It’s Fix the Tax Code Friday! On yesterday, I reported on a potential tax break for companies in San Francisco (clearly directed towards Twitter) meant to encourage companies to invest in a specific part of the city. We have similar breaks in Philadelphia and indeed across the country. But is it a good thing? Is it desirable to provide tax incentives to keep companies in one place or is it, as some allege, simply shifting the tax burden to other taxpayers?
So today’s Fix the Tax Code Friday question is:
That’s a tough one. I see why gov’t do this, but it’s not at all fair to existing business in these area. At the least, there should always be clawback arrangements in place for when the companies renege on the deals, or when the projections don’t prove accurate. Or, for say a situation like Twitter, make any tax savings deferred, with recapture if/when they move from the area, or possibly even if a ‘change in control’ type event, such as IPO happens.
Generally, localities are better off trying to create the best possible living environment, and a consistent, stable business tax environment IMO. But for the real problem areas, like say, Detroit, it’s hard to argue against them throwing anything and everything at potential employers to get them to move in. Any $ of incremental revenue is going to help in that case.
Living in a “rust belt” city, I basically agree with the above. But, we have businesses fleeing every day for “Southern Climes and Starry Days.” Part of that is the Right-to-Work laws which are prevelant in the southern states. Perhaps we need to re-work our laws up here to be competitive.