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Will Corporate Tax Breaks Be Enough To Keep Companies in Certain States?
Author: Scarinci Hollenbeck, LLC
Date: November 29, 2013
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States have long provided corporate tax breaks and deductions to profitable companies that agree to maintain operations within their territories. While these tax breaks can total into the millions of dollars, they may not always be a reliable way to convince some companies to stay put, a new analysis suggests.
Washington state recently made history when it signed a tax law offering Boeing an unprecedented $8.7 billion in tax breaks through 2040 in an attempt to convince it to locate production of a new jetliner fleet within the state. Analysts agree that this may be the largest corporate tax offering ever. The breaks would relate to the company’s business and occupation tax – the major business tax levied in Washington – as well as many property tax exemptions. However, it is unclear whether Boeing will agree to locate its operations to the state.
According to a recent analysis in The New York Times, corporate tax breaks for occupying a certain state are not uncommon, and states, counties, and cities routinely extend roughly $80 billion a year in tax benefits to businesses each year. However, these tax benefits are not always enough to keep companies in their cross hairs, and even in cases where these benefits are accepted, reputational damage can sometimes ensue.
For instance, San Francisco – which recently provided tax benefits valued at $56 million to Twitter and other tech companies – is currently managing a string of protests from residents who feel the tax breaks are excessive and unnecessary. The protests follow a report that the city stands to lose roughly $22 million on the tax deal. However, companies and advocates of the tax breaks contend that the money and the jobs they generate – both of which contribute to the state and national economy – outweigh any subsidies they receive.
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