Semiconductor kingpin Intel Corp. is sending a not-so-subtle ultimatum to state lawmakers: Give the company a tax break or risk losing out on the chance for a $4 billion production expansion at its Chandler campus.I think more than a chance would be necessary before any consideration should be made.
Intel, other technology advocates and the Greater Phoenix Economic Council are pushing hard for a change to the state's tax code that would result in a $100 million break for large manufacturers.What does the state get out of this deal?
The Silicon Valley-based chip-maker, as well as defense and electronics firms, would benefit from the so-called "sales factor." That tax cut would benefit large manufacturers by allowing them to calculate their corporate income taxes based on in-state sales instead of the current, more expensive formula that also takes into account property and payrolls.
Intel is considering its Chandler semiconductor plant for a $2 billion to $4 billion expansion that could result in 500 new high-tech jobs. The lure of that expansion is being dangled in front of state lawmakers who have failed to pass sales factor proposals in recent years.According to this, the state gets nothing.
Critics argue that the sales factor is corporate welfare that does not offer the economic development or job stimulus promised by supporters.
They point to sales factor states such as Illinois, Missouri, Massachusetts and Iowa, which have lost manufacturing jobs in recent years to offshoring and corporate consolidations despite having the business tax benefit.
Elizabeth Hudgins, vice president of the Children's Action Alliance, said the sales factor's $100 million price tag would jeopardize spending on key programs related to health care and child abuse prevention.It looks like this is part of a larger agenda and not related to the decision to expand here.
"It's very expensive, and this is a state with a plethora of neglected priorities." Hudgins said.
Michael Mazerov, an economist and tax expert with the Washington, D.C.-based Center on Budget & Policy Priorities, contends the sales factor is not a big determinant in company site selection and has not resulted in manufacturing or high-tech jobs gains in the states where it has been enacted.
Mazerov said state and local taxes make up only about 2 percent of corporate expenses and income levies only 10 percent of that total. [Arizona - BizJournal]