Don’t expect Silicon Valley to stop asking for political favors

“If legislators don’t stop granting favors to tech companies, they could turn Silicon Valley from a beacon of innovation and into another dreary group of companies relying on government to protect them from competitors, argue George Mason University researchers Adam Theirer and Brent Skorup in a new paper about the history of cronyism in the tech sector,” Joshua Brustein reports for Businessweek. “They also suggest that perhaps Silicon Valley should voluntarily disengage from the game.”

“Not likely,” Brustein reports. “Silicon Valley’s lobbying spending has ballooned in recent years, with Google alone spending $18.2 million last year, more than AT&T, Boeing or Lockheed Martin, according to the Center for Responsive Politics. But if you really want to see the tech sector resembling every other deal-making, legislator-bullying, favor-seeking industry it claims to be different than, flip to Theirer and Skorup’s section on state and local governments. Tech companies have really been getting into the time-honored game of threatening to leave towns that want taxes from them.”

For example, Brustein reports, “Texas gave Apple $21 million in state funds, in addition to various tax rebates, to set up an operations center near Austin. ‘During negotiations, Apple explained that it considered other locations besides Austin. Yet there is some doubt that Apple was serious about any location besides Austin,’ the authors wrote.”

Read more in the full article here.

MacDailyNews Take: Ooh, Apple negotiated. Big crime.

The benefits these companies bring to their communities (income taxes and/or sales taxes in most states, dollars into the local economy, etc.) far outweigh any tax incentives they receive.

[Thanks to MacDailyNews Reader “Rainy Day” for the heads up.]


  1. All these government agencies are doing is giving back taxes on PRODUCTION (aka income based taxes). Instead of parsing out tax incentives to a select few they should give them back to everyone, then tax consumption..Pricing on US produced goods remain virtually unchanged while pricing on foreign produced goods increases.

    The net effect of doing that is to disincentivise sending US manufacturing offshore, and while making foreign produced goods more expensive it encourages US manufacturing.

    Also everything you earn, you keep: wages, tips, bank interest earned, investment profits.

  2. How many cities are still the game of building stadiums for sports teams, not many these days, it will be the same other business to in time. Giving it away never works for long.

    1. Wrong. Most cities/states are building stadiums and arenas. Minnesota just agreed to fund the new Vikings stadium. San Jose is suing MLB so they can build a stadium for the A’s. New York/New Jersey just built the new Meadowlands. Jackson County, MO just finished completely refurbishing Arrowhead Stadium in Kansas City for $350 million+.

      This is no different from businesses getting tax breaks. Don’t forget, that many of the tax breaks actually are paid back in later years, but the tax break funds a lot of infrastructure improvements, like roads, utilities, etc. Not to mention the boost to local economies from additional sales tax revenues, additional property taxes as property values increase and demand for housing increases, and additional payroll and other local taxes.

      Beyond that, cities often look at having a company like Apple in it as having a large anchor tenant in a shopping center — the big fish gets some breaks, but the big fish also attracts a lot of little fish to the center.

  3. At some point, tech subsidies are a lot like farm subsidies: corporate welfare given to companies that have absolutely no problem making big money all by themselves. The vast majority of farm subsidies go to giant agribusiness concerns, not small farmers. Is it any surprise Apple gets a lot of tax subsidies, too. Money is attracted to money.

    1. Well, the bigger the company the bigger the bet it needs to make to keep growth rates that excite wall street. Sure, Apple might not need tax breaks to afford to invest in a new ancillary site in Texas. But once other localities are willing to offer incentives for Apple to go there, Apple has to consider those offers, and if they are sufficient to make measurable economic sense, then it’s only right that they might go back to Texas and say, “Thanks so much for you effort in this matter, but it looks like the economic and tax incentives OtherState is offering to us will allow us to recoup our investment sooner which helps with other things on our horizon.” And if Texas chooses to say, “Wait! Let us sharpen our pencils and see what we can do.” — Well, that’s just good business and good policy.

      Don’t ever expect Apple to seek tax incentives to resurface the parking lot or change the exterior lighting to LED. Small projects are not going to be worth anyone’s time. So, big money follows big money.

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