Companies Enlist President Trump to Gain State Tax Breaks

For over 50 years, Bloomberg Tax’s renowned flagship daily news service, Daily Tax Report® has helped leading practitioners and policymakers stay on the cutting edge of taxation and...

By Che Odom

U.S. businesses are enlisting President Donald Trump’s help for leverage over state and local officials on taxes, roads and other concessions needed to open plants or expand operations.

It is a new strategy being discussed among executives, public-relations consultants and corporate attorneys who find the White House amenable to participating in company announcements.

“The assumption is he’ll do it, they just have to decide whether they want him to,” an attorney at a large firm told Bloomberg BNA. The attorney, who spoke on the condition of anonymity, said he has sat in on such discussions with multiple companies. “It’s about leverage on state and local taxes, federal treatment, incentives, leverage with local officials on whatever is needed, and publicity.”

The discussions have taken place at Intel Corp. and United Technologies Corp., among other large companies.

Trump’s name attracts attention that companies can wield over state and local officials, the attorney said. Trump’s nod may also lead to more favorable treatment from the federal government, he added.

In return, Trump shows he’s creating a more business-friendly environment that may lead to more jobs.

The attorney said: “In 25 years, I’ve never heard talk like this, about how easy it is to get the president involved in announcements.”

A White House spokesperson declined to comment March 1, except to say the president is working hard to bring more, better-paying jobs to the U.S.

Intel Announcement

Greg LeRoy, executive director of Good Jobs First, told Bloomberg BNA that many deals are negotiated between companies and state governments for tax incentives, highway offramps, water-main access, eminent domain and the like.“Having a famous name, or a president, endorse the project would be useful in negotiations,” he said.A Feb. 8 announcement by Intel Chief Executive Officer Brian Krzanich, standing next to Trump in the Oval Office, is an example of the strategy in action.

Saying that he wanted to give the president credit for creating a better business climate, Krzanich pledged to invest $7 billion in an Arizona factory, creating 3,000 high-tech jobs.

During the announcement, Trump said, “Brian called a few weeks ago and said, ‘We want to do a very big announcement having to do with our country but also having mostly to do with Arizona and jobs.’”

Later that day, Chandler, Ariz., Mayor Jay Tibshraeny (R) told reporters that he saw the announcement as a sign that Intel views the city as financially stable and proactive.

Carrier, Quayle

In December, Trump announced that he and Vice President Mike Pence had brokered a deal that would keep roughly 800 jobs at a Carrier Corp. plant in Indiana from moving to Mexico. In exchange, Carrier would receive $7 million in state incentives over 10 years. Carrier is owned by United Technologies.

“That was more about United Technologies getting the better of Trump,” the attorney said.

That deal included some behind-the-scenes talks involving former Vice President Dan Quayle, now chairman of Cerberus Capital Management LP, he said. James Geisler, the current executive vice chairman of Cerberus, who held executive positions at United Technologies, was also involved. The talks took place at Trump Tower in New York, and state tax incentives were a hot topic.

Really ‘Bizarre.’

The business community as a whole has high hopes that Trump’s administration will be friendlier than Obama’s, though Trump hasn’t yet had the opportunity to do much, said Peter Fisher, professor emeritus of urban and regional planning at the University of Iowa.

Still, the idea that a company would enlist the president in an announcement to gain leverage in negotiations with state and local governments is surprising, he said.

“Seems a really bizarre realm for a president to pick sides in a fight in a competition among states,” Fisher, who founded the Grading the States website and authored a book on the creation of business-climate rankings, told Bloomberg BNA.

“If it isn’t a fight, then I’m confused, because local officials are going to take credit” for luring the business, he said.

To contact the reporter on this story: Che Odom in Washington at COdom@bna.com

To contact the editor responsible for this story: Ryan C. Tuck at rtuck@bna.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Daily Tax Report