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Since the announcement of the federal CHIPS Act funding, states and localities have awarded massive tax breaks and other subsidies to chip makers.

  • Intel is set to receive $2.4 billion from the state of Ohio and the city of New Albany for its investment in two new fabrication plants.
  • The state and various local governments in Texas have awarded Texas Instruments, Samsung, and GlobiTech subsidy packages worth $4.2 billion.
  • New York’s Green CHIPS program is expected to save Micron up to $5.5 billion on its state tax bill, on top of nearly $1 billion in project-specific public spending and local tax breaks.

Overall, states and localities have recently promised eight new semiconductor projects $14 billion in disclosed subsidies over the last three years. The communities making these commitments expect to spend $605,000 for every new job created.

Despite misstatements made by some public officials, the CHIPS and Science Act does not require states to match federal spending. In fact, it doesn’t stipulate that companies receive any direct state or local subsidies at all. In fact, the Commerce Department’s program guidance explicitly discourages the use of tax abatements and other kinds of direct corporate subsidies with limited spillover benefits to the broader regional economy. Instead, it calls for parallel investments in infrastructure, public education, and workforce development.

Giving subsidies to chip makers is nothing new. While the CHIPS Act was enacted in order to support domestic chip manufacturing, states and local governments have lavished semiconductor companies with public support for over 30 years. 

  • Oregon and New Mexico have awarded Intel over $5.4 billion in tax credits and exemptions since 1993, making it the single largest subsidy recipient in both states.
  • New York spent $1.2 billion in 2006 on a subsidy package for Advanced Micro Devices (AMD), now GlobalFoundries – worth $1 million per job. 
  • Both Tennessee and Michigan awarded Hemlock Semiconductors subsidy packages in 2008 together worth $850 million.
  • Local governments in north Texas granted Texas Instruments property tax breaks in 2003 worth an estimated $600 million
  • Utah and Virginia have collectively awarded Micron $372 million to expand operations in both states.

These massive subsidies deplete public revenues that could otherwise be spent on schools, roads, public safety, and other public services.

We recommend:

Fair sharing of the tax burden for higher public-sector costs induced by microchip production and local workforce population growth such as: higher school enrollments, greater highway traffic, increased fire and police protection, water and other utilities, and waste-water treatment.