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Data Storage Government The Almighty Buck

Do Tax Breaks For Data Centers Make Sense? (datacenterfrontier.com) 94

1sockchuck writes: Does it make sense for state to offer tax incentives to lure huge data center projects? After an extended debate, legislators in Michigan have approved tax breaks for a $5 billion data center in Grand Rapids. The project from Switch, which previously built the SuperNAP in Las Vegas, brought the debate into stark relief due to the size of the project — an estimated 2 million square feet of data center space. States competing for projects often find themselves in a bind, since the highly-automated facilities create a limited number of permanent jobs, but many states already offer juicy incentives. Michigan ultimately sought a middle path, tying the tax breaks to job creation goals. If the data center jobs don't materialize, the breaks disappear.
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Do Tax Breaks For Data Centers Make Sense?

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  • by Anonymous Coward on Friday December 18, 2015 @01:37AM (#51141785)

    Yes!

  • No (Score:3, Insightful)

    by Anonymous Coward on Friday December 18, 2015 @01:37AM (#51141787)

    Tax them. Do more with less. Data centers are a drain on natural resources.

    • Yes (Score:5, Insightful)

      by ShanghaiBill ( 739463 ) on Friday December 18, 2015 @01:58AM (#51141823)

      The tax breaks make sense for each individual state. Just like when you are arrested, and offered a plea deal to rat on your partners, it makes sense to do so: This is the Prisoner's Dilemma [wikipedia.org]. It would be best if the states would all agree to mutually stop the tax breaks, but in the absence of such an agreement, it makes sense for an individual state to defect, and offer a break.

      It is unfortunate that the courts don't ban these special tax breaks under the constitution's equal protection clause. No company should get a "special deal" that is not available to any other company. They should all be treated equally.

      • Re:Yes (Score:4, Interesting)

        by mwvdlee ( 775178 ) on Friday December 18, 2015 @03:19AM (#51141973) Homepage

        This.

        Datacenters are profitable companies and are not a necessity of life for the citizens.
        I see no reason why they would deserve a tax break.
        The only reason they do is because they push states (or other local governments) into bidding wars.

        If you could decide country-wide on which types of companies would get what type of tax incentive under what conditions, you'd save a lot of tax money.

        • Re:Yes (Score:4, Insightful)

          by dbIII ( 701233 ) on Friday December 18, 2015 @04:09AM (#51142045)

          The only reason they do is because they push states (or other local governments) into bidding wars

          Right down to the lowest bidder that either has an unrealisticly optimistic idea of the "trickle down" benefits or is getting a personal kickback.
          Funny how Vegas was on the list before - souls of honesty in politics down that way I've heard :)

          • by bluefoxlucid ( 723572 ) on Friday December 18, 2015 @12:34PM (#51143953) Journal
            Producing things in-state does produce jobs, trickle-down economics or not.
            • by Anonymous Coward on Friday December 18, 2015 @09:38PM (#51147895)

              Hence the bit that says "unrealisticly optimistic" above - the benefit should be more than the cost but often in these situations it is not. See foreign governments putting up money for Hollywood moves to be shot there for an extreme example - sometimes around 1 million per years worth of employment per person. It doesn't work to attract investment because the next lot want the same deal.

          • by Anonymous Coward on Friday December 18, 2015 @01:11PM (#51144241)

            The only reason they do is because they push states (or other local governments) into bidding wars

            Right down to the lowest bidder that either has an unrealisticly optimistic idea of the "trickle down" benefits or is getting a personal kickback.
            Funny how Vegas was on the list before - souls of honesty in politics down that way I've heard :)

            How about instead of "trickle down" benefits, we just automatically make everyone rich. Everyone gets to be king! Everyone gets to have big boats, mansions, feasts, and beautiful spouses. People will just be born rich!

            I know. Us millennials have evolved above money and work. It is our time to make our parents work for us! We... are... THE ENTITLED!!!!!

        • Re:Yes (Score:2, Interesting)

          by Anonymous Coward on Friday December 18, 2015 @08:45AM (#51142523)
          My county has an aggressive policy of cutting sweet tax deals to convince companies to locate here, particularly manufacturing. And honestly, it's been pretty successful in that regard. The irony is that they've had to jack up residential property tax rates to make up for it (we pay some of the highest in the state), meaning the smartest thing to do for the people that move to the area is to actually live in the next county or state (I'm right on the border) and accept the short commute to work here.
        • by Anonymous Coward on Friday December 18, 2015 @01:06PM (#51144183)

          This.

          Datacenters are profitable companies and are not a necessity of life for the citizens.
          I see no reason why they would deserve a tax break.

          Unless you work for said company and your wages buys food, shelter and transportation. By golly!

          I don't know what your logic is, but without profitable companies, then there would be no profitable worker bees. Unless you're one of those socialist or communist idiots.

        • by Anonymous Coward on Friday December 18, 2015 @02:15PM (#51144731)

          Datacenters are profitable companies and are not a necessity of life for the citizens.

          Until all you twats start screeching about how the internet is a "fundamental human right" and how municipalities need to provide high speed internet access to all citizens for free. Then datacenters are absolute necessities, and should be funded with tax money, right?!

          If you could decide country-wide on which types of companies would get what type of tax incentive under what conditions, you'd save a lot of tax money.

          If companies could decide country-wide on which products will be offered for which prices, they'd save a lot of marketing money.

          Funny how it seems like when government does it, at the point of a gun, you think it's moral and just, but when private companies do it, and people voluntarily agree to it, it's some kind of monstrous abomination.

          But by all means, let's get government into the business of price-fixing and collusion, too! After all, if we don't like the cost of a product, we can just set the allowed price via legislation, right?!

      • by whoever57 ( 658626 ) on Friday December 18, 2015 @07:48AM (#51142395) Journal

        The tax breaks make sense for each individual state. Just like when you are arrested, and offered a plea deal to rat on your partners, it makes sense to do so: This is the Prisoner's Dilemma [wikipedia.org].

        This is simply not true. Since the datacenters create only a tiny number of permanent jobs, there is no benefit in defecting (in this case, offering a tax break).

        • by Rob Lister ( 4174831 ) on Friday December 18, 2015 @08:59AM (#51142555)

          This is simply not true. Since the datacenters create only a tiny number of permanent jobs, there is no benefit in defecting (in this case, offering a tax break).

          In this case it may well be true. The deal is 400 jobs by 2022 and 1000 jobs by 2027. That's greater than tiny by my reckoning. If they don't follow through, they lose the tax breaks. I'm not sure why a pure data center needs 400 people, much less 1000, but perhaps it is more than just a data center.

          • by budgenator ( 254554 ) on Friday December 18, 2015 @12:09PM (#51143735) Journal

            Well if Slashdot in hires an extra receptionist, and uses a server there it would be 1 out of 1000, it's the data center, colocated businesses and contractors.

            Switch’s 1,000 clients include eBay, Intel, Shutterfly, Machine Zone (Game of War), Amgen, Dreamworks, HP, Intuit, Hitachi, JP Morgan Chase, Sony, Boeing Cisco, EMC, Google, Amazon, Time Warner, Eli Lilly, Activision (Call of Duty) and Fox Broadcasting, among many others.

              1,000 new jobs by 2026 collectively from "the data center industry"

        • by budgenator ( 254554 ) on Friday December 18, 2015 @11:53AM (#51143557) Journal

          I was starting to think that maybe our Nerd Governor [wikipedia.org] did something right, then I realized that "Switch [wikipedia.org] is a privately held company based in Las Vegas, Nevada.", Nevada a state with no income taxes, was getting a Sales and Use tax, tax exemptions. This means Switch a company that pays no income taxes, will be able to sell Disk space and CPU cycles and collect no sales taxes from it's customers, and very probably have some very sweet property tax abatements to boot from the township they're locating in return we get 400 new jobs in Michigan by 2022 and 1,000 new jobs by 2026 collectively from "the data center industry" and those numbers would be reported to the state by local economic development agencies.

          Like always we get screwed.

          • by bluefoxlucid ( 723572 ) on Friday December 18, 2015 @12:36PM (#51143969) Journal
            Ouch! No income tax! Income tax is the best type of tax ever invented--because all taxes are income tax. Sales taxes just take part of your income later. There are some interesting side-effects [wordpress.com] produced when implementing income taxes.
            • by budgenator ( 254554 ) on Friday December 18, 2015 @02:13PM (#51144709) Journal

              Yes no individual or corporate income tax [taxfoundation.org] in Nevada, that's why Microsoft [seattletimes.com] sells through there. You know if you actually crunch the numbers, you find that Corporate Income taxes shield people from individual taxes, we'd be better off not taxing corporations, so individuals would pay more individually and put a 25% tax on dividends to non-US taxpayers.

              • by bluefoxlucid ( 723572 ) on Friday December 18, 2015 @03:19PM (#51145347) Journal

                You know if you actually crunch the numbers, you find that Corporate Income taxes shield people from individual taxes, we'd be better off not taxing corporations, so individuals would pay more individually and put a 25% tax on dividends to non-US taxpayers.

                Taxing individuals more individually is a way to increase the cost of labor, thus raising the cost of products. Raising the cost of products reduces the amount of products that consumers can purchase with their income, thus reducing the amount of products you can profit by producing. Reducing the amount of production reduces the amount of required labor. Reducing the amount of labor means reducing jobs.

                That's a primary feature of my musings on public policy. It's one of the reasons I like progressive tax systems [wordpress.com].

        • by bluefoxlucid ( 723572 ) on Friday December 18, 2015 @12:35PM (#51143959) Journal
          If they don't reduce the datacenter taxes to zero, they're going to have more tax revenue.
      • by Anonymous Coward on Friday December 18, 2015 @09:56AM (#51142751)

        Taxes aren't some duty the state government is required to perform; it's something the state does for selfish reasons (the people want the revenue). Lowering your taxes relative to other states isn't any sort of "defecting" from some stable agreement with other states.

        I get why you compare it to the prisoner's dilemma (either settle for less now, or settle for less-than-that later) but there's not another player that you're somehow fucking over. Defect is the wrong word.

        OTOH, it does reek of defecting from fairness, with respect to the other industries in that state. "Whaddya mean you'll charge me less tax if I sell widgets instead of gadgets? WTF is so great about widgets, or horrible about gadgets, that you discriminate?" Whenever I see these things, it makes me angry that my employer's industry doesn't get an equal tax rate. We need it too.

        Everyone does.

      • by bluefoxlucid ( 723572 ) on Friday December 18, 2015 @12:33PM (#51143943) Journal

        You're right: it's a market thing. The states tax these businesses, just not as much as they otherwise would; that means state revenue. If the state has a new facility producing some good or service, that's more production; that production represents the generation (and export) of local buying power.

        Exporting local buying power is trade. You produce things using less labor than a neighboring economy; you send those products out to them, and they trade something they can produce for less than you. In currency economies, you sell your goods for currency, then spend your currency locally or you spend it to import. Because income requires jobs and local business, the same proportional spending equates to more money spent in each category, including locally: money coming in doesn't automatically mean wealth, because you can't have wealth without production; you need jobs, and more money spent even on retail (e.g. WalMart) mean more local jobs.

        To the government, that means more income to tax without an increase in population. That's a good thing: the single most effective way to increase employment is to reduce the cost of labor. This is so effective that a reduction in taxes on the working class at the current point in time can not only spread and slow the implementation of automation (you want this, but you want it to happen over a long time period so we can find new jobs after the machines displace people), but potentially create *too* *much* employment. If unemployment is 8% and it suddenly drops by 15%, your economy grinds to a halt: too many people working--or rather, everyone working and employers experiencing a labor shortage. To compensate, you'd raise the cost of labor by lowering full-time working hours (32-hour work week). Possibility.

        In the larger economy, something like tax breaks to attract business increases revenue without increasing productivity, and doesn't necessarily create more jobs. It only creates more jobs overall if the labor is the cheapest labor you can get; otherwise you're just leaching income from one location into another.

        It's notable that my economic theory--yes, I developed my own--accounts for production (goods and services produced), productivity (proportional labor involved in production--including waste labor by overproducing goods which never get consumed), and wealth (buying power per capita) differently than other theories. I've intentionally tried to adjust the theory to synthesize other theories from it, but only if I can keep something actually accurate--no compromises, just better-engineered theory. That's why I have things like total buying power being the total production, the buying power of unit currency being (that is: constantly approaching) the total income (for a period, as a running average, etc.) divided by the total production, and inflation representing when the total income increases faster than the total production (i.e. buying power).

        Defining the economics in this way accurately follows the generalized behavior of economies, and also explains the observations made by contemporary economists. The purpose isn't to write up formulas and numbers to try to predict economics, but rather to identify cause-and-effect relationships that says "doing X will lead towards Y". That lets me look at a lot of economic theories where people say, "In general, yes, but..." and say, "That theory is faulty. It tends to work out because X Y Z, and it tends to falter in completely predictable circumstances for exactly the same reasons."

        Adam Smith's division-of-labor theory is a shining example of this; inflation is another, whereby we seem to keep getting a higher standard of living even when wages grow slower than inflation. A higher standard-of-living indicates we're buying more and better things, yet how does that happen when your wages are worth less? Answer: you're trying to compare modern objects which could, at one time, be produced at the expense of *enormous* amounts of labor with their less-advanced eq

      • by Anonymous Coward on Friday December 18, 2015 @05:12PM (#51146253)

        It is unfortunate that the courts don't ban these special tax breaks under the constitution's equal protection clause. No company should get a "special deal" that is not available to any other company. They should all be treated equally.

        This should not be marked +5 Insightful. Taxes breaks or hikes are not specific to a particular company. You can't do that, just like you can't have a law that is specific to a person, and the Courts already set that Precedent long ago. A set of conditions/criteria are defined, and any business which meets the criteria either qualifies for the break, or is subject to the hike.

    • by Anonymous Coward on Friday December 18, 2015 @09:49AM (#51142723)

      If you want more jobs, tax labor lower. That reduces the cost of labor intensive activites. Which data centers aren't by the way - so why would you want them?

    • by magarity ( 164372 ) on Friday December 18, 2015 @01:28PM (#51144335)

      Tax them. Do more with less. Data centers are a drain on natural resources.

      Tax collection should be moved to where it is the least drain on economic resources; the final end consumer. States should reorient their tax collection to final sales and fixed property instead of on income.

  • by Anonymous Coward on Friday December 18, 2015 @01:37AM (#51141789)

    It's rather obvious - the tax code should be simple. Without tax breaks for special interest groups.

    The hodgepodge of tax breaks for this and that makes the tax code unfair, complicated, and leads to a race to the bottom between states, attempting to claw in industry by offering them the best deal.

    American states should unify in some sort of federation, with a common, unified and simplified tax code - which should get rid of every single tax break on offer.

    • by Anonymous Coward on Friday December 18, 2015 @01:47AM (#51141807)

      "American states should unify in some sort of federation..."

      What an amazing concept!

    • by Anonymous Coward on Friday December 18, 2015 @02:03AM (#51141841)

      Unless we enforce a single tax code at the city, local, county and federal levels this will be a problem. Note, I'm not actually advocating that. As complicated as it can be sometimes different areas have different needs and different desires.

      The town I live in refused to bend over for Walmart, who of course wanted a tax-break for a new location here a few years back. They are now just outside of town within a smaller town's city limits and all that sweet, sweet tax revenue now goes to them. Not only that, it's definitely costing their competitors a mile or so away some business (probably would have anyway) but that's also even more sales tax lost to my town. And their competitors are NOT mom-and-pop stores but rather places like Target and Kroger and Lowes.

      I don't know if the Costco that was built across the street from the Walmart (still outside our city limits) got similar tax breaks.

    • by Anonymous Coward on Friday December 18, 2015 @04:36AM (#51142101)

      The best way to unify and simplify the tax code and eliminate tax breaks is . . . to stop assessing income tax which is completely immoral. Repeal the 16th Amendment.

      • by Sique ( 173459 ) on Friday December 18, 2015 @05:46AM (#51142223) Homepage
        On the contrary: Income tax is very moral. It's the laws and rules and protections and education of a society that allows you to generate an income in the first place. And thus, you should reward the society with a share of your income.
        • by Silverhammer ( 13644 ) on Friday December 18, 2015 @07:19AM (#51142347)

          Is an income tax more moral than a property tax or a sales/consumption tax, both of which reflect actual use of resources? Why should someone who makes good money but lives very frugally pay more in taxes?

          • by Anonymous Coward on Friday December 18, 2015 @08:28AM (#51142475)

            Is an income tax more moral than a property tax or a sales/consumption tax, both of which reflect actual use of resources? Why should someone who makes good money but lives very frugally pay more in taxes?

            Why should somebody who makes poor money, but has to spend a lot more of a proportion of their income pay so much in taxes in sales taxes?

            Especially when what society spends its taxes on does not seem to be producing as much of a result for them? Is that a moral choice?

            If you want to condemn the poor, just do it, though people have been doing that from their own perceived moral high ground for centuries, so don't think it's anything new.

          • by Junta ( 36770 ) on Friday December 18, 2015 @08:43AM (#51142511)

            For sales tax applied 'fairly' across the board, it drives up the prices for those who can barely scrape by as it is. Income tax has a way to provide relief to those with low household incomes. If you start trying to target 'conspicuous consumption' type things with a premium tax, you get back into a game of crazy loopholes to sidestep elevated taxes.

            There are tons of problems with US tax code, but a focus on income versus consumption is not a deficient thing.

          • by budgenator ( 254554 ) on Friday December 18, 2015 @12:14PM (#51143787) Journal

            The tax break was for sales and use taxes, Switch is in Nevada which doesn't have Income taxes.

        • by moeinvt ( 851793 ) on Friday December 18, 2015 @10:10AM (#51142819)

          Q: Why do we tax tobacco?
          A: So people will smoke less.

          Q: Why do we tax income?
          A: So people will ... oh, wait ...

          Gimme a break with your "society" bullshit and just say "government". Let's put aside the fact that confiscating people's wealth under threat of violence is morally wrong to begin with and assume government must take wealth in some fashion.
          Apart from the inflation tax, the income tax is the most regressive tax imaginable. Why would you create a disincentive for people to engage in producing wealth? The mere fact that people are creating value benefits the society and increases its prosperity. If you want to tax something, tax consumption. Consumption is the destruction of value. Although it's necessary to eat food, burn fuel, etc. consuming things reduces the overall wealth of the society.
          The USA economy based on "consumption" is a 30 year illusion which was only made possible by vast amounts of debt accumulation. As long as people persist in the ridiculous belief that "consumer spending" is the path to prosperity, the economy is going to suffer.
          We should scrap the personal and corporate income tax entirely and replace them with the "Fair Tax"(fairtaxdotorg) then take other steps to transition back to a production economy. Our debt-fueled consumption economy and government "stimulus" economy is a house of cards.

          • by Anonymous Coward on Friday December 18, 2015 @10:31AM (#51142983)

            However, the wealthier you are, the more options you have for creating new wealth, and those new options are often taxed at lower rates. Isn't that an incentive? I'm not sure what it really incentivizes, though. Lower taxes spur investments, and investments are supposed to benefit everyone. If returns on those investments drop, however, the first option exercised by most companies to increase profits is a workforce reduction, which only benefits the investors.

          • by Sique ( 173459 ) on Friday December 18, 2015 @12:00PM (#51143633) Homepage
            No, society is not the government (except in some libertarian fantasyland of people who never experienced living in a non-societal environment).

            You could actually go and try to buy all the services a society (and that includes much more than just a government) provides at market rates. And then you would find out that no one except the super rich can afford to live.

            But here lies the first roadblock: "buying" is a concept only a certain type of society provides. Many tribal communities for instance don't know the concept of buying. Remembering the words we give to things and rules how to arrange words to transport meaning is a service a society provides, and it works perfectly well without a government. Remembering how to write and transfer this knowledge to the next generation is a concept a society provides, and no, it doesn't need a government for that. Transferring all knowledge written down to the next generation is a concept a society provides, and even then you don't need a government for that. And yes, the family is part of a society, and it can provide the basic services a society provides. But the scope of a family is limited. Most people you know are not family. But they are still society.

            The need of a government arises when the number of people increases, so we more often meet people we don't know than those we know. Then one concept society provides, mutual trust coming out of knowing each other, is no longer working well. We have to organize the meeting of other people in a way that it pays in most cases not to harm them and that we have a good idea beforehand how they will behave. Organizing a society means rules, laws and persons tasked with keeping track of the rules and laws and enforcing them by deliberately harming people who don't stay within the rules - bang! government.

            • by s.petry ( 762400 ) on Friday December 18, 2015 @12:46PM (#51144041)

              Society does not exist without Government, so you can't separate the two as you attempt to do. Even looking at the two definitions and being pedantic you can not describe one without the other.

              What one can do is define various forms of Government and describe their powers and/or limitations. A Tribe of people being one of the smallest societies for humans has a form of Government. Some tribes may use Monarchy, others may use a democracy. Further, some monarchies may be more tyrannical than others. No matter how we define it, "Government" is universally part of society.

              What you are attempting to do is claim that Government only exists within parameters of your opinion, which is wrong.

        • by Anonymous Coward on Friday December 18, 2015 @11:02AM (#51143241)

          Income Tax, as practiced by the USA Federal Government, is immoral.
          The entire Tax and Redistribution system implemented by the Federal Government is immoral.

          Any research into the Federal Government's practice shows that it is horribly inefficient.
          The Federal Government investigates and shuts down charities that spend as much on administration as the Federal Government does.
          States and Local Governments distribute a higher percentage of dollars collected than the Federal Government ever has.
          In welfare/help payments, the difference is staggering.
          The more local the welfare/help, the more effective and efficient the welfare/help is.
          Locals know the scammers and cheats; the Federal Government doesn't know or care.

          Additionally, the Federal Government taxes at an abusive rate and denies citizens the responsibility of participation.
          That is, people are paid not to work, to avoid taxes (through the underground economy as well as paying their tax payments for them).
          The Federal Government creates a dependency which causes people to surrender the right and responsibility for their own selfs--their actions and outcomes.
          Then the Federal Government, in particular, penalizes those who do take responsibility for their own selfs--their actions and outcomes.

          A simple, unprejudiced look at economics shows that the self-responsible do contribute to society.
          They buy goods and services. They create and produce. In spite of the Federal Government and its policies.
          They contribute to educational and charitable causes at higher rates in the USA than other countries, even European countries.

        • by Anonymous Coward on Friday December 18, 2015 @12:01PM (#51143647)

          I agree, when taxes are used for something that benefits EVERYONE. Taxes are immoral when used on something that contradicts the individual's beliefs or when taxes are used simply to benefit somebody directly that may or may not have earned it. Taxes shouldn't be used to pick winners and losers, they should go to true community projects. It's easy to get 90%+ of people to agree roads are a necessity, but that doesn't necessarily mean income tax should fund health care for people that make unhealthy decisions or pay for food for those that are unwilling to put for the effort to raise themselves.

        • by roman_mir ( 125474 ) on Friday December 18, 2015 @02:40PM (#51144963) Homepage Journal

          Moral? What a joke. You have just redefined theft and aggression and oppression and violence as morality. Of-course that is what all oppressive governments (the collective, the mob) do, they redefine words and then they apply them creating a giant ruse and misconception.

          Morality is in non-initiation of aggression. Governments are immoral by their very definition. Businesses are amoral, governments are immoral, governments by definition initiate aggression, use violence and oppress individuals. Income tax is absolutely immoral, it subjugates the individual to the government, to the collective, tot he mob, it creates a situation where an individual's income (labour, which means time) is owned by the mob and then the government can set the rate at whatever it likes.

          So no, it is absolutely immoral to tax income. It is absolutely immoral to tax different people's income at different marginal rates as well. It is also a horrible economic policy, as in reality the people with higher marginal taxes do everything in their power to move income somewhere else, making sure that it is untaxed, but this creates a huge misallocation of resources and achieves the exact opposite of your supposed desired effect.

          The effect that you are supposedly looking for is usage of the said income for greater economic activity. The effect that you are actually getting is removal of the income, off-shoring production and creating various wealth consuming strategies that are incompatible with greater economic activity, reducing the needed economic activity.

          Obviously whatever you tax you get less of, so the economics are awful, but the morality is unquestionably horrendous.

    • by thegarbz ( 1787294 ) on Friday December 18, 2015 @08:00AM (#51142417)

      It's rather obvious - the tax code should be simple. Without tax breaks for special interest groups.

      The net result is a world designed entirely by corporations for what makes financial sense given the resources. Suddenly you'll be missing on a lot of investment, you drive economic growth to restricted parts of the country and as typically would happen with a country the size of the USA the winners would be states with resources while the losers would lack incentives to bring any form of economic growth to their states.

      What you propose sounds good on paper, but there's a very real reason incentives are given by the government for certain things.

      • by Anonymous Coward on Friday December 18, 2015 @08:35AM (#51142495)

        (I'm the OP anonymous coward).

        I disagree with you. Not because you're flat out wrong - but because a system where special deals are offered individually through 'deals' with states, municipalities etc, is ripe for something rather nasty: corruption.

        Furthermore, as I argued initially - you risk a race to the bottom. Something we can clearly see in the US - but we can also see this with corporate taxes in the EU. Countries 'underbidding' each other to attract investment. This is obviously not sustainable.

    • by Anonymous Coward on Friday December 18, 2015 @08:05AM (#51142433)

      You don't get the idea of States, do you?

      You sound European.

    • by Anonymous Coward on Friday December 18, 2015 @08:44AM (#51142513)

      You know there are other countries right?

    • by Anonymous Coward on Friday December 18, 2015 @10:41AM (#51143071)

      The hodgepodge of tax breaks for this and that makes the tax code unfair, complicated, and ...

      and provides many opportunities for graft and corruption.

  • it makes sense. (Score:2, Interesting)

    by Anonymous Coward on Friday December 18, 2015 @01:53AM (#51141819)

    The state dose not lose anything by giving tax breaks. It dose not cost the tax payer anything. May cause some expenses in some ways, but once the data center is making profit they will be paying taxes for many years. Jobs or not, the state will still benefit.

    I realize what the author thinks is that that a tax break means the data center is getting tax payer money, which it dose not. The same as an oil company getting a tax break dose not cost tax payers anything.

    With the state tying the tax breaks to having a job goal.... why don't the data center find a better state to build?

    • Re:it makes sense. (Score:3, Interesting)

      by Anonymous Coward on Friday December 18, 2015 @02:00AM (#51141827)

      The state dose not lose anything by giving tax breaks.

      Opportunity costs. If the data center doesn't move in, the land could have been occupied by 200 10,000 sqft businesses. Of course, it could have ended up completely unoccupied, so it's hard to say what would have really happened if the government just told them to pay their taxes like everyone else.

      • by Anonymous Coward on Friday December 18, 2015 @02:26AM (#51141869)

        A data center, after it is built and the machines are in, tends to need only an onsite skeleton crew. You have facility people for HVAC, power, plumbing, and building security, some grunts to rack/unrack machines, plug/yank drives, some junior network techs to make sure server foobarbaz is plugged into port 2112 and getting a signal from the switch, then some security guards to roll around on their Segways, as well as some Knightscope security robots to make sure things are buttoned up tight when the security guard is off to lunch.

        At best, the data center might have a SOC/NOC with CCNA level admins, but the real "brains" will be at corporate HQ doing all their work via remote links.

        All and all, for the large amount of square footage, a data center really doesn't employ that many people. To boot, it is power hungry (power to run the servers, more power to pull the heat off that the servers generate), has a heavy, impermeable footprint (which isn't good for rainwater), and can be an eyesore.

        To boot, it bogs down the local real estate, as businesses can't really locate near it, as it is a large barrier (look how railroad tracks have separated cities.) In the country or a rural area, no problem. However located on the border of a town, it can definitely change the town's future, blocking a direction of expansion.

        Of course, what happens if the data center goes defunct? A large building like that in the middle of nowhere can't really be used for a warehouse, since it isn't on main transportation lines. It can't really be turned into a mall, since the population might not be enough to support it.

        This isn't to say that data centers are bad. However, they really don't generate a lot of revenue to a city or county.

        • by Rob Lister ( 4174831 ) on Friday December 18, 2015 @09:03AM (#51142561)

          Of course, what happens if the data center goes defunct? A large building like that in the middle of nowhere can't really be used for a warehouse, since it isn't on main transportation lines. It can't really be turned into a mall, since the population might not be enough to support it.

          In this case the building already exists, has been vacant for years, is an eyesore, and in need of some expensive environmental clean-up. There is little downside to this move. Perhaps you are right as a matter of principle, but this instance is a poor example for it.

    • by mwvdlee ( 775178 ) on Friday December 18, 2015 @03:22AM (#51141977) Homepage

      The country as a whole loses money though, as the datacenter would have been build somewhere without tax breaks if it couldn't get tax breaks anywhere.

      • by Anonymous Coward on Friday December 18, 2015 @02:31PM (#51144885)

        The country as a whole loses money though, as the datacenter would have been build somewhere without tax breaks if it couldn't get tax breaks anywhere.

        Taxation is not "creation" of money - it is "confiscation" of extant money. Taxation is also not some fundamental responsibility of government - taxation exists to allow a government to raise money for projects in the public interest.

        In this case, it seems that the local government has determined that the public interest is better served by having the datacenter locate in the state, providing jobs and growth, than it would have gotten from levying yet another tax on yet another business. By default, the assumption should be that the government does NOT need to levy more taxes, until they demonstrate that a program in the public interest requires more funding.

    • by dcollins ( 135727 ) on Friday December 18, 2015 @04:20AM (#51142069) Homepage

      Isn't it amazing how strongly correlated the quality of an argument is with its spelling and grammar?

    • by Anonymous Coward on Friday December 18, 2015 @08:05AM (#51142437)

      So the Infrastructure (water, roads, garbage collection, etc) were free for the data center?

      Taxpayers paid for them..

    • by zaphirplane ( 1457931 ) on Friday December 18, 2015 @08:42AM (#51142509)

      I think lift makers deserve tax breaks more

  • by mark-t ( 151149 ) <markt@nospAm.nerdflat.com> on Friday December 18, 2015 @02:34AM (#51141873) Journal
    The only people that tax breaks make any sense for at all are the poor.
  • No (Score:5, Insightful)

    by richardtallent ( 309050 ) on Friday December 18, 2015 @02:45AM (#51141887) Homepage

    Tax breaks by local or state governments to win construction projects NEVER make sense, and should be outlawed as a form of unfair treatment under the law.

    Small businesses hire FAR more employees and put FAR more back into the local economy than large companies who have the political clout to win abatements. Every tax abatement won by a company deciding to do business somewhere is an effective tax INCREASE on every other business and resident of that jurisdiction.

    When a company moves into town, they are taking advantage of the roads, sewers, fire and police protection, schools, and other appurtenance of civilization, and they should pay their fair share for that infrastructure.

    Speaking specifically about data centers -- they hire relatively few people, take up a large land mass, add stress to the local electrical grid, create buildings that drive down surrounding land values (who wants to live next to a windowless building with huge air conditioners?), etc. etc.

    I'm not saying they are "bad" neighbors, but they certainly don't deserve a ticker tape parade, and they should pay their fair taxes like anyone else.

    • by Anonymous Coward on Friday December 18, 2015 @05:24AM (#51142187)

      When a company moves into town ... should pay their fair share for that infrastructure.

      I like the part where you ignore the multitude of people who are employed and likely have their lives (and incomes) improved by a massive factor.

      No, you don't get to be a whore. Corporate tax, or personal income tax. Choose any one.

    • by Sique ( 173459 ) on Friday December 18, 2015 @06:04AM (#51142243) Homepage

      Small businesses hire FAR more employees and put FAR more back into the local economy than large companies who have the political clout to win abatements.

      To be fair: A large share of the higher hiring numbers for small businesses is a statistical fluke. You put the limit between small and large businesses arbitrarily at some number (lets say: 100 employees). Businesses will grow and shrink all the time, and there will be always businesses that cross the line between small and large. Whenever a business adds employes and thus becomes larger than 100 employees, it's a small business hiring. If the same business goes bust or has to fire employees, and thus shrinks back below 100 employes, it's a large business reducing workforce. But it's the same business, just crossing the boundary from different directions and thus classified differently.

      This effect will occur at any limit you set between small businesses and large businesses. It could be 10 people, 100, 250, 500 or 1000. You will always have businesses growing, and if they cross the line, it's a small business growing. And you will always have businesses shrinking, and if they cross the line, it's a large business shrinking.

      • by JesseMcDonald ( 536341 ) on Friday December 18, 2015 @04:15PM (#51145833) Homepage

        This effect will occur at any limit you set between small businesses and large businesses. It could be 10 people, 100, 250, 500 or 1000. You will always have businesses growing, and if they cross the line, it's a small business growing. And you will always have businesses shrinking, and if they cross the line, it's a large business shrinking.

        That's why there should be a fuzzy line between small and large businesses, rather than a sharp cutoff. Also, any time the company size changes, the weighting should be based on an integral over the range between the old and new sizes. Under 80? 100% small business. Over 120? 100% large business. Growing from 99 employees to 100, or shrinking from 100 to 99? Attribute half of that to small business, and half to large business. From 50 to 120? Weighted more toward small business. Etc.

    • by Anonymous Coward on Friday December 18, 2015 @08:07AM (#51142445)

      this..

      +1 if i had points.

    • by maestroX ( 1061960 ) on Friday December 18, 2015 @04:45PM (#51146063)
      Excellent comment.
    • by Anonymous Coward on Sunday December 20, 2015 @03:22PM (#51154877)

      When a company moves into town, they are taking advantage of the roads, sewers, fire and police protection, schools, and other appurtenance of civilization, and they should pay their fair share for that infrastructure.

      What about the idea that the datacenter IS infrastructure? Datacenters are necessary for our way of life. Soon, those roads will require a hell of a lot less use. Why? Because workers will be utilizing resources in the cloud, from their low-cost personal computer at home. Why shuffle entire people back and forth when we can just shuffle bits and bytes? You need datacenters for this.

  • by ErichTheRed ( 39327 ) on Friday December 18, 2015 @03:05AM (#51141943)

    As people and the article have pointed out, a massive data center build (often in the middle of nowhere) doesn't really benefit the local population of an area. Unless the company is moving a ton of admin jobs along with it, the tax base doesn't even increase when all these incentives are factored in. You'll have security guards, facility engineers (HVAC etc.) and a very small rack-stack-fix type of staff. Also, in the case of public cloud style data centers, everything beyond the physical hardware replacement is software-controlled once the core is built out, so you won't have as many traditional sysadmins employed. Plus, the added power and public utility costs add up as well when you consider generation costs, building or improving roads, etc.

    The thing about these special tax breaks is that states have to play Prisoners' Dilemma with each other. I live in a high-tax state (NY) and we're always hearing large companies with big New York operations threatening to move to North Carolina, Florida, Texas, etc. if they don't get a special tax deal. They do this because they know they can - the low tax states will do crazy deals to get companies to move there. A company I worked for moved to Orlando, and the state and city were practically building the company a new headquarters, building new roads and easing building restrictions to suit their needs. Plus, they got some insane tax abatement for 10+ years and cheap utility rates on top of that. When companies don't have to pay normal levels of tax, the only possible upside is increased property, sales and payroll taxes from employees that move in. The high tax states have to do at least some of this also, but it's an even worse deal for them usually since they have greater expenses to cover. Florida and other low tax states spend a lot less on education, they don't have to remove snow in the winter or perform as much road maintenance, etc.

    • by mlts ( 1038732 ) on Friday December 18, 2015 @03:15AM (#51141969)

      It only will backfire on the states giving abatements. Yes, it means that there is someone who will be paying a large electric bill and real estate taxes, but like others said above, there is a large opportunity cost. Even a big box store would be better in some ways, because it would hire a lot more people and being money to the community in sales tax revenue.

      As someone living in the area, given a choice of a data center which blocks out a huge chunk of land for good, versus something like a S-Mart or Gnome Depot opening up, I'd take the big box store, just because it is something I can use. It makes me wonder how long until data centers start getting pushback by the NIMBY types.

    • by dcollins ( 135727 ) on Friday December 18, 2015 @04:28AM (#51142089) Homepage

      In addition, there's also a moral hazard problem with the politicians shepherding these deals. They get positive PR for "making big deals", "bringing business to the state", photo ops shaking hands and breaking ground, etc. The fact that in the long run it's a net negative is not a problem for them -- in a few years they'll be gone to another post and the public will be holding the bag of debt, as usual.

  • by Anonymous Coward on Friday December 18, 2015 @03:08AM (#51141953)

    Nobody should get tax breaks for anything.

    • by Anonymous Coward on Friday December 18, 2015 @04:42AM (#51142117)

      ..and the tax itself should be fair to begin with and only be used to fund needed public infrastructure. Taxes should not be used punitively to manipulate behavior or give people handouts at others' expense for trivial reasons, as this is what really makes people resent them.

      One tax per initiative with open referendum. no general funds.
      Taxes must be revoted every year or they die. Sunset clauses keep the table clear of old cruft. They also sanitize slush which should go back to the taxpayer.
      Overfunded initiatives return unused money to the taxpayer and the tax is lowered. The money cannot be rechanneled. Conversely, if more money was needed, it goes up. Adjusting either way requires a vote as a new tax (the old one dies by default). Really, this is how a business operates and does for good reason: keeps the books from falling apart.

      This would require electronic voting to work well. Maybe every 2 years?

  • by Hognoxious ( 631665 ) on Friday December 18, 2015 @03:38AM (#51142003) Homepage Journal

    Well if it makes sense for sports stadiums, then it stands to reason it must work for datacenters.

  • by dbIII ( 701233 ) on Friday December 18, 2015 @04:05AM (#51142041)
    Michigan really should be taken over by the federal government or somebody that can run it. They have a huge amount of revenue but let a little bit of the third world into the USA in the shape of a total lack of government care in Detroit.
    Maybe they should just surrender to Canada again.
  • firS7 post (Score:-1, Redundant)

    by Anonymous Coward on Friday December 18, 2015 @04:20AM (#51142073)
    Worthwhile. So I CreEk, abysmal 1. Therefore there Avnd sold in the
  • by Anonymous Coward on Friday December 18, 2015 @04:51AM (#51142139)
    ...data centers tax YOU!
  • by Anonymous Coward on Friday December 18, 2015 @05:34AM (#51142199)

    This is most likely an attempt to try and keep some goodwill with the data center companies because of the federal government's ongoing spying and the reputation damage (and loss of clients) that it's causing these companies.

    Of course any data center company foolish enough to be influenced by the US government because of offered tax breaks after having their reputation tarnished, will continue have a poor reputation. People will just look at it and say: "Well, that company is officially on the take now."

    It's a nice attempt by the US though, as even if the company is resistant to spying, they can come in and say: "Well, you took our tax breaks. I guess you don't want them next year."

    Of course the money would be better spent getting rid of the overt spying problem and making an effort towards amends with the affected industry....

  • by swb ( 14022 ) on Friday December 18, 2015 @07:57AM (#51142411)

    Generally no. Race to the bottom, corporate welfare, etc.

    But I kind of ask "What's the data center for?"

    Is it meant to be a place to house fully automated, large scale, cloud services for companies based elsewhere, where the siting is purely about some kind of risk-management/engineering goal on a continental/global basis?

    Or does it have a significant colocation component to it, where they expect to house servers for a regional base of customers at a price point where it may encourage localized business growth by providing a resource they may not have locally?

    One thing I've noticed in Minneapolis is that with Target based here, there's like an entire sub-economy of businesses that work with Target. Just having Target based here means that many of those symbiotic business are here, too, which definitely means more local economic activity.

    It might be that a regional data center may attract the same kinds of symbiotic businesses that exist because the data center is there.

  • by Rob Lister ( 4174831 ) on Friday December 18, 2015 @08:04AM (#51142429)
    From the article ...

    The final package, which passed at 11:30 p.m. Tuesday, would end the tax exemptions if the data center industry does not collectively create at least 400 new jobs in Michigan by 2022 and 1,000 new jobs by 2026. The package now heads to the desk of Michigan Gov. Rick Snyder, who had sought the assurances on job growth for the project.

    I know there's a lot of contention here about offering tax breaks but states really are in competition for jobs. Getting past the moral dilemma of it, a dilemma I can't seem to muster, it is hard to see a downside to this. The perspective real estate--the Steelcase Pyramid Complex--has been vacant for some time now. It used to be a furniture manufacturing plant. Whoever buys it has to gut it and clean it up, as there are some nasty pollution problems to be remedied. Switch, the company that wants it, can go anywhere east of the Mississippi. I see no reason why they shouldn't look for the best deal.

    The only part I don't get is why a data center needs 400 people, much less 1000.

  • by trout007 ( 975317 ) on Friday December 18, 2015 @08:13AM (#51142455)

    Economically it doesn't make sense. It would make more sense to lower rates for all then pick and choose.
    Politically it makes sense because a politician can show the actual jobs they had a hand in creating while ignoring the lost jobs that are impossible to identify.

  • by EmagGeek ( 574360 ) <gterichNO@SPAMaol.com> on Friday December 18, 2015 @08:37AM (#51142497) Journal

    The government has a vested interest in having data centers on US soil where they can be easily accessed by various alphabet soup agencies. It only makes sense to incentivize placing them here.

  • by Anonymous Coward on Friday December 18, 2015 @12:03PM (#51143675)

    A datacenter will only create a handful of jobs once its been built, so there is no offset in the community for the lost taxes. It still costs just as much to run the city/state.

    So the only people who benefit from these tax deals are shareholders and corporations, shareholders who don't live in the same state and corporations who use accounting gimmicks to move the profits offshore.

    The locals end up either paying more in taxes, cutting services, running deficits, or more likely, all three.

  • by EdwardFurlong ( 3697195 ) on Friday December 18, 2015 @12:27PM (#51143899)
    Quick example in Ohio "Businesses that received tax credits, loans and grants from the state of Ohio complied with terms of their deals at a record rate last year, the Ohio Attorney General Mike DeWine’s office touted in an annual report of economic development compliance. Of 341 awards with a performance period ending in 2014, 269 were in compliance based on promised job creation and retention, according to the report, which is required to be submitted to the General Assembly."

    It's pretty constant in the news about companies threatening to leave the state and being offered tax breaks or trying to lure companies in by offering tax breaks. It seems more beneficial if all states would agree not to offer special tax breaks, of course everyone would have to agree to it, otherwise a few states could offer breaks and lure all the companies.

    • by MerlynEmrys67 ( 583469 ) on Friday December 18, 2015 @06:02PM (#51146537)
      You are missing one assumption, that all states tax loads are the same. There are high tax states, and low tax states - so if you are contemplating moving to a high tax state, and a low tax state comes in to bid on the project - the high tax state has to offer a tax break to be competitive. There is no reason for the low tax state to even start with an offer.

      Then you get into high regulatory compliance states vs. low regulatory compliance states, that is a huge deal as well.

      Now what would be easier is if states that wanted to naturally attract business went into a low tax overhead, low regulatory compliance mode - took the burden off of their small/medium businesses that don't make the headlines and let them grow naturally... Probably much more impact than bringing in 1000 jobs with a data center

      • by EdwardFurlong ( 3697195 ) on Saturday December 19, 2015 @10:11AM (#51149779)
        No, I understand there are high and low tax and regulatory states, those types of things apply to all businesses in the state though. I am more thinking two states that have pretty much the same rates etc, some company was founded in state A, and has been there for 50+ years, threatens to leave because state B will give them tax breaks, state A has to lower taxes for this one company to keep them there. In some cases it has nothing to do with high and low tax states, it's just a way for businesses to extort tax breaks from the state. Somehow there are several hundred thousand businesses in Michigan which do not get any special tax breaks, granted they are not all not billion dollar operations, but why is this one business special and another is not?
  • by blackanvil ( 1147329 ) on Friday December 18, 2015 @01:06PM (#51144189)
    I work for a large hosting/datacenter ISP, and most of the work on the equipment in the datacenters is done remotely. All we really need on-site is some semi-competent remote hands to unbox, rack, and plug in the various pieces of gear into the racks, some security guards to keep the riff-raff out and escort customers into/out of their cages, cleaning staff to keep the dust and debris down, and maybe an onsite engineer who knows all the power, network, and cooling setups enough to fix them when they break, though usually even that last position is remote. The remote-hands folk do all the physical work. Everything else is done by contractors or people working in an office somewhere -- I'd say about 90% of the engineering/admin work is done this way. So a massive datacenter, once it's operational and filled with customers, doesn't usually have more than a dozen or two local employees. There are some exceptions, of course -- a high-churn center will need more people for escort and remote hands, and some centers are completely unmanned, just a locked room or building that's only visited when things go really wrong. If you want jobs, insist they buy office space for their techs and engineers locally, forget about the datacenter.
  • by kackle ( 910159 ) on Friday December 18, 2015 @01:47PM (#51144517)
    I don't believe the government should ever use tax breaks to encourage anything. Such incentives are often abused, and later we all pay for it. And any mass benefits are dubious to begin with.

    If someone wants solar panels, 'let them eat eat solar panels'. But it shouldn't be on our tax dime the way I see it. Our history is rife with pointless breaks/expenditures.

    Disincentives, I can understand and sometimes support.
  • by DriveDog ( 822962 ) on Friday December 18, 2015 @03:15PM (#51145299)

    "...If the data center jobs don't materialize, the breaks disappear."

    If both of the data center jobs don't materialize, the breaks disappear. FIFY. Most such installations are worse than warehouses. Not only do they employ very few and eat a lot of land per job, but most of them suck a lot of power. Be a NIMBY and let it go somewhere else. You won't be sorry.

  • by Anonymous Coward on Friday December 18, 2015 @05:29PM (#51146375)

    Nuff' said

  • by AutodidactLabrat ( 3506801 ) on Friday December 18, 2015 @06:27PM (#51146693)
    more poor, more cuts in necessary services, wash, rinse repeat.
    ANYONE hear about wage depression?
    Major router centers only hire during installation and setup.
    After that, it is 100% remote administration with a tiny core of in house rack replacement workers at minuscule wages.
    The tax breaks, however, become the new "normal" and every effort to put the city back on a profit basis becomes "Tax hikes" and here we go again.
    Did you people learn NOTHING from the 2008 crash?
  • by Anonymous Coward on Saturday December 19, 2015 @06:56AM (#51149387)

    Do tax breaks for churches make sense?

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