Microsoft Expanding in WDM

[dmclone]

$20 million in tax credits for 29 jobs. Someone please explain this to me.

Just a wild guess but give them $20 million in tax breaks or give them nothing and then you don't have to worry about any taxes they would provide.

Maybe I'm getting this wrong but it's not like they are just giving them $20 million in cash from the taxpayers of Iowa. They are offering $20 million in tax credits. Is this right? If so I don't see the issue.

 

[cytech]

Or you can look at is as $20 million in tax credits to build a $700 million dollar project. Which the majority of that labor and material with touch the iowa workforce. It is roughly a 3% savings for Microsoft. While it only creates 29 permanent jobs it does create several jobs in building it. Even if they don't' use an Iowa construction company they have to pay employment and sales taxes. Not saying Iowa will recoup all $20 million immediately, but it probably works out.

Plus developing a relationship with Microsoft shouldn't be looked at as doing a bad thing. Granted i think most large corps are going to go where it is cheapest to build, but maybe this helps Iowa land something else in the future.

That is not quite right because that 677 includes all the servers too which will be out of state. The building will probably be around 100-200 million of the cost.

 

[boone7247]

I would argue the bolded. Most likely the construction company is using current employees and if they need more they will hire temps to fill what they need.

Right but if they don't have this job they may lay off workers or send them to another state to do work. So while they might already be employed it is still job creation. Even if the jobs are short term they are still jobs and someone is earning a paycheck. If they don't get this work then that is $700 million less being spent on development in Iowa.

 

[boone7247]

That is not quite right because that 677 includes all the servers too which will be out of state. The building will probably be around 100-200 million of the cost.

Last time a check you still pay sales tax on all those servers at the place of their destination. So 477 - 577 in computing equipment comes out to approx $23.85 - 28.85 million. Doesn't seem like is too bad of a deal for the state. Plus future upgrades of equipment.

 

[canker2323]

Maybe I'm getting this wrong but it's not like they are just giving them $20 million in cash from the taxpayers of Iowa. They are offering $20 million in tax credits. Is this right? If so I don't see the issue.

According to government accounting rules it is giving them money.

When I deduct my mortgage interest the government is taking less from me they aren't giving me anything.

 

[IcSyU]

According to government accounting rules it is giving them money.

When I deduct my mortgage interest the government is taking less from me they aren't giving me anything.

Tax credit =/= tax deduction. Tax credits lower on a dollar for dollar basis...a deduction is on a marginal tax bracket basis.

 

[canker2323]

Tax credit =/= tax deduction. Tax credits lower on a dollar for dollar basis...a deduction is on a marginal tax bracket basis.

It is the government taking less money than they would have right?

 

[IcSyU]

It is the government taking less money than they would have right?

Assuming it's a non-refundable credit, yes. If it's a refundable credit then no (I'm sure it's a non-refundable credit but your point is a bit misinformed).

 

[NickTheGreat]

I would argue the bolded. Most likely the construction company is using current employees and if they need more they will hire temps to fill what they need.

Which is creating jobs. Not careers, but jobs.

Sometimes guys who work in construction don't work. If nobody wants to build something, they sit at home.

 

[isufbcurt]

Which is creating jobs. Not careers, but jobs.

Sometimes guys who work in construction don't work. If nobody wants to build something, they sit at home.

I do not consider maintaining jobs to be creating jobs. And I also do not consider temp jobs creating jobs. To me creating jobs is creating a new full time/part time job that wasn't there before.

 

[boone7247]

I do not consider maintaining jobs to be creating jobs. And I also do not consider temp jobs creating jobs. To me creating jobs is creating a new full time/part time job that wasn't there before.

A job isn't infinite without end. A job could be one day, 10 days, two months 10 years or 40 years. If people are employed to build this it has created jobs, either they were doing nothing before, or they were doing something and someone was hired to replace them.

 

[1100011CS]

You see part of the governors plan was to create jobs. He created 29 jobs and it only cost Iowa taxpayers $690,000 per job!

It didn't cost Iowa taxpayers anything. It's not like they were paying the taxes before and now they won't be.

 

[cytech]

Last time a check you still pay sales tax on all those servers at the place of their destination. So 477 - 577 in computing equipment comes out to approx $23.85 - 28.85 million. Doesn't seem like is too bad of a deal for the state. Plus future upgrades of equipment.

While that is true part of the tax break the state is giving is waiving those taxes.

 

[Daserop]

A little more information about this project.

Microsoft to invest $700M into data center to power Xbox Live, Office 365 - TechSpot

 

[boone7247]

While that is true part of the tax break the state is giving is waiving those taxes.

So the state is still earning more money than it would have if it didn't provide the tax break. So not sure what the problem with giving them the credit is.

 

[isufbcurt]

A job isn't infinite without end. A job could be one day, 10 days, two months 10 years or 40 years. If people are employed to build this it has created jobs, either they were doing nothing before, or they were doing something and someone was hired to replace them.

Sweet my company just created 400+ jobs in Ames and it looks like they are going to be creating 400+ jobs everyday for the forseeable future.

 

[boone7247]

Sweet my company just created 400+ jobs in Ames and it looks like they are going to be creating 400+ jobs everyday for the forseeable future.

Right your company probably offers a steady stream of services/goods. That probably isn't as dependent upon 1 or 2 customers. Builders don't have the ability to diversify their product and smooth out revenue cycles like most entities. If they don't get this job there isn't a guarantee they will get the next one. So yes it creates a temporary job, but that is still a job and someone still was able to earn a living for a time being from it.

 

[cytech]

So the state is still earning more money than it would have if it didn't provide the tax break. So not sure what the problem with giving them the credit is.

You are right 10-20 years down the road they will get more money.

There are several tax breaks combined in this deal. One is a property tax break for 10 years on the added value to the property. Which means no additional property tax will be collected for 10 years. There is also a withholding tax break for their employees they hire. This means that the employees will get credit as though they paid Iowa income tax but the company will get that amount rebated back to them. Not sure on the amount of years on that though it is generally a shorter term like 5 years. Then there is the break on paying sales tax and any local option or school sales tax on their equipment purchases.

We need to lower the overall rates to a point where we can be competitive with our neighboring states and eliminate the use of these tax breaks.