Apple May Get $7.4M Tax Break If It Hires Travis County's 'Disadvantaged'

Texas is giving Apple millions of dollars in tax breaks to open a new campus in Austin.

Apple is the most valuable company in the world, but in one state, local governments are considering giving the computer giant millions in tax breaks.

Travis County, Texas may give Apple $7.4 million in property tax rebates over the next 15 years to hire "economically disadvantaged" locals, according to several Austin news outlets. And that's after Texas and the city of Austin already agreed to pay Apple $29.6 million to create a new campus in the city.

Under Travis County's proposal, Apple would receive the $7.4 million tax break if a certain share of the workers the company hires are unemployed, live in a poor area or have gone through job training, according to the Austin American-Statesman.

With state and local governments facing shrinking budgets, deals like those currently being considered by Travis County have become more controversial. Some argue that using tax breaks to lure big companies will help create jobs and boost revenue, while others say local governments are simply subsidizing private, profitable companies even as they continue to slash services.

In the case of Apple in Texas, local governments would likely lose money on the deal assuming they give Apple the entire $37 million tax break to open a campus in Austin. That's because the city of Austin estimates that the net benefit of Apple's new campus in Austin would be $23.2 million over 14 years: less than two-thirds the size of the tax breaks that state and local governments are offering.

Even as Travis County officials are considering giving huge tax breaks to Apple, the Texas government is slashing services to cope with a a $4.1 billion budget shortfall. Texas Governor Rick Perry is laying off 49,000 Texas teachers and cutting off financial aid for 43,000 Texas college students, according to the Texas State Teachers Association. Other public services slated for cuts include crime victim services, disability services, and homeless services, according to the Texas Tribune and Fort Worth Star-Telegram.

Apple plans to hire 3,600 workers in Austin, and the average wage for those workers would be $63,950 per year: one-fifth higher than the average wage in Travis County, according to the city of Austin.

But getting generous tax breaks from state and local governments isn't the only way that Apple avoids paying U.S. taxes. About two-thirds of Apple's money is parked overseas, where the company pays an international tax rate of less than 3 percent. Apple's CFO said in the company's latest conference call that it does not plan to repatriate its money because of the U.S.'s corporate tax policy.

Comments

[Frank David Nall]

01:49 PM on 04/05/2012

While a company like Apple whistles “God Bless America,” executives are not going to talk about the job losses induced by off-shoring, nor the horrifically abused foreign workforce that moving jobs to China has produced. And they’re not going to tell us about Apple’s preference for hiring part-time employees who can’t afford to buy health insurance. When such uninsured people have health emergencies, someone has to pay and the burden falls on the taxpayers.

Here is what Apple executives tell us instead: “We don’t have an obligation to solve America’s problems.”

[The Contrary]

01:48 AM on 04/05/2012

A race to econmic bottom, anyone?

WTF is wrong with local and state gov't officials keep handing out tax incentives to companies that really need skilled workers? It would be better to provide incentives for companies to partner with local public technical schools to improve skilled workers labor pool so they can provide services that companies really need while the workers would get better wages. Ultimately, economic growth both at business and personal levels will lead to higher revenues for the locals and states.

Let's start a race to the top economic ladder, shall we?

[nofriendofrepublicans]

10:06 PM on 04/04/2012

It's like having our own Chinese slave labor. What a country.

[lkgilles]

11:28 PM on 04/04/2012

Hiring poor people is like Chinese slave labor?

[UnRed]

08:54 AM on 04/05/2012

For all we know, the requirement is ONE "economically disadvantaged worker" and, given the Red State Follies as of late, that wouldn't be surprising.

UNLESS we're talking a substantial number of hires, this thing remains pungent with the fetid odor of Red State stink,

[Frank David Nall]

01:51 PM on 04/05/2012

Hiring low wage slaves is like chinese labor. The american worker has been abandoned by a government and corporations that have no stake in the country any more..........thank you thirty years of great freakin repubs.

[John Crane]

09:48 PM on 04/04/2012

Either give the money or don't. We don't need any social engineering. I would rather not see Apple get money from any government entity. They don't need corporate welfare. I think all governments everywhere should stop this nonsense and not let rich companies hold them hostage.

And as for a cachet of having Apple here. Apple is ALREADY here. So is IBM, Microsoft, Google, and Facebook. AT&T Labs is here. We are building an F1 race track. The guy that just won Top Chef comes from here. Every reality show wants to come here and film. If Austin can't make hay off of all that, and still feel that they have to grovel before Apple for crumbs, they are in sad shape, and we need new leaders.

[wronsutton]

07:21 PM on 04/04/2012

Isn't there already a big Texas computer company, employing 1000s.
May have heard of them, Dell.
What do they get?

[Gravenstein]

10:50 PM on 04/04/2012

Lost.

[Jim from Maryland]

04:42 PM on 04/04/2012

People do the math. 3600 jobs @ $64,000 = $230,400,000 per year and assume that people spend that money at 8.5% sales tax = $19,584,000.00/ year vs $500,000.00 / year for this incentive.
Now I'll agree not all of that money will go to taxable purchases on the first tier, but eventually all the 230mil filters down and goes into the local economy to be taxed. That is a 39 to 1 ratio that would not be available at all if Apple was not there.
That does not even count "halo" effect industries that will be supporting Apple, their material sales purchase, salaries et al.
Other states use this method of revenue enhancement regularly to increase, so why should Austin not take advantage of it.
The same argument was made when Apple set up their server farm in Carolina and heads rolled in Virginia for losing such a lucrative deal.
This is typical of non economic based thinking. I'll spend .50 to get 19.50 all day long especially with all the zeros behind them.
Better than spending 1/2 bill on Solyandra and getting nothing.
There were not 3600 hundred jobs at stake!!! Think of the housing boom as those people are hired on even if it is job shifting, there jobs have to be replaced.

[J0E1]

06:29 PM on 04/04/2012

Those numbers are ABSURD.  Those numbers are assuming that ZERO of the 3600 people who will be employed by apple were employed previously.   You also assume that all $64,000 is going to be spent on taxable items when in fact at $20,000 of that will go straight to the federal government.  Then if those employees own a $200k house, $20k/yr of the remaining $44k will go to a mortgage which benefits national banks. Also, where did you get $500k/yr?  That is only part of the total tax break of $37 million, or $2.5 MILLION/yr.

Besides, why did you even bother to do the math?  Did you not read the article?  The estimates were already done using REAL numbers and the city is poised to LOSE money on the deal.  Here is the exact quote from the article:


In the case of Apple in Texas, local governments would likely lose money on the deal assuming they give Apple the entire $37 million tax break to open a campus in Austin. That's because the city of Austin estimates that the net benefit of Apple's new campus in Austin would be $23.2 million over 14 years: less than two-thirds the size of the tax breaks that state and local governments are offering.

[mooph]

10:26 AM on 04/05/2012

The assumption that "local government would likely lose money" is comparative to a company of similar revenue-generating size settling in Austin and fully paying their taxes.

If that Apple-shaped hole in the local economy is left empty, the net benefit of $23.2 million -- the "less than two-thirds" -- would be zero. If Apple creates a campus in Austin, the $23.2 million is still an increase over zero new tax revenues created.

A more realistic model of whether local governments would lose money is an analysis of increased government spending on services and infrastructure against the projected $23.2 million gain, which this article does not cover.

[Sanders McGrillin]

04:31 PM on 04/04/2012

So.... we are going to give the company with the most money in the world huge tax breaks.....
while throwing our poor citizens under the bus by eliminating programs to help them....

This is why I will NEVER buy anything apple
ever
in fact I will speak badly about them every single chance I get.
Steve Jobs Hated to give out charity, but he obviously loved to receive it.
what a doo.chebag

[Jim from Maryland]

04:51 PM on 04/04/2012

Do the math, 3600 jobs, the salary, sales tax on money made. You'll get a 39 to 1 return as it filters through the local economy.
Old saying,give a job to 3600 men, they feed themselves and the community, give 3600 men nothing and they are hungry tomorrow ( paraphrased)

[J0E1]

06:31 PM on 04/04/2012

How about you read the article instead of trying to do financial calculations with your 3rd grade education?

[jflorish]

09:24 PM on 04/04/2012

Good, then dont buy anything.

[Barbarian At The Gate]

04:11 PM on 04/04/2012

Apple likes Texas because the State has no Corporate income tax, no personal income tax, and they are getting tens of millions in incentives from the State.

[Barbarian At The Gate]

04:01 PM on 04/04/2012

I am reminded of the lottery winner who was still collecting food stamps.

[lofttypeofaview]

02:08 AM on 04/05/2012

That's plural, there was more than one!

[David Engage America]

03:28 PM on 04/04/2012

While this article speaks specifically about state level tax breaks, the same issues arise when discussing federal tax incentives. The problem with most tax breaks is that they are targeted to certain businesses over others who are just as deserving of them.

Instead of providing more tax breaks to companies, the government should be arguing to eliminate tax subsidies in general. While it failed to pass, the most sensible plan that removes these economic distortions is the Bowles Simpson plan.

According to the truly non-partisan Tax Policy Center, the economy could grow faster and generate more tax revenue under the Bowles-Simpson plan "thanks to lower marginal rates and the smaller deficit in the overall plan." http://bit.ly/yzSOHA

[gmb007]

02:39 PM on 04/04/2012

American Capitalism:

Give MORE money to the already obscenely filthy rich and slash funds from those who already have nothing.

What part of this is not pathological?

[redonthehead]

03:19 PM on 04/04/2012

Picture yourself as the CEO of Apple, (I know, right) on one hand you have this offer from Texas, on the other hand you can build a campus in Detroit or New York or California with no incentives. What are you going to do?

[JustinP213]

03:25 PM on 04/04/2012

I'm going to Texas.

[Sanders McGrillin]

04:32 PM on 04/04/2012

let me see, uh I'll follow the lead all the CEO's before did & outsource to Foxxcon!

[The Refudiator]

02:37 PM on 04/04/2012

Wow, looks like Tom DeLay can get a job in prison now...

[Aerobat]

02:34 PM on 04/04/2012

I applaud the creative thinking. But I can see where the declining education system in Texas is beginning to take a toll. They are particularly lacking in math skills, specifically fractions.

Let's have a math quiz:
If a $90,000,000,000 company received a $7,400,000 tax break distributed over 15 years,
What would their annual tax break be and why (This is the cognitive part of the test) would they care?

Seriously though, part of why Apple is interested in Austin is for the existing pool of hi-tech and semiconductor industry workers. It might be a good idea for Texas to spend the $7,400,000 on incentives for technical schools and better feeder schools to help broaden the skilled worker pool so Apple and others might even expand their footprint in Travis County.

[Highball]

03:42 PM on 04/04/2012

Right. It really doesn't make a difference Apple, either way. A $7.5m break over that period of time is essentially a rounding error to a company the size of Apple.

And they aren't really building a new campus, as much as they are expanding the one they already have there. Austin is a natural fit, since they already have a presence, and, as you point out, high tech in general has a presence there.

[redonthehead]

02:24 PM on 04/04/2012

So I guess Apple should build a campus in some city that has vowed to tax them into the ground to help their fellow man. They shouldn't worry about the future because right now their products are flying off the shelves. Remember it wasn't that long ago that you could buy AAPL at $7/share and they had to get a cash infusion from Bill Gates of Microsoft. Apple is being responsible to it's shareholders and ultimately it's customers and should be applauded.

[mlambush]

04:44 PM on 04/04/2012

7.5m to Apple is nothing. It's what they sell in iPhone accessories in a week.

[jflorish]

09:25 PM on 04/04/2012

Apple is one of the great success stories in history. Not only becoming the biggest market cap and on pace to continue the growth, but how they did it .... its a great story.

[MrStat1]

02:21 PM on 04/04/2012

I guess a lot of you Lefitsts out there with IPads will have to now get rid of them since you have such a low opinion of Apple.

[Sanders McGrillin]

04:33 PM on 04/04/2012

I've never owned an apple product & I never will
plus I tell everyone I talk to that apple is horrible & to try anybody BUT them

[Gravenstein]

10:54 PM on 04/04/2012

But they just don't listen to you, do they?