Why Trump’s Carrier deal makes business sense
By now, I have read multiple stories and posts panning Trump’s deal with Carrier. To be sure, there are flaws in this deal, the most glaring one being the precedence that it sets for other companies.
But also, let’s just understand the numbers in their localized context, without considering derivative implications.
The deal does three things:
- Prevents 800 jobs from moving to Mexico
- Requires Carrier to invest $16,000,000 in Indiana
- Provides Carrier with a $7,000,000 tax relief over a period of 10 years i.e. $700,000 per year.
This amounts to $875 worth of tax relief per job saved per year.
Now, Unemployment benefits in Indiana would be $390 / week for each employee for 26 weeks. Thus, Indiana would pay out $8,112,000 in 6 months to those 800 folks.
Further, State and Federal government will receive up to ~ $128M in taxes over the next 10 years from the jobs saved (See below).
Then, purely in localized context (i.e. deal specific) — this deal makes a lot of sense. Why?
- Pay $7M over 10 years and save $8M in 6 Months
- Save more in other state benefits like Food Stamps.
- Save the jobs. I am assuming average wage is around $65,000 per year. Also, there is a significant emotional/behavioral benefit to the community.
- Receive State + Federal Income Tax + Social Security + Medicare income for the governments (State and Federal). This would roughly bring $16,000 per year per job saved. This equals total revenue of $128M over 10 years. (This number may be lower depending on how things play out, some folks will find another job, may up level their skills and find a job in the service economy, etc.)
- State gets an investment of $16M which will create additional jobs.
Is there a flaw with this logic? Has anyone talked about this in the press at all? If not, why?
Arguably, there are other flaws with this deal but isn’t this context important to have, for a well rounded discussion?