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It seems to me that there are many countries who are willing to spend big money to attract semiconductor business. But are there enough semiconductor companies who are willing and capable to expand to so many countries?
Reuters: Spain to spend 11 billion euros on semiconductor and microchip industry, prime minister says.
Short answer: no. Euro 11b for hi-tech is insignificant. For lower technology fabs (SiC, etc.) it might make sense but where do you get the equipment? Low tech fabs (On, Microchip, X-FAB) are NOT investing (and have no intention to). Could a Vanguard build something outside of its home base? i frankly doubt it.
For the record, AT&T once built and ran a factory in Madrid. This was a quid pro quo for upgrading the phone system to AT&T switching. I recall that the factory was bought by BP to become a solar cell maker. It's been closed I think.
TX is a unique case where the absence of income tax at the state level has shifted the tax burden to school districts and other low accountability environments (example your local hospital or EMT). In other states, the Taylor side deal would have come from the state capital.
Put another way, TX property taxes are much higher than many other states.
TX is a unique case where the absence of income tax at the state level has shifted the tax burden to school districts and other low accountability environments (example your local hospital or EMT). In other states, the Taylor side deal would have come from the state capital.
Put another way, TX property taxes are much higher than many other states.
In many states the property tax is an important source for K-12 education funding, just like Texas.
Although Texas doesn't have corporate and individual income tax, they do impose many types of fees and taxes plus federal funding. For fiscal 2021 Texas state fetched $170.5 billion revenue from various taxes and sources.
Texas State government is not poor. They have their own priorities. They can and they will push the responsibility of funding subsidies to local government as much as possible, in the name of creating jobs and developing the future.
You are right, TX is not poor. That said, I doubt that much fab capital is taxed at the local level anywhere in the country. I seem to recall a similar deal in Malta. The local entities go along, hoping for windfalls in jobs and new taxable developments (such as housings, shopping malls etc.). Does it work in the end? I am not sure.
What I do know is that whatever lead the US had after WW2 in quality of K-12 is gone. See Singapore, Finland, China, Canada, etc.
You are right, TX is not poor. That said, I doubt that much fab capital is taxed at the local level anywhere in the country. I seem to recall a similar deal in Malta. The local entities go along, hoping for windfalls in jobs and new taxable developments (such as housings, shopping malls etc.). Does it work in the end? I am not sure.
What I do know is that whatever lead the US had after WW2 in quality of K-12 is gone. See Singapore, Finland, China, Canada, etc.
Using K-12 education funding to subsidize businesses is not a fair and wise practice. Often they are enabled by political connections or individual's political inspiration. There isn't much accountability tied to the subsidies. Above all they are asking education institutions to subsidize private businesses for 15, 20, 30 years and allow those private businesses to claim they are "good" neighbors. I have seen even a new Walmart store demanded such subsidies.
It's funny yet ridiculous.
By the way, among all US counties there are 11 Texas counties in the lowest level of ten counties list (due to same score), in terms of adult literacy and numeracy skills.
That said, i think that the rationale goes like this: my school budget is $1m. My town has a grand list (list of physical assets - houses, buildings, equipment) worth $10m. Each million in capital is taxed at rate of $0.1 on the $. A fab moves into my town. My grand list is now $10b. I need to alter my tax rate, otherwise, the fab will pay $1b per year in taxes. So I reassess my school budget (based on # of kids etc) and rework my tax rate, giving the fab a "tax break" equivalent to what they would have paid under the old system.
Optically, it can be seen as fair. Intel has done the same in Hillsborough for years. Ultimately, the companies do not care one iota about the local workforce so boosting local K-12 is not a priority.
That said, i think that the rationale goes like this: my school budget is $1m. My town has a grand list (list of physical assets - houses, buildings, equipment) worth $10m. Each million in capital is taxed at rate of $0.1 on the $. A fab moves into my town. My grand list is now $10b. I need to alter my tax rate, otherwise, the fab will pay $1b per year in taxes. So I reassess my school budget (based on # of kids etc) and rework my tax rate, giving the fab a "tax break" equivalent to what they would have paid under the old system.
Optically, it can be seen as fair. Intel has done the same in Hillsborough for years. Ultimately, the companies do not care one iota about the local workforce so boosting local K-12 is not a priority.
Typically the school district/city will lay out the most rosy calculation and offer the particular business a multi years guaranteed rebate, by percentage or by dollar amount.
So often there isn't much serious benchmark or performance requirements linked to the rebate. In Samsung's case, Taylor Texas will rebate Samsung 92.5% (first 10 years), 90% (2nd 10 years), and 85% (3rd 10years) of property tax Samsung is going to pay.
The problems are:
1. Taylor school district has been operating under deficit for many years already. Each year they need to borrow $4 to $5 million to make even. How do they pay Samsung while district expense is going to increase due to Samsung project?
2. To solve the #1 problem, Samsung will pay certain amount of interest incurred from the debt Taylor school district borrowed. Potentially the Samsung project will cause Taylor to owe more money.
3. There is no guarantee the housing boom and business boom will be large enough to happen in the Taylor's boundary. Consequently Taylor will not gain any financial benefits from those out of district activities. But the rebate Samsung is going to receive from Taylor is guaranteed.
It's a typical incentive program happening across US every year. I hope there's some study on the actual results after 10 or 15 years on those projects started.
We agree in our disagreement! I think a town like Taylor is no match for Samsung when it comes to these types of deals. It's clear that a factory build out will cost any town money - new roads, more permitting, inspectors, residents etc. Then there are the new kids to educate (assuming that the population grows). Is your average town manager able to accurately forecast the needs that far out? Probably not. It does not make sense to me to have a deal go 30 years out. I mean who knows what will happen in the interim.
That said, i would venture that all large capex projects in the USA are done in this manner.
We agree in our disagreement! I think a town like Taylor is no match for Samsung when it comes to these types of deals. It's clear that a factory build out will cost any town money - new roads, more permitting, inspectors, residents etc. Then there are the new kids to educate (assuming that the population grows). Is your average town manager able to accurately forecast the needs that far out? Probably not. It does not make sense to me to have a deal go 30 years out. I mean who knows what will happen in the interim.
That said, i would venture that all large capex projects in the USA are done in this manner.
It's a very typical incentive/subsidy program that happens across US. But I think it's been abused to the degree of lacking accountability and common sense.
Using the new Samsung Taylor fab project as an example. Samsung is going to receive a guaranteed $954 million property tax rebate from Williamson County, City of Taylor, and Taylor School District through out the life of the agreement, probably 30 years.
But the existing Samsung Austin fab is in Travis County and only a
22 miles/31 minutes drive to the new Taylor site. Why do people believe Samsung's current suppliers and partners will setup additional offices or extra warehouses in Taylor? And why do people believe most Samsung Taylor employees will live in Taylor instead of the greater Austin area?
Fair on all counts. Capital rules so I doubt there was much choice. It was pay up or Samsung would have gone to upstate NY (or at least claim to). Remember the power outage for which the state never did a proper atonement.
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