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And what a deal it got. New Mexico and the community of Rio Rancho, just north of Albuquerque, won the bidding war by showering Intel with tax abatements and other assistance. Sandoval County, where the company erected its fab, authorized $2 billion in industrial revenue bonds in 1993 and an additional $8 billion in 1995--the largest local-government bond offering in history. The county held title to the land, building and equipment, which it leased back to Intel.
Since governments are not taxable, this arrangement enabled Intel to escape property and sales taxes. Then there is the investment-tax-credit deal, which allows Intel to pocket a portion of the state income taxes withheld from its bunny-suited tech workers' paychecks. In addition, the state provided money to train workers. These and other benefits add up to a third of a billion dollars in aid for Intel.
From Intel's vantage point, that is simply the way the system works. A company spokesperson said that states offer incentives "because they want to compete, and they obviously want the project in their jurisdiction rather than somebody else's...They try to develop their incentive package around those specific industries...that they want to build."
In any event, when some local residents challenged the giveaways as too costly, a citizens group supported by Intel commissioned a study to determine the company's impact. It concluded that the incentives "resulted in a good deal for New Mexico" and that Intel's expansion had created 10,000 jobs statewide by 1995.
But a TIME analysis of federal tax-return data raises questions. Let's look at two four-year periods, before and after Intel's massive Rio Rancho project.
Between 1989 and 1992, the number of federal income tax returns filed by New Mexico residents who showed wage income increased by 35,770--or 6.6%. Between 1993 and 1996, when the Intel-related jobs were created, wage returns rose 40,551, or 6.8%, a marginal increase.
More significantly, tax returns showing wages in three income groups ($30,000 to $50,000, $50,000 to $75,000 and $75,000 to $100,000) went up at a faster pace in the 1989-92 period than in the post-Intel era. Only two income groups increased faster in the later years: those at the bottom, with earnings of less than $30,000; and those at the top, with earnings in excess of $200,000.
Even more telling is the jump in the number of federal tax returns from New Mexico claiming the earned income tax credit. That is the credit intended to supplement the income of the working poor. Between 1989 and 1992, the number of such returns went up 14%, from 112,334 to 127,900. But between 1993 and 1996, it climbed twice as fast, shooting up 31%, from 134,613 to 175,797.
And although Intel is one of the largest corporate income taxpayers in the state, it has fared well in recent years. Documents filed with the U.S. Securities and Exchange Commission show that in 1991, Intel paid corporate income taxes to state governments at an effective rate of 8.6%. By 1997, while the company's taxable income had spiraled upward 1,097%, its overall state tax rate had dropped to 4.8%.