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Oregon's Botched Google Tax Break Shows Why You Don't Bend the Knee to Tech Giants

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As city officials around the US continue to carve out incentives that might convince Amazon to build its new headquarters in their town, lawmakers in Oregon are having regrets about their own efforts to please Big Tech. A new bill there would repeal tax breaks that were intended to lure Google to deploy high-speed fiber—but ended up just lining Comcast’s pockets.

According to The Oregonian, Oregon’s state legislature unanimously approved a proposal this week that would repeal tax exemptions that were first introduced in 2015. The tax breaks were reportedly written at the “at the behest of Google” and were intended to spur greater investment in infrastructure that delivers internet users gigabit speeds.


In a comedy of errors, lawmakers got in line to give Google what it wanted, but in their rush to push something through, failed to write the correct terms in the first bill they passed. Initially, the tax breaks would be offered to companies that provide speeds of at least one gigabit per second. Google Fiber offered speeds up to one Gbps. After Google said it couldn’t qualify for these new terms, lawmakers corrected their error with a second bill. Then Google lost interest in this whole Fiber thing and decided not to go forward. But companies that were already in Oregon were happy to take the discount on their tax bill with a bare minimum effort to meet its demands. From The Oregonian:

Losing the exemption would cost Comcast up to $15 million a year in taxes and Frontier Communications about $2.5 million, according to state estimates. That money will go instead to Oregon cities and counties, which lobbied for the repeal...

The tax exemption lawmakers created in 2015 was broadly written, with few standards for what a company must spend to qualify for the tax break or and no threshold on how many customers it must serve with its gigabit connections. So when Comcast and Frontier each began offering their own gigabit service, they each sought the tax exemption.

That could have cost local governments and school districts more than $17 million a year, according to new estimates from the nonpartisan Legislative Revenue Office. And that price tag is what prompted the Legislature to reverse course and consider undoing the 2015 legislation.


In 2016, Comcast tried to take advantage of the rules by pointing to a two Gbps service that it was offering in limited areas for $300 per month. That application was eventually denied. But last year, Comcast did rollout gigabit options in Oregon. The service upgrade had been planned to go in effect anyway, and it wasn’t so much an infrastructure upgrade as it was a way to wring the last bit of life from its existing coaxial cables. At $140 a month with no contract, it was also twice the price of the comparable municipal service offered in Chattanooga, Tennessee.

Now, lawmakers have introduced a third bill intended to scrap the whole mess.  State Representative Rob Nosse told The Oregonian that the previous bill was never properly vetted. “We should start over,” he said. “I’m not even sure if it’s needed, and I think we should stop offering it.”

So, the whole thing blew up in everyone’s face. Google never came, Comcast made more money, citizens aren’t any better off, and public institutions have less funding. What’s more, the companies that were already in Oregon get to claim that they’re being screwed out of a promised tax break after they did the bare minimum to qualify. Brant Wolf, a representative of the Oregon Telecommunications Association, an industry group, told The Oregonian that any repeal shouldn’t disqualify tax breaks that could be retroactively applied to “investments that would not have been made absent the tax credit incentive.”

It’s all a nice illustration of why you shouldn’t cater to the whims of tech giants that hold their investments hostage until the public essentially agrees to pay for them by leaving tax dollars on the table. And if you are going to do that, get an agreement in writing from the target company first. Last year, Amazon had 238 cities debasing themselves to attract their forthcoming second headquarters. Only one of them will be the winner. Time will tell if lawmakers in any of those locations made shortsighted changes that will screw them in the future.


[The Oregonian]