are homeowners, remember.

Posted by Guest on Dec. 04, 2012 @ 4:05 am

outweighs the supposed limits on the ad valoren rate prop tax rates.

Moreover, CA has the highest rates of state income and sales tax in the nation. So if you wish to rollback Prop13, will you be equally willing to rollback income and sales tax rates to the national average?

No, didn't think so, hypocrite.

Posted by Guest on Dec. 03, 2012 @ 6:53 pm
Posted by lillipublicans on Dec. 03, 2012 @ 10:19 pm

named lillipublicans. Move on folks - it's just the usual leftist claptrap.

Posted by Lucretia Snapples on Dec. 03, 2012 @ 11:00 pm

While sales tax in some CA cities will break the 10% level - a few other cities have a 10% sales tax but not many.

Throw in lots of user "fees" in CA, and property taxes that apply to some very fancy valuations, and it is clear that CA is a tax nightmare state already.

Posted by Guest on Dec. 04, 2012 @ 9:16 am

and the fact that you would try to fob off as truth your suggestion that for most Californian's income tax will "rise up to 13%" -- not even true in the most extreme case -- is perfectly in synch with the rest of your anonymously dispensed rhetoric.

Look, Guest, if people who go to this site were interested in the lies you parrot about your tax-victimhood, they'd be perfectly able to find those websites on their own. You keep on repeating the same nonsense because at your core you are a profoundly anti-social critter.

http://www.taxadmin.org/fta/rate/ind_inc.pdf

Posted by lillipublicans on Dec. 05, 2012 @ 1:31 pm

I said that some will - it's the new proposed max rate. And that's on top of about a 40% federal rate if Obama doesn't see sense.

On what planet is a rate of over 50% in any way "low" (and that was the claim I was countering).

Posted by Anonymous on Dec. 05, 2012 @ 1:44 pm

Taxing corporate property at market rate would solve the Prop 13 problem. Otherwise, I'm not going to spend my time arguing FoxNews libertarian tripe.

Posted by marcos on Dec. 03, 2012 @ 7:07 pm

They merely pass on taxes to people. Only people ultimately pay taxes.

Posted by Guest on Dec. 03, 2012 @ 7:36 pm

The full cost of corporate conduct should be recovered by taxation and individuals could choose how to spend their money based on a full cost price.

It should make no difference one way or another to the corporation if they're just going to pass it onto the customer, right?

Posted by marcos on Dec. 03, 2012 @ 8:27 pm

See? Everybody -- whether individual trademsan, hourly employee, corporate "person" -- we're all exactly the same. Tax us, and we start looking around for someone to pass that cost on to. Trademen and self-employed consultants raise their fees, employees demand a raise, corporations simply up the price of their goods.

Where did this idea of taxes get started anyhow?

Posted by lillipublicans on Dec. 03, 2012 @ 9:52 pm

genuinely believe that you're not paying enough property tax.

There's a place on your CA-540 tax return to make a donation. Go ahead - you know it will make you feel good.

Or is it only other people who you think should pay more?

Posted by Guest on Dec. 04, 2012 @ 4:08 am

Prop 13 protections for businesses are unneeded and should be eliminated so that business can pay its fair share.

Posted by marcos on Dec. 04, 2012 @ 8:06 am

relocate. As was said already, corporations just pass on taxes - it's people who will pay those extra taxes, one way or another.

Posted by Guest on Dec. 04, 2012 @ 9:18 am

they don't want to have the price of their products go up, and this would be inflationary.

Also bear in mind that corporations can leave CA, just like Twitter was going to leave SF.

Posted by Guest on Dec. 04, 2012 @ 4:06 am

There is surplus desire for people to live in and businesses to locate in San Francisco. If any firm is so flimsy that marginal tax rates are going to push them out of town, then that's not a problem for the public sector to consider, that's poor management.

High rents and housing prices also cause people to leave San Francisco and locate elsewhere, yet the libertarians celebrate this as the magic of the marketplace. Taxes are yet another externality operative in the magic market.

Posted by marcos on Dec. 04, 2012 @ 8:10 am
Posted by Guest on Dec. 04, 2012 @ 9:19 am

As much as the first commenter attempts to sound as if they know what they might be talking about, successful business has never afforded progressive or anti-establishment thought here or anywhere else. Ideas that challenge the status quo come about because they are responding to a status quo that is corrupt or stagnant. The economy of San Francisco has a long history of boom and bust and sadly a tradition of those in power victimizing those of lesser means, ask the Ohlone. The Big Four only became big because of graft and corruption and their ability to monopolize the movement of goods in and out of the city and later the state.

San Francisco has a long and proud history of left wing politics. The existence of Twitter or other blood sucking leeches does not somehow subsidize such political ideology. The 1934 General Strike was one of the most successful worker strikes in US history. The entire city was shut down. Communists, socialist and anarchists were front and center of this movement which had to be quelled with military troops.

That revolutionary spirit never went away either, the forties and fifties saw the beginnings of the gay movement and of course the beatnik culture. In the 60's of course, we had the hippies who stopped a war and changed society. Black liberation and the women's movement all gelled about the same time.

In the late 70's and 80's the punk movement was a driving force in this city. I remember the Democratic Convention of 84 and the punk rock riots and protests of Rock Against Reagan in Dolores Park and the empty lot across from the Moscone Center. Why was the lot empty? Because of greedy developers and their willingness and ability to use their connections at city hall to toss pensioners onto the street and tear down the building they lived in.

The first commenter said that the author of this article has weird values. Weird perhaps to the detached idle rich, those that they control, or the uninformed mall people of suburbia. But I found his views and perhaps his values to pretty mild and middle of the road. I am from San Francisco, a city, long on the cutting edge, slowly being drowned in a pool of mediocrity by idiots with only short term goals to enrich themselves. Those of you who moved here because of what this city was, you have swamped the boat and it is about to sink. You escaped bland, narrow-minded places and came here, to our city and with your vapid smugness you will not stop until you've taken away all that makes this place special, including it seems, ideas that are weird to you.

Posted by Guest on Dec. 07, 2012 @ 6:49 pm