I said (Bidding for firms):
My state income tax payment goes to someone else in the state. But in this case the reduced taxes are enjoyed by Facebook folks out-of-state. If out-of-state folks don't have standing then the incentives are costs.
Since the state is granting the tax breaks I'm inclined to disenfranchise the out-of-state Facebook folks.
He commented (from the inbox):
If the server farm never came to NC then the state would also get no income tax revenues. The question is would they have come to NC without the tax breaks? If the answer is no then it is no cost to the state with a net gain of 42 jobs. How can it be a cost if NC never had the option of getting the money in the first place?
Anyway you know I hate subsidies and special tax incentives that politicians use to choose winners and choose losers....if NC wants more jobs then they should cut taxes across the board. Let the market choose what those jobs should be.
The problem is that the land has an opportunity cost, whether Facebook would have come to NC or not. In addition, the taxes help pay for the additional infrastructure that the new firm requires. When states are bidding for firms, the firms are able to extract these benefits (tax breaks) from the winner (i.e., loser). If the states all decided not to bid for firms, then the winner would receive the firm based on its comparative advantage (skilled labor, etc) and enjoy the tax payments from out of state.