
The New York Hustle of Amazon’s Second Headquarters - lobo_tuerto
https://www.newyorker.com/tech/annals-of-technology/the-new-york-hustle-of-amazons-second-headquarters
======
bradleyjg
For the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone
cooperates the payoff matrix is globally optimal. But for New York City it's a
good deal, and those claiming otherwise refuse to look at the math and instead
want to go with how the deal makes them feel.

$150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around
9.25% at that income level that's around 350MM in income tax alone. That
doesn't include the taxes that Amazon itself will eventually pay, nor any of
the knock on economic effects of injecting all that extra money into the local
economy. For NYS and NYC this deal is a no brainer.

The federal government is _supposed_ to be the mechanism whereby coordination
problems like this are solved. But the federal government (for a long time
now, this isn't specifically about the current administration) if anything
seems to want to encourage this kind of thing, not discourage them.

So here we are. You can rant and rave about the perfidy of actors acting
rationally or you can work to change the rules of the game so as to produce an
outcome you think more desirable. I know which one I think is more productive.

~~~
clairity
you make it sound like those numbers are completely comprehensive and without
agenda, and that these subsidies are an unmitigated good. but they completely
ignore jobs lost, companies shuttered, environmental impacts, and opportunity
costs.

you're looking only at inflows and ignoring outflows. no systems dynamicist
would take such an analysis seriously. systems have boundaries (by
definition), and you must look at all traversals across the boundaries, not
just the ones you like.

plus, you ignore the fact that amazon probably would have set up shop in nyc
for far fewer, and probably even zero, dollars in subsidies. i.e., the same
benefits without redirecting tax dollars to the already rich.

 _yes_ to more, _savvy_ economic development; _no_ to corporate giveaways.

EDIT: to your point about actors acting rationally, i would hope a group of
business owners who don't get such subsidies put a bill before the people to
either hold amazon accountable to promised performance or rescind/restrict the
subsidies (or failing that, vote the bums out). the economic development
program dollars they used should be directed toward entrepreneurs and small
businesses, not mega-corps.

~~~
matchagaucho
_" you ignore the fact that amazon probably would have set up shop in nyc for
far fewer, and probably even zero, dollars in subsidies"_

Not a chance. Property tax incentives and subsidies are offered in all 50 U.S.
states to encourage employer relocation. There is rampant competition.

~~~
clairity
but there is only one new york city.

~~~
bilbo0s
As arrogant as this comment may sound, when you're talking about a facility
like Amazon's HQ2, HN user "clarity" is right.

There really is only one place that combines a ridiculous amount of technology
expertise, with an east coast location, and multi-modal transport links to
both the US and the Europe-Africa side of the world.

But that's all the more reason that NY state did not need to offer that much
in subsidies. (Again, I know they got a good deal, but not giving Amazon
_anything_ would have been an even better deal.)

------
lordnacho
The thing that seems the most interesting to me is the control over the
financial narrative.

Here's a bunch of numbers, and if they add up to more than zero, we should do
the deal.

There seems to be very little questioning of wether the accounting given is
appropriate. What's the chance that Amazon would put staff in NYC even with no
money? I'd say reasonable. Is anyone concerned about rising prices when 25k
new high income people show up? Will they show up, or are they already there?

Plenty of things in the details can be challenged, I'm not saying I know the
answer to any of these things.

But the narrative seems to be that there's these numbers, and they point to
"we should do it".

Normally the only tax/subsidy I'm in favour of is externality related, eg
Pigouvian. And I'm not seeing a lot of that argumentation here, though
admittedly I'm not the keenest observer on this one.

------
__float
Has anyone seen specifics on how they'll be held accountable? They've made
promises for x jobs with $y average salaries, but if they don't meet that,
then what?

[https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-
que...](https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-queens-long-
island-city-explained) suggests that nearly $1.3 billion is not tied to any
amount of job creation at all.

~~~
jhall1468
That article is an example of people not understanding what this deal is.
Amazon is not receiving $3B in public dollars, they are receiving $3B in tax
breaks. They are shifting a small % of that via PILOT and some other funding
Amazon has agreed to.

I don't understand how people think this is in any way a bad deal for NY.

~~~
rhizome
Tax breaks have a value, some might even say a cost.

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intopieces
Eh. Everyone is acting like $3B is some massive some of money. The State of
New York recently sealed a budget for ~$168B and and the economy of the state
itself is somewhere around $1.2T. Hell, Amazon itself has a market cap of
nearly 800B.

As of 2017, "[m]ore people are leaving the New York region than any other
major metropolitan area in the country":

[https://nypost.com/2017/04/01/people-are-fleeing-new-york-
at...](https://nypost.com/2017/04/01/people-are-fleeing-new-york-at-an-
alarming-rate/)

So, 25k additional people is closer to stemming the tide of people leaving
rather than overcrowding an already hot market.

~~~
throwaway2048
The tide of people leaving because NYC is becoming completely un-afforable if
you make less than 60k a year.

~~~
intopieces
The median household income is $59k. It’s not unreasonable that a large
metropolis cost above average, given the higher population, while declining,
still represents high demand for housing and local amenities.

------
l8again
>> Throughout a bidding process that saw dozens of cities vie to be the next
location of a proposed hydra-headquarters, there were murmurs that Amazon
might really just be looking for a regular office, and rebranding it a
“headquarters” to corner those tax breaks.

That is exactly what happened.

------
jorblumesea
Amazon was just looking to expand satellite offices, and used the HQ contest
as a way to get free business info as to where to expand next. They were also
looking for generous tax breaks to allow them to operate leaner in high COL
high talent areas.

My guess is NY and NOVA areas were already being seriously considered and
someone had the bright idea to turn it into a race to the bottom. Remember, as
way back as 2016, Bezos was buying property in the DC area.

------
jefftk
We should ban these kinds of deals at the national level. They're rational for
companies, and rational for regions, but overall they allow extremely large
companies to avoid paying their share of taxes.

~~~
erikpukinskis
They do seem to open up a much more complex calculus in the tax system.

I think you can make an argument that these deals can improve efficient
allocation of capital. But like credit default swaps and other complex
financial instruments, I think you run into the issue of, is there a level of
complexity that's just too much for the rest of the system to be rational
around.

One of the purposes of tax structures is to allow people to make predictions
about what the exact financial consequences of various choices they might
make. If you add this kind of one-off negotiation into that, you undermine our
collective ability to be rational about our financial choices.

However, if you allow this kind of negotiation, and you allow governments to
try to compensate organizations for the systemic benefits they bring to an
economy, that also has some utility. You can create an incentive to these
organizations to create value outside of just their bottom line. And if we
allow these kinds of deals, then over time we'll be able to systematize them
and then eventually make them broadly available under standard terms.

So, I don't know. I'm not sure rushing to an outright ban is the way to go.
But I do think there's some merit to the idea that in financial transactions
there's a limit to how far the contracts can be recursive. Allowing it to be
infinite makes for a chaotic fuzzy edge to the markets.

------
maria_
Being from New York and having followed this situation closely, I can say that
this entire fiasco serves as a good example on how the politicians we elect
_ought to_ protect their constituents from predatory corporate power.

However, this is not the case. Its mere political theatre as De Blasio and
Cuomo pose for the cameras, as what matters is not the actual success they
have achieved for the city in terms of job creation, but the _perceived_
success. That's how politics works. Otherwise some kind of protocol would
exist to enforce, track and hold to account the job creation promises alleged
by corporations or federal economic policies (NAFTA anyone?). How convenient
that it does not exist. How convenient that we forget that as a private
enterprise, Amazon has no obligations to the public.

The old tired adage "socialism for the rich, capitalism for the poor" sounds
about right. Supporters of Amazon can work out all the math they want to try
to convince others (and mainly themselves) of any public benefit. When
taxpayer dollars are diverted to corporate welfare, that's when we, the
public, get those austerity policies that we love so much. All in exchange for
the 25k high-paying jobs not applicable to the working and middle class folks
who in addition, will no longer be able to afford living there and will be
forced out.

~~~
codyb
Isn't NAFTA pretty much very favorable to the US?

I agree with your sentiment that corporate welfare sucks and would have been
much happier with the tax breaks being distributed to startups somehow,
however, you're talking about LIC, where home prices already average above one
million dollars.

Gentrification in LIC started a long time ago. These 25,000 people, many of
whom will be hired from within the already vast tech talent pool, probably
aren't going to drive prices up very much.

I think it really underestimates just how big NYC is to think such a thing.

------
karpodiem
I love living in flyover country.

~~~
bilbo0s
I live in flyover country in Wisconsin. We still got hosed on our Foxconn
"deal". Living in flyover country does not make us immune, we can fall victim
to these deals as well.

------
jetcata
The level of greed that Amazon and Bezos continue to demonstrate is sickening.

~~~
jhall1468
He's doing what most companies do: try to reduce their legal tax liability. If
CEO's didn't do this, the boards of these companies would replace them with
someone that will do it.

You are blaming Bezos and an entity for standard corporate fair. That's a
symptom of the problem.

~~~
my_username_is_
Still, it's a game that should be stopped. The federal government should stop
things like this from happening, as it extracts value from local governments
and gives it to corporations

~~~
jhall1468
It does NOT extract local value... it reduces Amazon's tax burden in exchange
for high paying, highly taxed jobs. There's no money being paid to Amazon.

~~~
anticensor
The state should appoint companies past a certain size a board member. It is
not like taxes are unnecessary.

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claydavisss
Bezos played these cities like a fiddle. They'll never offer deals to him like
this again but he doesn't care because this was a one-shot stunt.

Like sports teams, the impact on the local economies will be negligible. Lets
see how many of the 25k jobs even show up...

~~~
thenanyu
There are benchmarks baked into the deal, so no jobs = no tax breaks. The
cities should have known better than to play this game, but at least there's
that.

~~~
claydavisss
Not true, only a portion is tied to job creation goals

~~~
jblow
It’s tax breaks. If you don’t employ enough people, you won’t be paying enough
taxes to take advantage of tax breaks anyway.

------
watertom
Amazon negotiated in bad faith and as such any deals should be voided. I'd
like to NYC mayor call out Amazon instead of allowing the good people of NYC
to be railroaded.

What the cities have submitted were nothing more than proposals, they are not
contracts and are not binding. Considering the new information that has come
to light mayor de Blasio.

More than anything Northern Virginia should withdraw their proposal, Amazon
wants the Government cloud business so bad that Virginia has Amazon over a
barrel.

~~~
claydavisss
Withdrawl would require politicians admitting they were duped. In NY,
Democrats have a monopoly on power so they have no need to be responsive to
voters.

~~~
abalone
Poppycock. One of the top stories from this election is how establishment NY
Dems are facing a challenge from the left, e.g. Ocasio-Cortez who is critical
of the Amazon deal.[1]

[1] [https://www.cnbc.com/2018/11/13/alexandria-ocasio-cortez-
ama...](https://www.cnbc.com/2018/11/13/alexandria-ocasio-cortez-amazon-
queens-hq-is-extremely-concerning.html)

~~~
prolikewh0a
Cynthia Nixon was also a thorn in Cuomo's side during the primaries, and much
further left.

