NY Times Didn’t Check Facts on San Francisco “Twitter” Tax

by Randy Shaw on December 3, 2012

The Sunday December 2 front-page New York Times story (“The Empty Promise of Tax Incentives,” by Louise Story) described how governments giving tax breaks to corporations in Michigan, Missouri, and other states neither got the promised jobs nor even assessed the economic cost of the incentives. But apparently seeking a more 21st century corporate target and a California city to complete its picture, the Times’ expose on failed incentives also cited San Francisco’s Mid-Market tax exemption that benefited Twitter. The story claims while “San Francisco has been cutting its budget,” and “public parks have lost about $12 million in recent years, workers at Twitter will not lack for greenery. The company’s plush new office has a rooftop garden with great views and amenities.” But the Mid-Market tax exemption has not cost the city money. This picture of Twitter getting tax abatements while San Francisco’s budget is cut, and securing private greenery at the expense of public parks turns, is false.

It’s a familiar story: a corporation gets cities or states in a bidding war to open a plant, securing huge tax abatements in the process. The plant then quickly closes without providing the promised jobs, with city taxpayers holding the bag.

Yet in order to fit the Twitter tax-exemption into this frame, the NY Times had to avoid checking the facts. If its reporters had done so they would have recognized that the Mid-Market tax exemption stands as a powerful counter-story to the many failed tax abatement schemes across the nation.

The Times v. Reality

Twitter moved to Mid-Market in June 2012. Its tax exemptions only apply to employees hired after this time. So for the picture the Times offered of declining park budgets with money instead going to Twitter’s “greenery” to be true, we would need to see this trend occurring after June 2012.

It has not. While the Times says “San Francisco has been cutting its budget,” such cuts occurred in the years preceding Twitter’s move. In fact, there were no cuts in the first budget approved after Twitter’s relocation, a key fact the Times ignored.

Further, the parks budget was not cut following the implementation of the Mid-Market tax exemption. So contrary to the Times’ reporting, there is absolutely no connection between reduced park budgets in prior years and tax incentives for Twitter’s relocation.

Why did the Times include a photo of Twitter’s rooftop garden in its story when it has nothing to do with the city park budget? Perhaps the contrast was too good to pass up, even though it’s untrue.

Curiously, unlike the other examples in its long story, the Times never told readers how the Twitter tax-exemption works. Unlike the other examples, the exemption only applies to net new hires, so that Twitter continues to pay payroll taxes on the number of employees it had prior to its relocation.

While the Times claims that Twitter’s exemption could be worth $22 million, that assumes it reaches 2600 employees, which was the city’s highest estimate. Yet Twitter had less than 1000 employees when it moved to Mid-Market, which means that it would be years before the exemption saved them anywhere near $22 million annually—and this still assumes it more than doubles its workforce.

The Times also ignored a key distinction between the Mid-Market exemption and the other examples in its article: the use of the tax incentive not to “save” the jobs of a single company but to stimulate economic activity in a long-troubled geographic area.One would never know from the Times story that the Twitter tax exemption spawned the greatest wave of investment in Mid-Market in over fifty years, greatly boosting city revenue.

This is where the Times’ failure to check its facts again undermines its entire conclusion about the Twitter tax measure. Unlike all the other examples cited in its story, the Mid-Market tax incentive will more than pay for itself in increased revenue to the city from new development and renovations in the area.

Many of these investments—such as Dolby’s purchase of a Mid-Market office building, new housing developments in the area planned after the exemption passed, and Square’s leasing of a vacant building —are not even covered by the tax-exemption. Had the Times talked to these and other companies they would have learned that Twitter’s arrival was key to their deciding to relocate to a Mid-Market neighborhood that had desperately tried but failed to secure such investment for decades.

As I wrote last month, false narratives about Twitter and the Mid-Market tax exemption continue to abound. Most of these narratives claim Twitter has had too much of a positive economic impact; now we have the Times’ claiming the opposite, citing the chief benefit of the tax incentive as a rooftop garden for Twitter employees.

The Times is a great newspaper. It could have provided the same level of research and analysis in assessing the Twitter tax exemption as it did for other examples in its story. If it had checked its facts, it would have found the Mid-Market exemption as a positive model of how public tax-incentives should work.

The Times missed this opportunity. It should revisit the issue more carefully in the future.

Randy Shaw is Editor of Beyond Chron.

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