Which State Will Get Lower Taxes To Get Amazon And Caterpillar Business?

By Douglas A. McIntyre Published Mar 28, 5:53AM EDT

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Amazon.com (NASDAQ: AMZN) is so upset by the prospect that it must collect state sales taxes on items it sells that it will desert its operations in Dallas because Texas sent it a bill for $269 million. Amazon has threatened to do the same in California. Other states will follow if they are not willing to agree with the e-commerce company’s view that it is not a tax collection agency.

Amazon’s business and that of heavy earth machine equipment maker Caterpillar (NYSE: CAT) could not be more dissimilar. But, Caterpillar has threatened to pull business, and lay-off workers in Illinois if the state does not roll back new taxes. Caterpillar probably won’t move according to people who know company management. That has not kept CEO Doug Oberhelman from writing Governor Pat Quinn that governors from at least four states have tried to woo the heavy machinery company out of Illinois, and “they make compelling arguments,”’according to The Chicago Sun-Times

States are in a bind which most did not face before the recession. Many politicians were elected on platforms of austerity, and, sometimes, higher taxes. It is easy to tell voters that the rich and large companies should bear more of the financial burdens to close state deficits. That is true until the rich and those corporations threaten to leave.

Governors in the states which have invited Amazon, Caterpillar, and other like-minded firms have to do a difficult set of calculations, but they are critical to finding a solution to their deficit problems. Are they better off to make tax deals to get large companies to move to their states and bring jobs with them? Or, do their offers of special tax deals invite existing employers to insist on the same, with the potential of undermining a significant part of the large business tax base.

Some state or states will get more of the Amazon.com business than they already have. Amazon has made that clear. It may turn out that having Amazon as a resident is more expensive than telling it to go elsewhere.

Douglas A. McIntyre

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.