California residents are being held hostage, and local cities are paying their ransom. The culprits? Wealthy corporations like Apple, Deckers Outdoor Corp (the makers of Ugg Boots), and Best Buy, each of which have struck “deals” with California cities to stay in those cities in exchange for an absurd tax handout. By threatening to move and take thousands of people’s livelihoods with them, these companies managed to negotiate a rebate on the local sales tax for their own products, funneling money that should be spent on local services back into the pockets of corporate shareholders.
Like the Amazon negotiations in New York and Washington, this is part of a concerning trend of mega-corporations treating people’s livelihoods as a bargaining chip to get the best deal all while taking money away from local communities in the process.
When you buy something in California you pay a 7.25% sales tax to the state. Of that 7.25% the state gives 1% back to the city where the purchase was made. The agreements that cities make typically give around half of that 1% back to the corporation. In California about 10% of the state’s 482 cities (and some counties) have one of these agreements with a local corporation. This is money that would have been spent on schools, transit, parks, or public safety but is now being spent on subsidizing mega-corporations who don’t need it.
Initially when Apple secured a deal with the city of Cupertino in 1997, the company was on the verge of bankruptcy. In exchange for keeping their operations in Silicon Valley, Apple would receive half of Cupertino’s share of sales tax for five years. Now 22 years later and with a net worth of over $1 trillion dollars, Apple is still receiving a version of the deal they first cut in 1997. Luckily the city of Cupertino is doing well, but this can’t be said for other California cities.
In 2015 the struggling Central Valley city of Dinuba struck a 40 year long deal with Best Buy to keep the local processing center in their town. The deal gives Best Buy a 45% return on the city’s sales tax revenue, which over 40 years would equal $33.3 million. Dinuba has an unemployment rate of 14.5%. Corporations like Best Buy are taking advantage of small towns who are reliant on the revenue of one business to support their residents. They strong arm local governments into unfair deals that take money and opportunity away from local communities.
In 2018 Amazon paid nothing in federal income taxes and Apple spent $9 billion on stock buybacks. These same corporations are begging local municipalities for tax incentives like they’re a small business. Why do we allow mega-corporations to hold people’s jobs hostage as a negotiating tactic? When corporations strong-arm cities into giving them tax breaks they don’t need, it’s the local residents that suffer. Each dollar that’s stolen from a community in the form of a tax break is a pothole unfixed, a teacher underpaid, a community program canceled, or a vital service slowed down. It’s time that we end this technically legal heist and start expecting some of the wealthiest corporations in the world to start paying their fair share.