
Subsidies to Amazon Are Uneconomical, Un-American, and Unconstitutional - chmaynard
https://promarket.org/subsidies-amazon-unamerican/
======
tootie
> Amazon is not going to be more productive in New York than in New Jersey

That's a humongous assumption and one that I think simply isn't true. Not
specifically that New Jersey is a worse place to run a business, but in
general he seems to be assuming that geography is complete non-issue. That's
just obviously not true. There's a zillion businesses that have set roots in
NYC or other industry hot spots and most of them received no specific
incentives. I mean, why did they even conduct this search if everyplace is the
same? They could have put their HQ2 in the Nevada desert and saved way more
than their tax breaks were worth.

~~~
jackconnor
Yea I found this a very weird thing to say, as engineering talent was a huge
reason for choosing New York, and is a resource that New jersey does not have
in anywhere near the same abundance.

I am curious where they would've chosen had subsidies actually been illegal,
as this author says we should do. My guess is that they would've ended up in,
you guessed it, New York and Virginia, regardless.

~~~
Hypx
I find that very hard to believe given the close proximity of NJ to NY. In
particular, Newark is literally just across the river from New York City.

~~~
lowercased
On top of that, how many people working in NYC actually commute in from NJ?
Meaning... they're actually _living_ in NJ in the first place.

~~~
tarboreus
You actually are wrong about this. No one here want to work in NJ. Few young
people in the city keep cars. People would scratch their heads if you told
them you were working out there. Might be just a psychological thing. but it's
real. I wouldn't look for jobs in NJ unless they dropped into my lap.

~~~
lowercased
i was responding to this idea to amazon located in NYC because that's where
the engineers/workers are at. If there's actually more in NJ, locating there
would have meant those jobs would have just dropped in your lap. But I don't
have specific numbers on commuters from NJ, and suspect their decision was
based on more than just staff availability.

------
manfredo
My understanding is that these tax breaks were never intended to be subsidies,
but rather mechanisms to entice Amazon to set up shop in said area. Say you're
a landlord, and you can't find a tenant for a unit. In response, you offer
lower the rent. Is that a subsidy? Say you're at a car dealership, and you
can't find a buyer for a given type of car. So you offer something like
preferable financing, or extended warranty. Is that subsidizing the car buyer?
I'd say no, they're offering incentives, not subsidies.

Sure, this may sound like spitting hairs but I do think calling the tax deals
given to Amazon a subsidy is deceptive. In my mind, a subsidy is giving to
support someone or something in need, that usually wouldn't be profitable
otherwise. Like green energy, electric vehicles, or growing certain types of
crops. The delals given to Amazon were tax incentives. Something Amazon
doesn't need, but the city offers in order to entice Amazon into setting up
shop there.

~~~
bassman9000
Comparing a landlord, which only represents the owners' interests, to the
state, which represents all taxpayers', doesn't make sense.

~~~
manfredo
In a sense, the state is the landlord of all the residents of the state. The
state provides services to the people, and in return the people pay rent
(taxes) to the state.

This is not directly related to the point I'm making though: the point of
these tax deals is not to help Amazon's business (though that is likely a side
effect). The point of these deals were to entice Amazon to set up shop in that
location. Thus, it is better to call these deals incentives rather than
subsidies.

~~~
rosser
> _Thus, it is better to call these deals incentives rather than subsidies._

Note the added emphases:

"A subsidy or _government incentive_ is a form of financial aid or support
extended to an economic sector (or institution, business, or individual)
_generally with the aim of promoting economic and social policy_." [0]

"a grant by a government to a private person or company to assist an
enterprise _deemed advantageous to the public_ " [1]

"A subsidy is a benefit given to an individual, business or institution,
usually by the government. It is usually in the form of a cash payment _or a
tax reduction_." [2]

I don't think there's nearly as bright a line between "subsidy" and
"incentive" as you're trying to paint here.

[0]
[https://en.wikipedia.org/wiki/Subsidy](https://en.wikipedia.org/wiki/Subsidy)

[1] [https://www.merriam-webster.com/dictionary/subsidy](https://www.merriam-
webster.com/dictionary/subsidy)

[2]
[https://www.investopedia.com/terms/s/subsidy.asp](https://www.investopedia.com/terms/s/subsidy.asp)

~~~
manfredo
This isn't financial aid since Amazon isn't short on cash. It also isn't
promoting any economic or social policy (unless people see e-commerce and
cloud computing as a social policy, which seems far fetched). So it at least
fails the first definition.

Perhaps a better way to put my underlying idea into words is that these cities
are still acting in _their own self interest_. Much like a dealer offering a
few grand off sticker price, these cities are making a concession to Amazon
but are still acting in their own self interest because they would be making
even less money if Amazon decided to set up shop somewhere else. "Subsidy"
often as the connotation of being something charitable to advance some social
policy. These cities aren't being charitable to Amazon. They're acting in
their own self interest by making themselves economically competitive. Much
like the dealer accepting a lower price, they're accepting a lesser payment
but the alternative is not making a sale at all. Sure, an argument could be
made that Amazon would have chosen NY or DC with a smaller incentive - but
that's more of a hypothetical criticism of the government's negotiations
rather than the act of offering incentives in and of itself.

This is distinct from something like offering a subsidy to buy electric cars.
This is a scenario where the government is making a sacrifice in order to
promote an environmental benefit.

~~~
rosser
You seem to be asserting the unsubstantiated, and until now implicit premise
that "subsidies" are necessarily somehow "charitable."

I don't find that to be at all supported, whether in the literature, in the
behavior, or in your argument.

EDIT: That is to say, a "subsidy" can absolutely be used to serve the
subsidizing party's interests, as you describe, alongside, or even _over_ the
subsidized party's. Charity is an orthogonal question.

~~~
manfredo
Two of your 3 definitions specified that subsidies are characterized by having
the aim of promoting some sort of "social policy" or something "advantageous
to the public". In my view, this means subsidies are "charitable" insofar as
they are making a monetary sacrifice to promotr some sort of greater good, be
it environmental (like green energy subsidies) or social justice (like grants
to minority or women owned businesses) or something else.

I don't think any of the public officials framed these tax incentives to
Amazon of having any sort of "social policy" or anything of that sort. They
seemed to have been offered with the explicit goal of optimizing revenue in
the long term, not trying to advance any sort of social good beyond bringing
in more money.

~~~
rosser
You don't see any growth in the local economy that would result from HQ2-A (or
is this one -B?) as an "economic [or social] policy" worth supporting, for its
own sake, or that it's not somehow "advantageous to the public", under the
kind of thinking that uses tax breaks to lure corporations like this?

The "greater good" under discussion is, IMO, the "rising tides lift all boats"
notion that (at least some of) the people behind this policy believe will
result from it.

That's _not_ charity; it's "optimizing revenue in the long term". It's purely
about "bringing in more money".

EDIT: Not to say I subscribe to this theory, personally, but that's my
understanding of the motivations in play.

Now, if you'll excuse me, I have far more productive things to do with my time
than to keep going in circles here.

~~~
manfredo
No, the presence of HQ2 in and of itself is not a social policy, and yields no
public benefit. It serves the interest of the government, by increasing
revenue. Presumably they will spend that money on something that does have
social benefits, but that's not directly tied to Amazon's tax incentives.

Sure, it is if we adopt a definition of "subsidy" that includes tax incentives
that are offered with the goal of increasing tax revenue in the long run, but
such a re-framing eliminates the root of a lot of outrage about these
"subsidies". It's no longer correct to say that New York and Virginia are
_giving_ anything to Amazon, because these governments are still receiving
more taxes than they would have without Amazon's presence. The article linked
by OP doesn't actually dispute that. The only piece of quantitative data it
provides is a correlation between campaign contributions and subsidies. The
article claims that the tax incentives (or if you prefer, subsidies) are
uneconomical, but it does not actually put forth any data to demonstrate that
NY or VA will see a net loss in the Amazon HQ2 deals.

------
rusher81572
The Government should not pick winners and losers. It is unfair for one
company to get these great incentives. Also, the taxpayer ends up subsidizing
all their monetary benefits for choosing the city. I am glad that both sides
agree that this is wrong.

~~~
theptip
> the taxpayer ends up subsidizing all their monetary benefits

The taxpayer in NY ends up better off after this deal; even critical articles
like the OP acknowledge that the subsidies are dwarfed by the increase in tax
revenues that the state will gain.

To recap, Amazon is getting ~$1.5b in performance-pegged tax breaks over 10
years. The OP gives an estimate of $14b over 25 years in tax revenue added;
that gives $5.6b over the same 10 year period, or over $4b net gain to NY
taxpayers.

Note, if the office turns out to be less successful at generating tax revenue
than projected, then the tax breaks scale down.

There are legitimate arguments against this kind of deal, such as that it
encourages a race to the bottom where desperate cities offer close to zero net
taxes. But we're pretty clearly quite far away from that equilibrium; cities
still have bargaining power in these negotiations.

~~~
Barrin92
>The taxpayer in NY ends up better off after this deal;

you added a qualifier that OP did not add. Yes, the _new york_ taxpayer is
better off, but this is rent-seeking behavior

New York is better off by subsidizing Amazon in the same sense as Luxembourg
is better off compared to other European countries by being a tax haven.
Hardly something applaudable.

~~~
Godel_unicode
NY taxpayers are collectively paying for something of benefit to them with
their tax dollars. It's something which can only be paid for by aggregating
many people's money together, and creates a spillover benefit for the people
paying for it.

That's literally what taxes are for.

~~~
Barrin92
No, this is not comparable to a simple tax collection. In the usual case,
people leverage a tax on people or property within their own jurisdictions to
fund programs. That is to say, they themselves pay for their services.

What is happening here is that New York creates an incentive that is supposed
to motivate Amazon to move economic activity out of some other location in the
US to New York, at the disadvantage of everyone else, who now can either enter
into this competition and erode their own tax base, or take the loss.

If you could simply increase your tax revenue by giving tax money away to
companies, you would have invented a magical tax money printing machine.

~~~
Godel_unicode
> If you could simply increase your tax revenue by giving tax money away to
> companies

I find it the height of irony that, on a site created by a startup
accelerator, you're saying that you can't help a business by giving it cash

~~~
Barrin92
by funding a startup you are adding competition to the market. Funding
startups is not a zero sum game. In fact fostering a local entrepreneurship
community that can compete with amazon on the market would be to the benefit
of workers, the economy, and citizens. Transplanting existing Amazon jobs from
one place to the other, is a zero sum game.

related article precisely on this issue:

[https://hbr.org/2018/07/landing-amazon-hq2-isnt-the-right-
wa...](https://hbr.org/2018/07/landing-amazon-hq2-isnt-the-right-way-for-a-
city-to-create-jobs-heres-what-works-instead)

~~~
Godel_unicode
You think that Amazon has 25,000 jobs that are going to be transplanted to NY?
Come on.

------
rayiner
> I am not a lawyer. As an economist, however, I can state with certainty that
> there is no difference between discriminating through taxes and
> discriminating through subsidies. I can also say that preferential trade
> areas and preferential treatment for some companies are equally destructive
> of free commerce. Hence, it is not unreasonable to argue that these types of
> corporate subsidies are even unconstitutional.

The dormant commerce clause prevents states from discriminating against in-
state businesses versus out-of-state businesses, not between in-state
businesses. It's not a dormant commerce clause violation for a state to charge
different local taxes to different local businesses. It's only a violation if
the state imposes different taxes on otherwise similarly situated businesses
on the basis of state residency. _E.g._ if New York gave people a sales tax
discount if they purchase from an online retailer with an in-state presence.

~~~
will_brown
Well one such example of different tax treatment would be professional such as
lawyers. At least in my state lawyers are exempt from charging/collecting
State sales tax for our services.

But there is a major difference in the legislature passing a law exempting
certain types of businesses from charging/collecting sales tax vs opaque, back
room dealing to carve out special taxes for a single company.

It was just recent a post made it to the front page regarding the proposed
BEZOS Act for large companies to reimburse the Federal Government for federal
welfare subsidies low wage workers receive. Even though the proposed Act
didn’t actually single out Amazon, they were used as an example as well as
Walmart of companies that would fit into this legal framework. Still many here
in HN screamed Bill of Attainder. I disagree (and personally like the spirit
legislation).

I do think this is distinguishable, because obviously this is a personalized
tax deal made for one company. Of course if this is constitutional for
cities/states to just create individual tax deals, maybe all those other
cities who got played by Amazon should take a que and go ahead and create a
personalized tax deal for Amazon and tax the ever living shit out of Amazon so
they effectively can do business in their jurisdiction.

------
Bucephalus355
Wow and this is from the quite conservative very free market University of
Chicago (Milton Friedman’s group).

Amazon is like an army undergoing the pincer movement and getting closed in
from both sides...

~~~
ArchTypical
Dominate the market, conservatives like it, liberals decry it. Take subsidies
because you want to get some free money, you get the reverse edit: liberals
also hate subsidy corruption (good note).

~~~
gilrain
Liberals are also against baldly corrupt subsidies, of course.

~~~
merpnderp
Are they? The 2009 recession was full of corporate cheese and it seemed like a
pretty solid front defending it.

~~~
knowuh
Can you provide an example?

This might be the first time I have heard a critique from that angle.

Many of my capital-skeptic friends were against the bank and insurance
bailouts without meaningful consequences.

They are still pretty irked TBH.

I think of these people as 'liberal' in the 'leftist' sense of the word. Maybe
you mean 'neo-liberal', as in the economic sense?

Or maybe you just have a different demographic group in mind that I am unaware
of.

Regardless, I would like to learn more.

~~~
merpnderp
In particular I GM in mind. A clear cut case of corporate welfare going to a
badly ran corporation, but which had strong political connections.

------
djrogers
> If companies are successful in pitting one state against another, they will
> end up paying no state taxes. As a result, the economy will not be one iota
> more efficient

This was preceded by a claim that Amazon would employ 25000+ people at the new
HQs. Those people _will_ pay taxes, and having 25k extra jobs in your state
is, economically speaking, better than not having them.

------
superbaconman
I've never been a fan of granting special treatment to specific businesses.
It's completely unfair to local competitors who have been quietly paying their
taxes; You can boast about the economic gains, but don't forget about the harm
inflicted on the rest of the sector.

------
bilbo0s
I marvel at the power of NYC.

We in Wisconsin have been shouting this from the highest rooftop since the day
Walker inflicted the Foxconn "deal" upon us. But there was not a single _word_
from places like U Chicago. I mean, Walker is part of the GOP, so if
conservatives had spoken up it might have helped. Who knows?

Now, the way it stands, we're obliged to pay more than three times as much
money as NYC, for less than _HALF_ the number of jobs. And, again, if all that
weren't bad enough, the jobs at Foxconn will likely pay much less than the
jobs at Amazon.

How do you get marketing like the people in NYC have? Because _man_ , we got
_HOSED_ on that deal. I'd, at least, like a law that would restrict governors
or mayors or whatnot from making deals like that without putting them to a
popular vote.

~~~
HappySweeney
> How do you get marketing like the people in NYC have?

Be the city with the HQ of most/all large US marketing firms.

