"The Costco business has been cooking for a while, and we’re finally seeing the details of a proposal that the city give back to Costco $20 million in sales taxes, taxes on their own sales and on the sales of the other stores that come to their development. They have seven additional pads besides their own. The city says the $20 million over a 10-year period is an inducement to get them to come to Georgetown.
Before this, our city leaders have said that sales tax is a reason for more retail development, telling us that sales taxes help keep property taxes down.
You may wonder why, then, should we give it back? How can it help if we don’t have it? *** Tax abatement talk is heavy going, about as fun as working out square roots with a pencil.
As a result, we taxpayers are at risk of becoming gullible sitting ducks, influenced by dull figures and vague, plausible-sounding talk. When we think of economic development, we think of attracting industry from outside — manufacturing, or a high-level service business with good jobs and taxable property that can help lower taxes for the residential taxpayer.
When Thing, Inc. needs a new location, it looks for land, a suitable labor pool and good infrastructure: roads, rail, airports, reliable electricity, etc. Since many communities have what Thing, Inc. needs, it starts a bidding war between them.
Who will give the best tax break? Who will donate land? Who will build, at taxpayer expense, the new roads needed? If Thing, Inc. is a strong company, it doesn’t need the tax breaks, but will take them if it can.
The tax breaks rarely make a difference in which site Thing chooses, but the breaks can be pitched to the citizen as a do-or-die choice and that scares people into folding. Thing, Inc. has knowledge and skill. It has customers. It has cash flow from outside. The town has land, people and infrastructure. But so do many other towns. At the negotiating table, Thing has a strong position. The town can’t easily find another Thing, but Thing can easily find another town. So tax breaks happen.
*** But with retail, the negotiating positions are different. The town has the cash. When Big Retail wants to go into a town, it is because the town already has rooftops and roads with lots of traffic and more to come. BigR does not come to town before the money is there. Otherwise, a tax abatement would get us a grocery store on the east side of Georgetown, where there are not yet enough homes to support a grocery.
But BigR saw how well the arguments worked for industrial tax abatements, and it adapted them to pitch abatements for retail. The arguments, though faulty, are effective, since we are used to hearing them in another context. But ask yourself this: When the city tells us that these abatements are needed as “inducements,” do we really think that BigR will go to Muleshoe, Texas, if Muleshoe offers a better tax break? Thing, Inc. might go to Muleshoe, but not BigR. Abatements are useful for landing export businesses — businesses that earn money from outside the area.
When the city gives a special tax break to one retail business, it harms the others. Is this fair?"
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