Republican New Jersey Governor Chris Christie has been a big proponent of tax breaks for companies that locate their headquarters in his state — especially automakers.
Subaru saved $US118 million on its tax bill in a deal to remain in the Garden State, according to Bloomberg’s Rose Kim and Elise Young.
But those tax savings weren’t enough to keep Mercedes-Benz in New Jersey. The German luxury car-maker recently announced that it’s moving to Atlanta.
As Bloomberg reported, “Christie had met with and called a top executive at the carmaker, Michael Drewniak, a spokesman for the governor, said in an e-mailed statement.”
According to Bloomberg, Drewniak said, “‘In each conversation Mercedes USA made one thing very clear about its decision to leave — the cost of doing business and the tax environment is just too high here to be competitive with a state like Georgia…This only reinforces Governor Christie’s repeated calls to lower taxes and change the business climate.'”
There’s an element of gamesmanship here. Like NFL teams that want their cities to build them new stadiums by issuing debt and threaten to move to Los Angeles, the only big US city without a franchise, if the money doesn’t materialise, automakers are getting serious about making their tax situation as favourable as possible.
There’s also an element of Christie turning a loss into a sort-of political win, penalising the opposition for resisting him on low-tax policy.
In Bloomberg’s report, it’s noted that Toyota is leaving Southern California, its longtime US home, for Texas. Nissan left the Golden State several years ago, moving to Tennessee. Mercedes is now also heading to “Detroit South,” the cluster of southern states that have created alluring business environments for foreign automakers, combing friendly tax climates with “right to work” labour setups that prevent the United Auto Workers from gaining any traction.
It used to be that proximity to major luxury markets, such as New York and LA, mattered to the import brands. But Mercedes clearly believes that it can do business as easily (and far more cheaply) in Atlanta.
The only major luxury brand bucking this trend is Cadillac, which last year moved its sales and marketing operations to New York from Detroit, the better to stay abreast of luxury trends in an acknowledged luxury capital.
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