> this unwillingness to play ball may just result in the companies fleeing to other countries rather than other states

If they could they will do it. But it is not possible as you need data locality. If your data center is in China, it cannot compete in speed with a local data center. And this is true in different ways for a lot of businesses. That is one of the many reasons why all business are not already in India even that everything is way cheaper there.

And how a small company can compete with this kind of deals? Google is already having a scale advantage add to that tax breaks and it's impossible to compete with them. These tax breaks have a very bad impact on any capitalist economy.

Well, small companies don't have a need to build large multi million dollar data centers, for one. Data centers, we can all agree, are kind of like a utility that favors scale. But there's lots of businesses and industries where this is true.

It seems like the federal tax code could be changed so local tax breaks or incentives just count as fully taxed income.

You can't outlaw them without modifying the US Constitution due to the 10th Amendment as it concerns states rights. Individual states could outlaw it, but they would just be putting themselves at a disadvantage relative to other states that did not.

I'd like to understand why the 14th Amendments provisions for due process and equality under the law aren't applicable. Seems to me that whatever taxing regime a state designs should be applicable equally to all legal entities (people/corporations/llc/etc). No favorites.

Interstate commerce?