An editorial in today’s Raleigh News & Observer criticizes Google for its “rough” tactics in negotiating tax breaks with North Carolina state and local officials – and blasts the officials for “groveling.” Government documents released last week, say the editors, paint a “very ugly picture of just what went on behind the scenes as Caldwell County officials and legislators sought to land a Google computer center for [the town of]Lenoir”:
Google demanded, for example, that public officials not mention its name during negotiations over legislation to grant some specific tax breaks. The company even wanted those involved in the deal to sign nondisclosure agreements. Incredibly, some Caldwell County officials did sign, as did some lawmakers. To their credit, officials of the state Department of Commerce did not sign. Demands of this sort are outrageous, of course. Google should have known better than to make them, given that the people it was pressuring worked not for the company but for the public.
Even if you look beyond the ethics of demanding that public officials sign nondisclosure agreements, you have to wonder about the business rationale of this kind of corporate bullying. Google, after all, is extremely conscious of its public image and has gone out of its way to portray itself as a company with a pristine moral character, presenting itself as the anti-Microsoft. Did it really think that its pressure tactics, documented in emails to public officials, would remain under wraps?
Google appears to have believed it could accomplish two contrary objectives: keep its plans for building a data center secret, and push big tax breaks for itself through the state legislature. If your main goal is secrecy, you probably don’t want to throw your weight around inside a state government. If your main goal is minimizing your property taxes, you’re probably going to have to sacrifice some secrecy. In believing it could accomplish both goals, Google displayed an arrogance that belies its public image.
You have to wonder whether saving $100 million over the course of 30 years was really worth it.
Who thinks Google will be around in 30 years?
I’m usually quick to defend Google, but I don’t see how this kind of approach can work for them. (And I don’t know any serious public officials who do sign NDAs.)
Even if transparency creates headaches and makes doing business difficult, it’s the only way. Clearly there is a market for cities to attract businesses and it is best if that plays out openly, just like so many things.
And if tax management has become such a core part of the busines, then the Canary Islands probably represent better domicile.
The ultimate irony of this story is that cities and states generally don’t benefit economically from offering “tax incentives” of this sort. The Economist magazine ran a story awhile back about a study of such incentives that found that lost tax revenue is not offset by other tax revenue, job creation or other benefits, and that the cost per job created is often incredibly high. It’s not unlike the stadium, sports team and convention center games that cities play, often to their cost.
It’s also interesting to see that Google’s arrogance applies even to this side of their business. My company has direct experience with their Microsoft-like tactics in unfairly favoring their own software products and punishing competitors.