Plano City Council Passes More Economic Fascism
On July 24, 2023, the Plano City Council passed a tax rebate for a New Jersey company that is worth $2 billion. Yes, that is billion with a B. The rebate was originally on the consent agenda as item A.B. The wording was as follows, “To approve the terms and conditions of an Economic Development Incentive Agreement for Tax Rebate for calendar years 2024-2031 by and between the City of Plano, Texas, a home-rule municipal corporation, and CoreWeave, Inc., a New Jersey corporation; and authorizing its execution by the City Manager or his authorized designee.” You can get the agreement at the following link. https://plano.novusagenda.com/agendapublic/CoverSheet.aspx?ItemID=8487&MeetingID=3420 If it was not taken off the consent agenda, because Councilman Anthony Ricciardelli had to abstain from the vote, we here at PPPB would have missed it. Councilman Ricciardelli did not mention why he had to abstain. Some people call this kind of tax rebate Corporate Welfare or Crony Capitalism. It is neither; this is Economic Fascism.
Before I continue, let me define my economic words. Capitalism is the private ownership of property, capital, or means of production. A Free Market is where people can voluntarily exchange things of value without government interference. In a Free Market, prices are set by supply and demand. Also, a company succeeds or fails on its own. Economic Fascism is when the government controls economic activity, the incentives of investment, or economic planning. With Economic Fascism the government can restrict any action or promote any action.
Now that we have defined the economic terms, you may be asking, what is CoreWeave? According to it’s website, “CoreWeave is a specialized cloud provider, delivering a massive scale of graphics processing units (GPUs).”
The Economic Development Incentive Agreement that City Council passed said, “[The] company agrees to occupy at least 454,421 square feet of space at 1000 Coit Road, Plano, Texas 75075.” It also agrees, “…to add at least $1,600,000,000.00 of business personal property [in the space] and use [it] as a data center during the term of this Agreement.” In exchange, the city will give “a tax rebate equal to fifty percent (50%) of the Business Personal Property Taxes…paid by the Company to the City for the 2024 tax year.” In 2026 the City will return 25% of the Business Personal Property taxes paid in 2025. The agreement does not say how many employees CoreWeaves has to hire, or if any have to be current Plano or DFW residents. From what I can tell, CoreWeave will store the cloud servers at 1000 Coit Rd. That is the business personal property that is worth $1.6 billion.
This economic development agreement payoff is not the only one Plano has ever done. Plano is also not the only city to give away money to entice industry to move within its boarders. Cities, States, Republicans, and Democrats do this everyday. It interferes with Capitalism, the Free Market, and is Economic Fascism.
This kind of interference with the economy has consequences. The obvious first consequence is reduced tax revenue. That fact alone should anger any homeowner struggling to pay their property tax bills. To add insult to injury, the city council may vote to raise property taxes in September for the 2024 fiscal year. That is right, a New Jersey company gets a tax rebate and Plano residents may get higher tax bills.
The next consequence of deals like the one with CoreWeave is the government picking winners and losers. The government is propping large companies up while others suffer. Large companies worth billions of dollars that can afford their tax bills get help, while small businesses trying to start out get nothing. For example, a person who wants to open a small restaurant would not get a deal like CoreWeave. Yet, I would bet a restaurant owner does more for Plano’s economy and people. The owner of the restaurant would hire contractors to make improvements to the space, buy tables, chairs, and equipment. This personal business property would be taxed by the city. The owner has to also buy the food on a regular basis. The personal business property and food can be bought in Plano or other parts of Texas. The owner has to also hire staff who would, most likely, come from the area. The people who eat at the new restaurant would pay a sales tax to the state and city. All of this directly helps the people and economy of our city and state. CoreWeave’s servers are probably not made or bought in Texas. Since the cloud is not a tangible good, people will not pay a sales tax. Yet, CoreWeave gets a tax rebate that it does not need, and the small restaurant owner, whose profit margins are razor thin, gets a tax bill. If Plano raises tax rates, small business owners may not be able to afford it. That may cause them to never open, close down, or raise their prices.
Another problem with this kind of Economic Fascism is it tampers with the economy. Companies are no longer just picking cities or states to go to based on natural market forces. Instead, they are picking a location based on how much money they can get from a local or state government. We saw this with Amazon’s HQ2. Originally Amazon planned to build a second headquarters in Queens, NY in return for $3 billion in financial incentives from the city and state governments. When the incentives got pulled, due to outrage by some politicians and residents, Amazon decided to go to Arlington, Virginia. If Queens was the perfect place for Amazon’s HQ2, the company would not have needed $3 billion to put it there.
In a true Free Market and Capitalist economy companies would go to cities based on what is best for their customers, employees, and profit margins. They would not need a monetary incentive from a government entity to move. However, as long as we have government central planners, who think they know what is best for everyone, and politicians willing to give hand outs to rich companies we will have an economy that Mussolini wanted instead of Adam Smith.
This is J. Romano for Plano’s Political Pit Bull signing off.