Iowa's New Top Crop Is Server Farms

1sockchuck writes "Microsoft just confirmed that it will build a $500M data center in Iowa, following the lead of Google, which is nearing completion of a $600M facility in the state. Boosted by generous tax incentives and affordable power, Iowa is prevailing in a fierce competition with other states for these huge data center projects for tech titans. Iowa officials say they intend to leverage that track record to attract even more projects in a bid to transform the state into a mecca for server farms." The Economist covers this trend more broadly, focusing on Washington state and Iceland angling to become server-farm destinations.

Iowa takes lead in corporate welfare

[XanC]

Discuss.

Re:Iowa takes lead in corporate welfare

[Kohath]

Tax cuts are not welfare.

If you decide not to hold up a liquor store, that's not a generous gift you've given the liquor store owner.

Re:Iowa takes lead in corporate welfare

[AvitarX]

Assuming the state runs on an ab out balanced budget it does mean citizens are taking a larger percentage of the taxes. It could still be better for them though. The fact that Corporate taxes are essentially a tax on customers of that corporation, and that most Google and MS customers are not from Iowa, would mean that the citizens of Iowa are paying taxes that in a normal (for that state) structure would be paid by people world wide.

If the power is really so cheap why the need for tax breaks?

This is really more like corporate affirmative action (for advantaged corporations) than welfare though.

Re:Iowa takes lead in corporate welfare

[CambodiaSam]

Think of it as a "Tax Sale". The state can give up-front breaks to the corporation, they can offset this with additional revenue that is brought in from the ancillaries: more high-salary (high tax) workers moving in, other associated businesses that will benefit (and pay more taxes), and even other effects like rising property taxes.

Now I'm thinking like a business person on this. I have a deep cynicism that tells me that your average scum sucking low-rent politician isn't doing this kind of analysis. They're likely just handing over the tax breaks to generate a larger pool of benevolent corporations that give to their re-election coffers, and to stamp their campaign signs with "I created ### jobs for Iowa" pandering.

I get the feeling my ranting is going to burn some Karma. Oh well, it's election season, anything goes!!!

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Re:Iowa takes lead in corporate welfare

[mdfst13]

tangible results are measurable

Sure, but correlation is not causation. Let's assume that Iowa were not handing out tax breaks. What might happen instead? It's quite possible that the server farms would still go there (it's centrally located, cheap power, and low wages). Then they'd have all the current benefits plus higher tax revenues.

You can only measure results if you know what would happen without intervention. Without that, all that you are measuring is current state. You don't know if the current state is because of your change or despite it.

Re:Iowa takes lead in corporate welfare

[AvitarX]

I didn't say they were paying more. I said they were paying a larger percentage. That would be true with a smaller government too (what did ab out mean, probably that I am too stupid to proof read).

Giving benefits to a type of company you want while not extending them to other companies you apparently don't want (small businesses I guess?) is affirmative action, weather you approve or not.

I will say that taxing corporate profits is kind of silly for most companies. If a company is in a competitive market (or playing nice by not returning much more than 10-15 percent) a tax on them is just a tax on customers. You could argue that this provides a local benefit by spreading the tax burden from those that are outside of equivalent jurisdiction (as those foreign to the local become customers and help the profits), but it is really more a strategy to help government tax people that are too dumb to realize it, since everyone hates corporations (except the one that pays them).

I also think there is an argument to tax large profits for the sake of encouraging re-investment (for example a 50% tax on all profit over 15% of gross would encourage some of that extra profit to be spent on R&D (or salaries, probably for those who need it least). You could even allow years where profits ate 10% to allow the extra 5% to be deducted from future years.

All of that could still be bad, because in new fields people relay on better than 15% return (VC's), I don't know how much of what they make is capitol gains, and how much true profit.