Dangers of Long_Term Economic Incentivies

The city of Round Rock is facing the possibility of losing $20M+ annually in sales tax revenues due to a potential rule change by the Texas Comptroller. Community Impact

The proposal would redistribute sales tax collected on internet purchases by routing tax revenue to the purchaser’s city rather than the city where the online sale is received by the business fulfilling the order. Currently, the opposite takes place: Sales tax revenue stays in the city where the business is located.
For Round Rock—the headquarters of Dell Technologies—this shift would result in tens of millions of dollars in lost revenue annually, city officials said. In fiscal year 2018-19, the city of Round Rock collected a total of $28.5 million in sales tax from Dell, Sheets said. Based on the terms of an economic incentive agreement signed in 1993, the city rebated around $8.5 million to Dell in FY 2019.

These incentives were given to Dell Computer in the early 1990s to encourage Dell to move its headquarters to Round Rock.

Now the city has become dependent on these incentivized revenues and their loss will necessitate a tax hike says the city.

How about a reduction in the city budget instead? As is typical of government, reducing the budget is never an option.

Round Rock makes the disingenuous argument that since the sales tax from brick and mortar stores stay in the community, so should internet sales taxes. Do the sales taxes paid to Amazon stay in Seattle or in the Texas City that houses the Amazon distribution center from which purchases are dispatched, or they allocated on the basis of the buyers location?

Inquiring minds would like to know.