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An Apple server farm could soon be coming to recession-stricken North Carolina. In return, North Carolina hopes to hand Apple tax breaks which could total $300M USD over the next 30 years.  (Source: Wahaha wu)
NC officials hope to lure Apple server farm to the state

As one of the most financially successful companies in this recession economy, Apple makes a popular target for taxation.  However, recession stricken North Carolina plans to go the opposite route, hoping to lure a huge Apple server farm into the state in exchange for a massive tax break that could total as much as $300M USD over its lifetime.

Both Apple and state officials declined comment, but a state lawmaker speaking on conditions of anonymity revealed that the state is in talks with Apple over a facility to be built in either Catawba or Cleveland County, an investment that could total as much as $1B USD by the time construction completes. 

In lieu of the proposed deal, NC's House Finance Committee approved changes to the way in which corporate income taxes are calculated.  The state plans to give breaks to companies who only make a small share of their total nationwide sales in the state, but have a large portion of their payroll and property in the state.  The proposed cuts do come with some strict conditions; the companies must be located in one of North Carolina's poorest counties, provide health insurance, meet a wage standard, and forego other state grants or tax breaks.

Rep. Paul Luebke, D-Durham praised the measure, stating, "The bill ensures it's going to go to an area of high unemployment. This reflects concerns many of us have had about economic development policy, that priority should be given to the neediest counties."

A memo by legislative fiscal staffers reveals that the initial tax breaks could total $46M USD for a company investing $1B USD.  The memo declines to mention the specific company that the state is reportedly in talks with.  The memo does say that only one company has the potential to qualify for the breaks.

If the bill is approved, Apple may join a growing tech corridor stretching from Raleigh to Greensboro.  In 2007 Google Inc. began building a $600M USD server farm outside Lenoir in the western North Carolina foothills.  The center opened this year.

Google will receive $260M USD in tax breaks over the next 30 years, in one of the state's largest deals yet.  Apple's deal could be even fatter, though.  The memo indicated that the company being considered could save $300M USD in tax cuts over the next 30 years.  The estimated breaks would comprise of $3 million from 2011 to 2018, and then $12.5 million each year after that.

The Apple site initially hopes to employ only 100 workers, but state officials believe it could grow into many more jobs.  The state, which has a 10.8 percent unemployment rate, is desperate for jobs.  Four non-urban counties in North Carolina have unemployment rates greater than 16 percent.

The bill has passed the Senate and awaits a full House vote on Tuesday.  Rep. Jennifer Weiss, D-Wake, said of the bill, "Given our economic situation in this state, with the rising unemployment, this really is critical."

The new Apple server farm would likely be used to serve among other things Apple's App Store and Mac-tied email accounts.  Ironically North Carolina moved earlier this year to tax digital downloads, a business Apple, with its iTunes and App Store, is deeply vested in.



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Feds should step in
By bjacobson on 5/25/2009 10:13:15 AM , Rating: -1
It's not fair that a state be able to seduce a company into their state. The Federal government should tax anyone that does this.




RE: Feds should step in
By AlexWade on 5/25/2009 10:41:16 AM , Rating: 5
North Carolina is where I live. And North Carolina is a big business whore. The tax break they offered Dell was tens of millions higher than the next closest competitor. It was going to takes decades for the state to recoup those tax breaks. That is not an isolated example.

North Carolina is a big business whore. Meanwhile, the state is moaning and groaning about not having enough money. So they raise taxes on small businesses and people. It is no surprise the feds are investigating the previous governor for corruption. He will spend some time in a federal jail before too much longer.


RE: Feds should step in
By nordicpc on 5/25/2009 10:58:44 AM , Rating: 2
I also live here, and am frustrated by these huge tax breaks. Server farms, aka data centers, don't really bring jobs to us, they are just a big investment that someone from out-of-town will probably be building anyway. I'm glad that we're trying to move away from tobacco as our main staple, but these huge deals are sucking the life out of our government.


By KristopherKubicki (blog) on 5/25/2009 11:28:15 AM , Rating: 3
The whole point of server farms is to operate with a little manpower as possible.

The reason the big server farms (we call them network centers everywhere else in the world) live in the Midwest is because the power and bandwidth are cheaper.

This bill has better legs if the policy was to subsidize bandwidth instead -- oh wait we have a national program for that coming up.


RE: Feds should step in
By zinfamous on 5/25/2009 4:03:39 PM , Rating: 3
agree with both of you.

I was born and raised in NC. The last year I was a resident was 2003, when the state was undergoing a budget crisis (working for NCSU, this naturally affected any type of state employee)

Now I live in CA. funny how on opposite coasts the same sort of constant mismanagement leads to such repetitive crises.

On another note, I suspect it will be difficult for Apple to attract the type of snobby employee that they cater to counties like Catawba or Cleveland (hell, I've never heard of Cleveland county--wtf is that?)

Further, it is indeed a good thing that NC is doing what it can to phase out tobacco is the primary, uh...legal cash crop, Simply b/c of the overwhelming stigma now facing the crop it will be difficult to sustain as a viable economic crutch by the end of the decade.

Now if only they can come around to legalizing what is BY FAR NCs real #1 cash crop, I think these budget issues would be a thing of the past. Next to that, I'd like them to throw some legitimacy to the history and unmatched quality of the fine, fine Moonshine that comes out of NC. Tons of revenue opportunities within the state (as well as others of the Appalaichan region) that are stupidly hindered by archaic blue laws and uninformed puritanical "moral" legislation.


RE: Feds should step in
By Mitch101 on 5/25/2009 9:52:19 PM , Rating: 2
I live in NC now. Moved from NJ a few years back.

I had to look up Cleveland also and that just doesn't make any sense. Actually I think that's where VCR tapes go because VHS just beat out Betamax there.

Catawba is a strong possibility because there is going to be a lot of growth that way as they complete Rt16 which should explode the growth in that area. Very nice 4 lane highway being put in that runs into Charlotte and through Catawba up near Hickory.


RE: Feds should step in
By danzig on 5/26/2009 1:50:11 PM , Rating: 2
Cleveland County is in the Charlotte metro area. Shelby is the main town there.


RE: Feds should step in
By mikeyD95125 on 5/27/2009 1:26:35 AM , Rating: 2
As you should know we deal with the crap that goes along with marijuana being illegal. Two different products, same story. Hundreds of millions spent on enforcement and imprisonment that could be made in taxation and reduced prison costs.


RE: Feds should step in
By aftlizard on 5/25/2009 11:54:55 AM , Rating: 4
And if they didn't offer them those breaks those businesses would go elsewhere and the state would lose sales, property and income taxes to another state that would be willing to deal with them.

What you and most leftists are missing in this gripe is that even if with the tax breaks the state and localities will still come out ahead with tax revenue that they wouldn't have if they let some other state outbid them.

So in essence what I am hearing from you is that you would rather not have any tax revenue at all if that means giving out a tax break.


RE: Feds should step in
By AlexWade on 5/25/2009 2:51:39 PM , Rating: 1
What you forget is that once the contract is up, these big businesses will relocate to another sucker state willing to give them a tax break. In North Carolina, the tax break Dell received would take decades (decades plural) to recoup from the employees and remaining tax on the company. By the time the money is recouped, Dell will negotiate with another state or threaten to leave unless given more tax breaks.

In short, no matter what, the state will not come out ahead. The state is still in the negative in tax revenue from the Dell plant.


RE: Feds should step in
By aftlizard on 5/25/2009 5:25:27 PM , Rating: 3
Okay so let me get this straight:

If I offer a company a 300 million dollar tax break over thirty years which essentially reduces the potential tax income from , let's say, 400 million to 100 million that I as a state am worse off than if I didn't offer a tax break at all and that business goes elsewhere and I lose all of that money entirely.

Yeah that does not make sense.

Let's not forget the other secondary taxes that are not reduced. That are likely not even calculated in your Dell scenario.

I lived in a city where two major plants received ten tax abatements and every ten years they came back for more, and then again. Of course there were the steaming mad locals etc. who occasionally opened up and argued that it was ridiculous to give them tax abatements etc. However a ten year study released showed that property taxes decreased over that time while property tax receipts increased, payroll and state income tax receipts from that area increased and local sales tax receipts increased. All of those added up more than paid for the tax abatements. However quite possibly none of those secondary tax receipt increases would have happened if those abatements weren't allowed. In fact if the population stagnated or even decreased over that time period local taxes would potentially have had to increase because of local services and infrastructure maintenance.


RE: Feds should step in
By Alexstarfire on 5/25/2009 6:30:53 PM , Rating: 2
It's hard to say much without knowing actual numbers.


RE: Feds should step in
By just4U on 5/25/2009 7:18:48 PM , Rating: 2
If all states had a standardized tax system then they wouldn't lose money at all.. (provided the companies didn't re-locate out of the country)

The way I see these deals is the company wins, that particular state wins but the country as a whole loses as it's not bringing in what it should be in the larger scheme of things.


RE: Feds should step in
By Hoser McMoose on 5/25/2009 3:28:58 PM , Rating: 3
quote:
What you and most leftists are missing in this gripe is that even if with the tax breaks the state and localities will still come out ahead with tax revenue that they wouldn't have if they let some other state outbid them.

It is rather delicious irony that you complain about "leftists" while supporting the notion that State governments should play an active role in determining private sector business.

The answer here is NOT to "fight" for specific companies to setup shop, but rather for government to butt out altogether and not waste taxpayer money on targeted handouts. The money for these handouts can't just be willed into existence (as much as politicians might act like that is the case), it comes from taxpayers. Every time one company gets a "tax break" it means that everyone else is paying more!

If governments didn't spend so much money trying to encourage specific jobs they could lower their overall tax rate and let the free markets decide things. Sure you'd lose out on the media-friendly businesses that are good for buying votes, but overall employment would be UP.


RE: Feds should step in
By FITCamaro on 5/26/2009 9:32:09 AM , Rating: 4
The state government's aren't playing an active role in the private sector any more than a car company is influencing your decision of which car to buy by offering you incentives.

Large businesses will operate in whatever state it makes sense to. If they can operate in one state cheaper, they'll move there. Certain states already have lower tax rates and yet they still offer tax credits.

The federal government has no right to intercede in what happens within state borders. States have their own constitutions and state legislatures. If they allow it, the federal government has no authority whatsoever to override it barring it does not violate federal law.

I don't know your thoughts on government subsidies for solar and wind power but I'm gonna guess you don't oppose them.

And tax breaks for corporations moving into a state does not directly translate into everyone else paying more taxes. Businesses moving into a state brings more tax revenue, not less. You're implying that the tax credit somehow decreases revenues that others then have to make up for.


RE: Feds should step in
By mendocinosummit on 5/25/2009 11:45:40 AM , Rating: 5
So, you want the Federal Government to punish a State that entices business to their State? What about a State that entices citizens to their State with no sales tax or no income tax?

Do you want the almighty Federal Government to punish those States so all States are the same and people can't vote with their feet? It doesn't really matter, because I think with the way things are going this will come to fruition sooner than you think, I hope you like one nation totally f'ed.

Enticing business and people to States through governance diversity is what made America great under the free market.


RE: Feds should step in
By BansheeX on 5/25/2009 1:44:05 PM , Rating: 3
Damn straight. States compete for tax revenue, as it should be. You don't get revenue from an absurdly high income tax if no one sticks around to pay it.

However, I am totally against company-specific subsidies, or socially engineering the tax code. One legal behavior should not be taxed at a different percent than another legal behavior. It makes no freaking sense. NC could generate just as much revenue from luring all kinds of businesses than just making some kind of special exception for Apple. This is why you want a flat tax, it's entirely possible that there is something going on under the table and we just don't know it. We DO NOT want that to be a contributor to success. You eliminate that suspicion with a flat tax.


RE: Feds should step in
By Targon on 5/26/2009 8:06:12 AM , Rating: 2
The easy solution is that people pay taxes to the town, the town then pays to the county, the county then pays to the state, and the state then pays the federal government. In this way, local services get paid first, and the need for federal funds to pay for this program and that program goes down.

People would be happier knowing that the vast majority of their tax money goes to pay for local services first, with only ten percent of what they are paying going to the county, ten percent of the county revenue going to the state, and ten percent of the state revenue going to the federal government. Since the federal government really should only be dealing with the military, programs like NASA, and R&D of various things, the number of federal programs could be reduced to the point where it would not need the money it is currently getting.

The problem with the current system is that because all of our tax money goes to the federal and state governments, local programs need to rely on state and federal programs to be properly funded. There is also the problem that government employees get paid higher for the same work in many places as people in the private sector, plus they get more paid vacation days than those in the private sector.


RE: Feds should step in
By FITCamaro on 5/26/2009 9:36:35 AM , Rating: 2
Actually many civil service jobs pay less than in the private sector.


RE: Feds should step in
By Suntan on 5/26/2009 3:48:41 PM , Rating: 1
Sorry, no. Disagree completely.

The only thing that makes the federal government look like a well oiled and highly efficient machine is looking at a State government in process. The only thing that makes a State government look the same is watching a local/community government in action…

No way would I allow my local government to have first dibs on *all* my tax dollars. My city does *not* need yet another pointless round-about put in. (Show of hands as to how many other people have to deal with what used to be parallel streets inexplicably pulled together and thrown through a roundabout only to have stop signs then posted on every outlet?)

My local government wastes enough money as it is. I’d rather my Federal government get a chance to waste its fair share of it…

-Suntan


RE: Feds should step in
By aftlizard on 5/25/2009 11:50:46 AM , Rating: 2
It is absolutely fair, it's called being competitive. It also won't stop at the state level. When they start looking at city or counties those cities and counties will likely offer property tax abatement's to lure them there.


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