Hacker News new | comments | ask | show | jobs | submit login
Amazon’s HQ2 Spectacle Should Be Illegal (theatlantic.com)
406 points by tysone 3 months ago | hide | past | web | favorite | 285 comments



Some back of the envelope math. Amazon is receiving $1.525 billion in incentives from NY state and city, conditional on creating 25,000 jobs (https://www.nytimes.com/2018/11/13/nyregion/amazon-long-isla...). That's $61,000 per job, paid out over 10 years.

From a purely fiscal point of view, do we expect these jobs to generate $6100 a year in additional tax revenue for the state and city? That would be the "breakeven point". This could come in the form of additional state and city income taxes, consumption that is taxed, etc. Payscale says the average Amazon software engineer makes around $109k (https://www.payscale.com/research/US/Employer=Amazon.com_Inc...).

If we believed that Amazon is actually creating 25,000 NEW jobs, as well as jobs that otherwise would not exist, it seems pretty reasonable to say that the state and city come out ahead net-net. However, I have trouble believing that the "knowledge workers" who will join Amazon would otherwise have been unemployed and underpaid. Factor in the various negative externalities of increased commercial and residential rents for others, potential traffic/congestion issues etc., and it seems like Amazon got a sweetheart deal.


Thank you for running the numbers. How can we price in the wasted time/effort of the dozens of other cities who put in bids? How about the many millions or perhaps billions of dollars of free advertising and air-time taken up by this charade? I am neutral on Amazon specifically but surely we should not allow big companies to run roughshod all over our desperate cities? Look at Foxconn and Scott Walker for another example of companies harming and exploiting a metropolis/state. It really rubs me the wrong way.


I didn't see Bezos pointing a gun at anyone's head to force their city to bid. This is 100% on them, if they thought it would be a waste of money, they could've opted to spend nothing. "Running roughshod all over our desperate cities", while a fun turn of phrase, completely and utterly misrepresents what happened here. Don't blame Amazon for the actions of local governments, though I know it's the easy/lazy way of approaching the problem.


That's rather the point: when all actors are behaving rationally, yet the outcome is not something that is good for society, we need to change the rules to change behavior.


Indeed, it’s a little disappointing how reliably the tired argument of “no one is forcing them to” comes out on HN, as if generations of social reforms addressing such arguments as “no one is forcing impoverished families to send their children to the factories” never happened. Your observation is an excellent encapsulation: All actors are behaving rationally, to a net social loss, and thus the rules need to change.


"when all actors are behaving rationally, yet the outcome is not something that is good for society, we need to change the rules to change behavior." +1!


One might make the case that the cities were not acting rationally.


Its rational to not entertain amazon's offer only if you know for certain nobody else will either. The first one to defect gets everything.

https://en.wikipedia.org/wiki/Superrationality


This is like paying Tom sawyer to paint the fence. It's okay to let the other kids outbid you.


I'm not sure I'd agree with that. For instance, I think the Nashville deal is fantastic for my city/state. we are getting 20% of the jobs (5k vs 25k) for "only" about 100 million compared to several billion from NY and VA. It will easily make that back in benefits to the local economy and increased tax revenues.


There was still lots of local pressure from Chambers of Commerce type folks to get cities involved. And if they didn't apply, civic leaders would be accused of being anti-jobs. So a lot of pressure to get involved even if not straight from Mr. Bezos.


That's life in government, I guess. It's as if they were elected precisely for the purpose of making tough decisions that affect everyone.


How can we price in the wasted time/effort of the dozens of other cities who put in bids?

Be reasonable. That's an absolutely ridiculous counterpoint, and a perfectly reasonable answer is "assign it zero" since no city was compelled to apply. Should we dispense with competitive processes completely? Why have the Olympics, for instance, because it's such a waste of time for everyone that doesn't medal?

Further, the Scott Walker/Foxxcon debacle is a completely different category than the HQ2 situation. However, it is not going to be productive discussing the reasons that an ostensibly large manufacturing site was situated in an electoral battleground state with substantial involvement at a federal/executive level.


> no city was compelled to apply

I think this could be argued. The thing about democratically elected politicians is that while you can't "force" them to do something, there can be enough political pressure to effectively compel them to do something. In this case, any city that passed on this opportunity would have to describe to their constituents why they didn't want to bring 50,000 high-paying jobs to their city. It's much easier to just play ball, hence over 238 submissions.

> Should we dispense with competitive processes completely? Why have the Olympics, for instance, because it's such a waste of time for everyone that doesn't medal?

Do the Olympics change the rules in the middle of a competition like Amazon did?

> the Scott Walker/Foxxcon debacle is a completely different category than the HQ2 situation.

It is different in many ways, but also similar in a number of ways. Specifically, both used the promise of X number of jobs to extract a set of concessions, then proceeded to chop that jobs number in half.


>while you can't "force" them to do something, there can be enough political pressure to effectively compel them to do something.

>any city that passed on this opportunity would have to describe to their constituents

So, democracy in action? Constituency wants something, and politicans have to obey? Or do you prefer politicans to decide by themselves and not having to explain their decisions back to their constinuents?


"Democracy is the theory that the common people know what they want, and deserve to get it good and hard."

-- H.L. Mencken


So the point is that, being a democracy and subject to societal pressures, you can't assign that value to zero as that is unreasonable.


Nope, no city was compelled. That was intended to be a rhetorical point, because it's so obviously not the case. Did anyone feel pressure to because of constituencies? Maybe. But compelled? Absolutely not.

You have a point that the Olympics analogy isn't great. One other flaw is that cities aren't contractually bound to deliver the promised incentives, either. Olympic athletes can't change their performance after the fact.

I find myself in an uncomfortable situation, where I'm defending Amazon (who I have no relationship with aside from being a customer) and not even liking the HQ2 selection process, even a little. But it's just hardball negotiation that was conducted a bit more publicly than countless other site selection processes for countless other companies.


fwiw, i think all of the amazon concessions are tied to the number of jobs specifically. at least that was true for the Nashville office which I've followed more closely. i.e. to get all the breaks they have to create all the jobs.


Should we dispense with competitive processes completely?

When we're talking about pitting strapped local governments against each other in corporate welfare bidding wars, the answer is, absolutely, unequivocally, yes.


What we're talking about is the time spent putting together a report and emailing it to Amazon in this case. I'm not talking about jurisdiction shopping (which is gross whether it's corporate domiciles in DE, lawsuits in east TX, or if you want to make the case that's what HQ 2's process amounted to).

What was asked, and what I answered, was how to account for the time of municipalities that answered the RFP. Since they do not have to actually offer any of the proposed subsidies since they lost, then I think it's fair to assign no value to the cost. If you disagree, please feel free to tell me what price they paid instead of downvoting.


Cities actually spent quite a bit of money on hiring consultants, site planners, doing impact studies, etc. I don't think it's unreasonable to say mid to high 7 figures.

-https://www.consulting.us/news/290/consulting-firms-recruite...

-https://technical.ly/philly/2017/09/13/site-selection-consul...

This is not to mention that cities likely had to hand over demographic data that would've otherwise been very expensive to collect: https://www.businessinsider.com/amazon-hq2-search-data-2018-....

Look at some of the cities that made the finalist list:

-Columbus (population ~880k)

-Denver (population ~700k)

-Indianapolis (population ~870k)

-Nashville (population ~667k)

-Newark (population ~285k)

For these cities, an additional 25k jobs would have been huge. Scott Galloway has advanced the theory that a large goal of the HQ2 search was to secure competing bids, which Amazon then took back to NYC and DC in an attempt to secure better terms. If these "finalist" cities were simply used as stalking horses with ~0% chances of actually winning, I can't help but feel it was a little wrong to induce them to spend the necessary fees on consultants and planners to put together a decent bid.


If it was actually their plan which it very well seems like from the way everyone is talking about, wouldn't this actually be fraud rather than just unfair?


There was no commitment, and there was no false information. How can there be fraud?

I do the same thing Amazon does all the time, to get the best price. I don’t need to be honest and tell the seller I’m using them to get someone else’s price down. Maybe I do go with the new seller if their price is good, maybe it’s not good enough to sway me from the other seller. It’s just business.


I am of course not a lawyer. But there's a whole lot of difference between casually asking a seller a price or haggle vs. asking for a formal bid for something. I think in a formal bid the expectation is that you have a reasonable chance to win given the expense needed to answer a bid.


It sounds like the sort of casual fraud that megacorps routinely get away with.


Totally agree with you. I'd like to know what happens if a city doesn't hold its side of the deal, perhaps on a technicality; can the other party sue -- and win? Has it happened before?


Is there also a possibility of an incalculable factor which will yield a return on investment given that this project would bolster a middle class thus creating an increased likelihood of higher education for the next generation? My point is that something like this is never fully thought out and the future isn't written yet. These projects could boom or bust.


>Is there also a possibility of an incalculable factor

I certainly wouldn't base my calculations on it


This is often the case with government grants to cities as well. The cities that put together bids collectively spend more than the amount of the grant back to the winning city.


Unfortunately I think casting Amazon as the villain here is incorrect. I say unfortunately because that would be the convenient thing to do. But Amazon doesn't have an obligation to repair America's infrastructure or create jobs in cities that haven't succeeded in attracting skilled employees in large numbers. If Amazon believed they could legally gain an advantage by having cities compete against each other, they are almost obligated to do so. But perhaps there's a less cynical way to look at it. Maybe Amazon really didn't know at the outset which city they would pick, and only after considering everything submitted to them, concluded there wasn't a strategic case to be made for putting a second HQ in a city other than DC or NYC. I actually believe that to be the most likely scenario, but maybe I'm naive.

The unfortunate fact is that the politicians who emptied their pockets are to blame. But they too are only doing what they believe both benefits their constituents and of course helps them stay in office. To put it another way, if the mayor of Pittsburgh said "we aren't going to play ball and give a handout to one of the largest companies on earth" people who live there probably would have revolted. I don't think there's a good solution except for voters to become smarter about how their budgets are spent and make clear to politicians they don't want tax dollars wasted courting a company that doesn't need any government assistance.


> From a purely fiscal point of view, do we expect these jobs to generate $6100 a year in additional tax revenue for the state and city? That would be the "breakeven point".

You need way more than $6,100 per employee per year to reach break-even, as those employees will have definite costs to the city in the form of expenditures on services.

Strict cost accounting isn't really the right framework to use because cities have many people who cost more in services than they earn in tax revenues. You can't get rid of them because they're "unprofitable", and it isn't a city's job to turn a profit.


>>You need way more than $6,100 per employee per year to reach break-even, as those employees will have definite costs to the city in the form of expenditures on services.

will they not rent and buy sandwiches from the area? Or pay the NY state /NYC income tax? Or sales tax on a lot of stuff they buy /spend? NY comes way out ahead, IMO, over 10 years. Amazon pays $100+k salaries for such staff


Will none of them ever require police assistance? Fire protection? Will they ride the subway? Will they use the streets and bridges? Will they drink city water? Or use plumbing? Will they vote?

Maintaining infrastructure and services for residents of a city costs money. Adding ~25,000 residents will absolutely increase these expenses. The additional tax revenue will almost certainly more than cover it. But let's not pretend that tax revenue is "free".


Where do you think police and fire funding comes from?

It's taxes, paid by residents, and patrons to businesses... it's not like the people moving in will just take, and not pay any taxes at all.


What position do you think you're arguing against? Because it's not what the actual topic in this thread is. CydeWeys simply pointed out that the state needs to make more than $6,100 in additional revenue from each worker because they're not just paying Amazon's tax incentives (which cost $6,100)- they're also paying to provide police/fire/etc coverage for the new worker.


>>But let's not pretend that tax revenue is "free".

Oh, in NY and similar cities surely it is not free: you pay a substantial state tax AND a city tax. Not to mention a fat sales tax and fees on roads and bridges. But if you rent in X neighborhood and live there you generally paid your dues on services.

Let's not forget that people (especially AMZN /GOOG / FB employees) also pay fed taxes, that trickle down to states for infrastructure etc etc. Not crying about NY state fat cats wanting $500K pension after "working" for the state.


Just for the sake of accuracy, most of the Northeast states are net givers in terms of federal taxation.

I.e. for every $1 that NY sends to the federal government in federal taxes, it receives something like ~$0.80 in spending: https://www.osc.state.ny.us/press/releases/oct17/100317.htm. Most of the money that NY receives is for Medicaid and other entitlements.

NY receives every year a total of $165 per capita for transit, slightly less than the national average of $168. When considering the cost of labor and materials in NY, that gap is probably much larger in real purchasing terms.

On the other hand, NY state directly spends $639.2 per capita on transportation annually: https://www.usgovernmentspending.com/year_spending_2019NYdn_.... The actual cost of the "pensions" you deride is $1085.2 per capita per year to the state. If you look at total state and local spending, the total costs of pensions are $1758 per capita per year, and transportation is $1788.8 per year. Neither reaches 10% of total statewide spending.

This doesn't directly negate your point about federal money trickling down, but NY is not receiving very meaningful assistance from the federal government.


I am sorry, but a lot of states--if not most--have lower taxes than NYC. Amazon is bringing 25,000 people earning probably over $100K per person and Amazon will be here for (at least) another 20-30 years.

That person is buying a condo, eating at NY restaurants, paying local state and payroll taxes, dry cleaning at local stores, buying clothes locally, etc etc etc. We know that people at that age virtually spend all their money...so what if AMZN got an x% discount on volume? What more do you want?


You don't seem to be listening at all.


Brooklyn resident here ;-)

But I think you may have missed my point: there are expenses for city residents. A non-zero percentage of these new residents' tax revenues will be spent on the residents themselves.


The argument is that there is also a burden/liability cost of bringing on an additional 25,000 citizens. They will have students that go to NYC schools, they will have disputes that need police officers, they will have emergencies that need EMTs/Firefighters, and they will have have cases that may burden the court system. They will also use the subway and they will litter and they will wear down the roads. These add burden costs to the city.

Yes they will easily generate more than $6,100 in revenue per year for the city from income tax alone (6.65% is the NYC current tax rate in the $79,000 - $215,000 income bracket. This would bring in $7,248.50 a year based on the average of $109K income from income tax alone. Yes these employees will buy lunch everyday, they will buy TVs and iPads and bed sheets and alcohol and stuff. They will pay 8.85% sales tax on all these goods (only 4.5% of which goes to the city). If we assume they spend 50% of their income on sales taxable goods then they would pay another $9,646.50 a year in sales tax.

So the question is how much on average does one citizen cost the city (the burden cost). As long as it is less than $16,895 (the sum of both previous figures) than things should be ok.

The city also monetizes its' citizens through other means such as traffic tickets, property tax, state lottery sales, cigarettes, alcohol purchases, etc. So this $16K number is a low-ball figure.

I am inclined to believe that the burden cost of a citizen is well below $10k a year. For easy math if we assume that a citizen does cost the city $10k per year, and the tax subsidies do cost $6,100 per year then that means the overall burden cost is $16,100 which would be the break-even point for an amazon employee. Money the city can earn on that employee above that figure would generate a net-benefit for the city. Anything below that figure would be a net-determinate to the city.


I like the direction of your argument, and your overall conclusion might be true, but I think there are some significant flaws.

First, I think you are confusing the New York STATE tax rate with the New York CITY tax rate. The 6.65% you quote is the rate for the state. The city tax rate is significantly lower.

Second, you are making the classic error of applying a marginal tax rate to the entire income, rather than just the portion within the brackets. Income lower than the bracket is assessed at a lower rate, so the effective rate on the total is less.

Anyway, when I plug the $109,000 salary into a calculator here https://smartasset.com/taxes/new-york-tax-calculator and use a Brooklyn zip 11238, it shows a "Local" tax of $3560. I'm not how it affects your overall argument, but I don't think it's true that "they will easily generate more than $6,100 in revenue per year for the city from income tax alone".


Probably not as much as you think in the USA. Social services, based on my last statement from the HMRC is a huge amount of the taxes I pay dwarfing the defense budget.

Its the same at county level to.


We spend a lot on social services here in the US, we just don't always get the best value for money.

Here's some stats: https://ballotpedia.org/Analysis_of_spending_in_America%27s_...

NYC spends $8,690 per year per capita, and NY spends an additional $6,804 on top of that. So we're looking at $15.5k spent per year on the average citizen across the state and city. Thus your break-even is actually around $22k in state/local tax revenue per Amazon employee. And in order to reach that, your average single filer Amazon employee will need an income of $230k according to this calculator: https://smartasset.com/taxes/new-york-tax-calculator#UDJIdPT...

Note: I haven't taken property or sales tax into account here; feel free to make reasonable assumptions and do your own math. This will bring the $230k figure down.


> ... as those employees will have definite costs to the city ...

Yeah, because none of those employees will pay property, income, sales or other taxes locally...


But that's already factored into the calculation...


There's another problem here that isn't addressed by whether its a net plus revenue to the city. The tax break isn't applied across the board to all companies which means that Amazon is getting an unfair competitive advantage.

I don't really think of a company like Amazon needing a competitive advantage.


I can't find where I originally saw this, but as a thought exercise:

What if, instead of giving $1,500,000,000 to Amazon, NYC gave out $60,000 subsidies to some 25,000 (!!!) local small businesses?


Now this is interesting. This would be a little like an accelerator "spray and pray" model, where economically you would only need a small percentage of those companies to become large job creators and tax payers for this to work out in the city's favor. You got my vote Jake!


What kind of new infrastructure can a small business afford with $60,000 that would enable them to become a large job creator?


Why do small businesses need to become "large job creators"? If in ten years those subsidies create an average of just one new job each, the return is equal to what Amazon promises.


That's not true at all.

If they make 1 new minimum wage job each, it would actually cost the city way more.


Sure, not all jobs are created equal. But there are a million variables here: when the job is created, the salary, whether it's filled by a current resident or a newcomer, how much public infrastructure the worker uses, etc.

More to the point, though, the goal of the city isn't to maximize its revenue — it's to make its citizens lives better. A minimum wage job for a poor current resident might be better the community than high-paying job for an imported knowledge worker, even if the latter means more money for the city.


And you glossed over all of those things to make a politically convenient point. And I was just pointing that out.

If you believe the latter I don't know what to tell you. Move to Detroit? The idea that less tax revenue is somehow good for funding social programs seems insane to me. Not sure how you're going to begin to justify that.


I think the idea is that it would kick a handful that might have been stuck or failed over an "activation energy" hump into becoming medium-to-large businesses someday.

Like a catalyst.

I don't know if it would be better than this Amazon stuff or not, but it feels healthier.


That's more than a lot of startup accelerators give, so I think the answer is that it potentially lets a company get it's footing long enough to experience growth and self-sustain. This is a Y-Combinator affiliated website, after all...


Or even better, what if NYC didnt levvy the tax at all, and gave the money back to its citizens!


Divided evenly across citizens and given lump-sum, the bulk of the money would be likely spent within the next few months, creating a spike of economic activity. People go shopping, businesses make some extra profit, maybe hire a new employee...


Maybe because using such taxes in a smart way is a smarter way of giving the money back?


What defines ‘smart’? I can think & consider & carefully plan — and still do something foolish. Moreover, what you consider wise I may consider foolish. Who am I to judge your choice, and who are you to judge mine?

It would certainly be democratic to give the money back to the citizens, permitting each to spend it as he will; then each would get a vote on what he thinks the best expenditure is.



But even if the state and city come out ahead, they could have benefited even more if cities weren't allowed to compete for these types of contracts - without these tax breaks, Amazon would still have to build a headquarters, and a similar amount of jobs and tax revenue would have been generated, without requiring any incentives. It may not have been in New York, but someone in the US is still benefiting.


Is that how you run your businesses? It doesn't matter that I didn't win this contract - it's ok though as someone else won it and they'll benefit instead?


A city isn't a business, and shouldn't be run like one. In theory they exist to serve the people, and I don't see why it is any better for people in New York to get a contract than people in any other city.


Yes a city is run to serve its citizens. If they can better serve their citizens by bringing in a major employer then that seems on-mission to me.


Can't really do that because it would be called a "cartel". But otherwise: yes, please!

It would be perfectly legitimate for federal rules restricting ruinous competitions such as these. There are, in fact, many examples: Minimum wage, or the workplace safety and wage restrictions in trade deals like NAFTA, or very explicit rules against certain subsidies.

Sane jurisdictions that consider the possibility that cooperation may, in very rare and limited circumstances, not the end of humanity are much stricter: the EU limits subsidies to temporary measures only, and also puts limits on bespoke tax deals with individual companies.


> restricting ruinous competitions such as these

Who or what do you think has been ruined by this competition?


Ruinous is not "the quality of having led to the ruin of a specific entity". Rather, it is defined as follows:

disastrous or destructive: a ruinous effect on the environment. • costing far more than can be afforded: the cost of their ransom might be ruinous.

I think it's pretty obvious what's being destroyed: the ability of local jurisdiction to collect tax revenue from large cooperations. Without this little beauty pageant of ugly capitalism, Amazon would still hire the same number of new employees, possibly even in the same locations. Only difference is that a billion $ could be invested in public goods, instead of going Amazon shareholders'.


The cities who bid obviously did a calculation and decided that it was net worth it... otherwise why on earth do you think they did it?

And it's not a zero-sum game. Perhaps a better proposition from a city makes a more productive Amazon? We're talking about efficient transport and things here, after all.

Your approach is let everyone make things equally as bad and let Amazon pick any of the worst. Amazon's approach is 'what can cities do to help us maximise both our success and yours?'

I think it's positive and constructive.


It's death by a thousand cuts. If Amazon really needed to expand their HQ and add 50,000 new jobs, they would do so regardless of any tax incentives. By pitting cities against one another, Amazon privatizes some of the gain that would have otherwise been public.

Repeat a few hundred times in cities around the country and huge sums are being handed over to corporations needlessly.


More taxpayers bring additional costs so it's more net revenue we're interested in. Additionally the window to compute the total net benefit is not bound to 10 years but for many decades, as long as Amazon is there. For instance over a 24 year window (how long they've been in Seattle) the required net additional tax revenue to break even would only be ~$2500 per year. And it's not just salaries that would generate this revenue, it's also property taxes and taxes on services providing for the HQ and employees. Increased rents and property prices are actually good for local government tax revenue.


> Additionally the window to compute the total net benefit is not bound to 10 years but for many decades, as long as Amazon is there. For instance over a 24 year window (how long they've been in Seattle) the required net additional tax revenue to break even would only be ~$2500 per year.

What discount rate are you using? My quick calculation is already pretty generous to Amazon, since they already get 10 years to generate the 25k jobs. Presumably, some portion of the $1.525 billion is available immediately for campus improvements etc. It's not worthwhile to project 24 years out, especially when considering the time value of money.

> And it's not just salaries that would generate this revenue, it's also property taxes and taxes on services providing for the HQ and employees.

Yes, I mentioned that increased consumption is likely taxable. The question again is whether this consumption would've happened anyway, by other companies, or by Amazon's future employees working at other companies.

> Increased rents and property prices are actually good for local government tax revenue.

Would you be in favor of widespread gentrification? It's not hard in an accounting sense to "optimize" the local tax revenue generated in New York. Just make it a city where cost of living is so high that only the wealthiest can afford to live there. In a city where affordable housing is already in very short supply, and homelessness is still a major problem, I'm not sure how "good" it is for the city to have to spend more on rent assistance.

The "effective property tax rate" in New York is ~0.8% (https://smartasset.com/taxes/new-york-property-tax-calculato...). To generate an additional $1k in property tax, the price of a property would have to increase $125k. Maybe good for the city, certainly not good for the middle-class and poor New Yorkers who have to contend with higher rents and cost of living.

EDIT: Not to mention that it's hard to see how increased rents lead to more revenue for the city. The state may be able to bring in more corporate tax income, but a more valuable property means that property owners can also claim more in depreciation etc.


> EDIT: Not to mention that it's hard to see how increased rents lead to more revenue for the city. The state may be able to bring in more corporate tax income, but a more valuable property means that property owners can also claim more in depreciation etc.

Higher rent means higher property valuation, which means increased property taxes. In Manhattan (and other places like Florida), there is also a tax on all commercial rents that would grow. I don't think Long Island has one though, so just the property tax growth.

Regarding gentrification, Economist has a great article on the unsung benefits and highlights some studies showing displacement is not as widely perceived. People's opinion changes when you call it "revitalization", "redevelopment", or even just "development".

https://www.economist.com/united-states/2018/06/21/in-praise...


Another thing to factor in, if there were no tax incentives given to open/expand offices in the DC/NYC areas, would Amazon have expanded their presence there anyway?

Considering the two areas, it seems likely they would open additional positions there regardless of whether the areas "won" the HQ2 battle, much like they're doing in Boston (and probably other places as well).

This makes tax incentives even less worthwhile.


> Factor in the various negative externalities of increased commercial and residential rents for others, potential traffic/congestion issues etc., and it seems like Amazon got a sweetheart deal.

I think it's only fair to factor in the various positive externalities. Some of those abatements you mention are for development of the spaces they are occupying, which Amazon has committed to do in the billions. Growth pains almost always exist. In places receiving large amounts of migrants (seriously, Amazon is small number compared to the influx of out-of-state employers moving to other regions) they will experience unquantifiable negatives, but we should not let this detract from the similar unquantifiable positives of economic mobility.


Don't forget that a good portion of those Amazon workers will also bring their spouses. They may even become permanent residents.

The math is more complicated than any of us understand.


A good portion of those Amazon workers will already live and work in NY, and leave their current job where they aren't being subsidised to one that is.


And how many competitors shrink as they compete on an uneven playing field (the basis of these "incentives" -- taxes and such) with these behemoths?

If you're big enough to "break the rules", arguably you're a monopoly or close enough to this to merit great suspicion and corresponding oversight.


I live in NYC, and the Total New York State & City Taxes is over $10,000 a year on a $109k base salary. See: https://arjun-menon.github.io/tax-analyzer/?income=109%2C000...

Moreover, the $109k is likely just base salary — there is probably additional stock and cash bonuses on top of that. Note that NY does not have a lower tax on capital gains or dividends (like the federal tax code), so they’ll be taxed like regular income. The $109k is also likely an outdated or incorrect number, as that’s too low a base salary for a Software Engieer in NYC — I expect the average SWE base at Amazon to be something closer to $130k.

Besides, I don’t think a business development tax break is unfair as long as it is being granted to all companies (and not just Amazon). That’s what people should be fighting for. In addition, a large chunk of the incentives are state tax credits (I assume non-refundable ones). This means the state is simply going to revive reduced additional revenue because Amazon is moving in — they don’t per de lose money (unless whatever business was going to be built in Amazon’s place would have not have gotten these tax breaks). The way this is being portrayed — it sounds like it’s a literal giveaway to Amazon, which I’m not sure it is (it would be, if it largely consisted of refundable tax credits and state capital grants).


I think the numbers and the philosophy are fascinating. Not just the Amazon deal--all these corporate invitation incentives.

Let's say Boeing decides to move their HQ from Seattle. Should a city like, say, Chicago, offer incentives to land the new HQ? What is the economic loss to Seattle? What is the economic gain to Chicago?

Why should Boeing or Amazon get off from paying taxes, but Bob's Sandwich Shop doesn't? One obvious answer: Bob's Shop doesn't really matter. But what if, say, McDonalds threatens to pull out of Chicago unless they get the same deal as Boeing? Does McDonalds matter? Do they employ enough people? Are they hard enough to replace? How about Walmart?

It intrigues me that municipal bidding has not spread to be leveraged by more corporations. I mean more blatantly leveraged. I mean like Boeing/Amazon-level blatant. Imagine if Carrier turned the tables on Trump. Publicly.

If Chevron threatened to pull all its stations from a city, would any city care? Is there enough competition to fill in the hole?

What do you call a corporation that exists in a space without enough competition to fill in the hole? Should you treat such companies differently? Should you let them not pay taxes? Should you impose monopoly regulation on them? Should you handcuff them? Or roll out the red carpet?

Should you punish any corporation that achieves this status? Or should should encourage the innovations that allow such creations?


Boeing is in Chicago since 2001. And yes, the tax incentives were awarded [1].

McDo upgraded to shiny new HQ in Chicago this year, reportedly with no tax incentives [2]

[1]: https://www.nytimes.com/2001/05/11/business/chicago-offering...

[2]: https://www.dailyherald.com/article/20160613/business/160619...


What a coincidence.


Boeing already moved HQ from Seattle to Chicago.

None of this bargaining should be legal.

https://en.wikipedia.org/wiki/Boeing


Amazon would have created those jobs either way, maybe just elsewhere.

So every dollar spent is a dollar lost for the US.


...unless the cities competing got them to create a better environment for Amazon and so made Amazon more productive, earning more money overall.


But surely tax breaks vs subsidies should be calculated differently? That is, letting Amazon skip paying $2 billion in taxes over 10 years doesn't cost the city anything directly. So from your "purely fiscal point of view", then isn't it just the cost of the marginal person on the infrastructure and housing prices, etc, vs the taxes collected?

From the article, it looks like the city may actually pay up to $500 million in a "capital grant", but I'm not sure what form the rest of the subsidies are in.

That said, the article uses wording like "Ohio taxpayers sued the state after it paid the automaker DaimlerChrysler about $280 million in tax exemptions and tax credits" so my perspective might be wrong here. It just feels misleading to use the verb "paid" on tax credits to me. Like, if I bought a Tesla, and got the $7,500 tax credit, I wouldn't feel exactly like the government paid me anything. Sure it cost the government that much, in some sense, since I would have paid the government those taxes had I not been given the break, but that doesn't really apply to the Amazon case since they wouldn't have paid those taxes anyway, since they wouldn't be in that state.


The issue isn't wether or not these incentives are net positive for the location that wins.

The problem is the prisoner's dilemma of the situation, forcing jurisdiction into a race-to-the-bottom competition.

That's because Amazon would hire these people anyway. NY and DC may come out ahead. But for the country overall, it's purely a transfer for billions from taxpayers to Amazon stockholders.


If you take that to its logical conclusions then states being able to set their own income taxes, sales taxes and their own employment laws is equally guilty.

Those low tax states are net recipients of $ from states like NY and CA - of course that would mean major changes in the constituation :-)


The logical conclusion happily isn't always at the bottom of a slippery slope.

Here, it would be enough to stop these bespoke, one-company deals. Because no state could afford giving such rates to all companies, the practice would end.

That's exactly what has happened with most offshore tax haven over the last decade or so, btw.


$6k per job seems like it will be break even on state income taxes for sure.


Accurate. As an Amazon employee living in NYC last year I paid 14k in state taxes to NY state and almost 8k in local taxes to NYC.

Just on income tax alone that covers the $6k and that's not considering side effect impacts I have on city income in the form of paying my rent and paying local businesses which generates even more tax income.

Now of course this is all dependent on the fact that I wouldn't be generating any money for the city if it wasn't for Amazon which isn't true. I'd still have a job, it just might not pay quite as well as working for Amazon, but I'd still be contributing income tax.

Overall though from what I can tell NYC is getting a good deal and will end up with more money despite the tax breaks.


Yes I see this as a win/win/win really. If you want city life, live in NYC and if you want suburban life live in North VA. Still I see a lot of HQs in Amazon's future as well as hubs in other places. Maybe the NYC office will be the helicopter stop for Bezos between Manhattan and Long Island. :)


Particularly in New York, with their state income tax brackets. Not to mention any NYC income taxes added on top.

Virginia has lower rates, but they still ought to make out.

https://www.tax-brackets.org/newyorktaxtable

https://www.tax-brackets.org/virginiataxtable


>>If we believed that Amazon is actually creating 25,000 NEW jobs, as well as jobs that otherwise would not exist, it seems pretty reasonable to say that the state and city come out ahead net-net.

From NYC's perspective, many of these probably will be new jobs, because many knowledge workers who wouldn't otherwise will move to NYC because of an Amazon job.

Further, $109k/yr/employee is way too low for NYC Amazon engineers; this is likely ignoring the equity grant which is taxed as ordinary income. The average will skew much higher. It seems that each new employee will very easily generate over $6100/year in state+local tax revenue.

Further there are synergies and network effects from NYC having more tech jobs and these nth-order effects will also generate tax revenue.

You can argue that this charade wasn't good for America, but it certainly was good for NYC.


Amazon received incentives from the government, but the vendors they will provide business to did not. Amazon will likely pay out billions to build their new campus - going to construction companies that will pay taxes.


This analysis is flawed.

In order to calculate a breakeven you need to determine the marginal increase in government expenditures created by a new city resident, which is obviously nonzero.


But most local government pay out goes not on high paid engineers if its anything like the UK - I know someone who was the lead councillor for social services in a large local council he had a large budget.


They don’t need police and fire and roads and subsidized subway and ferry service and building inspections and restaurant inspections and street cleaning and bike lanes?


Easy to imagine that generates $6k per job given wages and payroll taxes. Further, halo effects and construction act as multipliers on that.


I don't think construction costs are a multiplier of payroll taxes as far as the city government is concerned, and the folks at Amazon making big money would be employed regardless. Yes, some people will move into NYC for these jobs, but many of them will just move from another NYC firm to Amazon, maybe for a small raise. It's very conceivable that the folks moving within NYC will have a payroll tax increase of less than $6k.


Unless the positions they leftto go to Amazon are made redundant, those will be refilled, also. You just take salary x jobs and apply tax regulations. That's the overall tax receipt effect. There are 25k additional jobs that are likely over 6 figures in salary.

The construction jobs come from building out the space and necessary infrastructure upgrades are paid positions that often are contract. They aren't permanent but they count for additional tax revenue. As is the revenue of the jobs created by the spending from the additional HQ2 positions (25k jobs requires X new lunch locations, Y new fitness trainers, etc). That is the halo effect.


> It's very conceivable that the folks moving within NYC will have a payroll tax increase of less than $6k.

But do we think the jobs that the new Amazon hires are vacating will go away? Seems probable that many of them will be backfilled, and potentially at a higher compensation rate than they were before, since there'll be more demand for software engineers in the market after Amazon has moved in.


> Yes, some people will move into NYC for these jobs, but many of them will just move from another NYC firm to Amazon

But if those other companies then have to fill the vacuum by hiring even more, then it's still a + per job; and arguably more because increased liquidity in the job market results in more competitive salaries.


> However, I have trouble believing that the "knowledge workers" who will join Amazon would otherwise have been unemployed and underpaid.

No, but they might otherwise have been employed somewhere else, like SF. It's a zero-sum game, which is part of the reason why this whole bidding for corporate headquarters business is silly from a national perspective.


Another thing: if the cost of living increases due to the HQ's presence (which it will), then that means property taxes increase. Everyone will be paying more in property taxes, so $61000 per job is incredibly easy to meet.


> do we expect these jobs to generate $6100 a year in additional tax revenue for the state and city

The answer is probably not. Most state income taxes are pretty low and property taxes aren't much better for the city/county level kickbacks.


State income tax is 8.8% in NY. Do the math, 6.1k is met easily.


Payscale is wrong because 30-200% of those salaries are paid in stock


Also how is a smaller competitor going to be on a level playing field. For example existing NY companies paying full taxes are partially paying Amazon's subsidy.


Economic behavior has a compounding effect. Each Amazon employee who lives in a city contributes demand for local businesses that end up creating other jobs.


All these cities are simply gambling on becoming the Silicon Valley of the East. If they do take off, this $1.5 billion would be a steal.


There are already more software devs in NYC than in Silicon Valley. There's also triple the amount of people in the NYC metro area, and a lot of other industries. I'm not sure NYC needed to give a lot of money to attract them. It isn't like NYC is some former steel town or something looking to bootstrap an industry. On the contrary, NYC has added 375k people to its population in the last 10 years which is about 40% of the SF total population.

NYC also has a Gross metropolitan product 3.5x the bay area. I think Silicon Valley would like to be the NYC of the west.


It seems very unlikely that New York City needs to pump taxpayer money into proving to multinational companies that there is value to being located near the talent concentration they already have. It seems unlikely that Amazon's presence there is going to be the spark that finally ignites their struggling tech sector, or attracts job seekers from outside the region (spoiler: New York doesn't have these problems). It seems much more likely that Amazon is contributing to many of the existing NYC area problems (Read: housing/infrastructure) by further straining resources AND demanding they be paid a ransom for not building in Baltimore.

At this point, based on the cities chosen, it seems more like Amazon held these 2 obvious choice cities hostage by threatening to move to smaller, less established city instead. "Give us all your subsidies, or we'll just go build in Baltimore"


Absolutely. Right now there is SV and everwhere else. This puts NYC in clear #2. Its already the biggest second office for Google and FB. Once it gets critical mass its cements its position and will attract lots of smaller companies.


Isn't just planned amount of Salary to be paid and taxes collected from that?

How can we find out if these jobs will pay that much?


What Amazon did shouldn't be illegal; what the cities did to try to get Amazon to them should be.

Rather than punish Amazon, punish the public servants who thought a large tax break for years, or real estate deals, would really be big enough to draw the company in.

What Amazon did was playing the field; why not get a bonus for letting others compete; rather than taking nothing because it was already decided?


...what the cities did to try to get Amazon to them should be

Oh, there's some karmic payback for the cities doing what they did. You see, all that inside information that the 236 other cities gave away to Bezos? He gets to keep that:

http://inthesetimes.com/article/21571/the-hq2-scam-how-amazo...

"Amazon now has a treasure trove of non-public information about America’s future, in addition to knowing how much cash cities are willing to part with to land an Amazon facility. And it got all that, along with a giant PR benefit from the bidding war, for free.

If you knew a city was going to build a road in a particular place, you could make a lot of money buying up the real estate there. Imagine that on a national scale and you can see how Amazon will grow far wealthier from the data it collected than even the raw dollars extracted from HQ2’s big winners. In fact, this was the real reason Amazon orchestrated the whole charade."


While true I'm not seeing how this fact will influence cities/public servants to not be so dumb in the future? Or stop these corporate welfare parades from happening again...

But knowing how regulation typically works they probably wont help either. They'll probably be over-bearing and quickly out of date, or more likely end up hurting local communities trying to get new business from small-medium scale companies while big mega-corps continue with business-as-usual getting free rewards from the state at the expense of citizens and smaller firms.


> ... I'm not seeing how this fact will influence cities/public servants to not be so dumb in the future

this whole episode makes me reflect upon the Tesla Megafactory bidding process where Musk played California off against other states. Ultimately Governor Brown made some comment about how Tesla was just asking for too much and it didn't make sense for California. So it went to Nevada.

And, what I wonder is: is there a consulting firm that serves as an intelligent counter force to Tesla and Amazon et al? Musk and Bezos are supposed to be hyper-smart so is there, say, a branch of Goldman Sachs that can hyper-intelligently advise state/city leaders about this particular kind of divide-and-conquer corporate predation (if that's what it is)?


All of the money is lined up to take from the state/city coffers and resources. It's 'free' 'other peoples money' to all of these companies. Why would anyone want to play the consistent losers side?


i was thinking it would be a profitable line of business for some consulting company. e.g. host a small, invite-only conference for governors (or, more realistically, their delegates) about the concessions Amazon appears to be looking for and what states and cities risk by giving that stuff away.


Correct. But you don't want to eliminate municipal competition either.

The problem here is of representation. Ie. the city residents could not agree with their tax money being spent on this.

This is an example where a direct democracy shines, basically any decision which lasts longer than a current politicians' mandate should be voted directly by citizens to align the incentives. Any decisions with effect roughly contained within a voting period could be delegated to 'managers', ie. politicians voted for administration of public things.

The problem today in countries without direct democracy for longer term issues is that they elect these 'managers' to decide on matters vastly exceeding their mandate.


> city residents could not agree with their tax money being spent on this

New York City taxpayer here. Fine with it. 25,000 high-income jobs, even if after 10 years, makes the new engineering campus on Roosevelt Island instantly more productive. Those jobs will pay taxes, spend money in the local economy, and drive demand for East River infrastructure improvements.

I do believe that these sorts of subsidies should be required to be put to a popular vote. Wouldn't be a bad state constitutional amendment, actually...


From the perspective of the whole country, perhaps we do want to reduce municipal competition and outright prohibit giving expensive handouts to bribe companies to pick their location.

From the perspective of a city, giving $x so that the HQ gets built there instead of some other city might make sense.

From the perspective of the whole nation, the notion of handing out large amounts of money to gain taxes in location A and lose taxes in location B is clearly ridiculous - let the company pick whatever city is most competitive without the handouts, and if some other city wants that HQ, well, they need to provide better services, not just a discount (which essentially is a loss for the combined coffer of all the governments), unless the gov't "one level up" has considered that it's better for national interests that this area needs to be subsidized above others.

For any single city it may make sense to underbid other cities, but for all cities together it makes sense to cooperate/collude so that underbidding doesn't happen.


> Ie. the city residents could not agree with their tax money being spent on this.

City residents generally vote against any new development (literally NIMBYism), so it's pretty likely that this would have been something they're against.


Competition should be party neutral period as a rule of law thing alone in my opinion. As in offer tax incentives for say having 6k office workers who make a median income of 70k and don't impose externalities beyond a large office building's traffic - all legitimate interests to the locale and who they are doesn't really matter.

But that it is for specific companies both misses the point of a healthy economy and leads to corruption by definition - not being treated equal under the law.


I would argue the problem here is of special treatment. We do want municipal competition, we don't want company-specific competition, though.


this is, in fact, what the article advocates, making it illegal to offer such subsidies and prevent the race to the bottom between jurisdictions.


Let me see if I understand this correctly. You want to ban me bidding on something because it raises the price for when you eventually win it. No thank you.

Say I'm running a town in Colorado. You think Amazon is going to set up in DC. Well, I want a shot at that. Having an Amazon HQ in my town would be wild. It could reverse economic decline and everyone's life would likely improve with the added dollars to the local economy. I want to bid on that and go all the way up to my break even. What if it makes it more valuable to move here? I want the shot at that.

Either you give me the chance to do that or you give me megabucks to not do it. But if you're using the law to compete economically we're probably not correctly using comparative advantage.

If it gets net negative for you at some point, don't bid! Why use the law to stop me from bidding?


It's a solution to a collective action problem. Amazon has offered a prisoner's dilemma to cities, and it's extremely hard to avoid someone defecting. By making it illegal to defect, everyone benefits, except Amazon (in this case).

e.g. imagine no one had offered any incentive to Amazon. They almost certainly would have ended up in NYC and Washington D.C. anyway, but the taxpayers in those locations would be saved footing the bill for their arrival and taxpayers elsewhere would be saved footing the bill for coming up with proposals, which only existed as leverage for Amazon in getting a better deal elsewhere. Likwise competitors with Amazon would not have to contend with a rival who is getting government subsidies. Overall the free market actually benefits from this intervention.


I think the difference is that it isn't a person bidding on the Amazon HQ, it is a city, and IMO, cities in the same country shouldn't be competing with eachother for business. Amazon has to put a headquarters somewhere in the US, what benefit do US citizens get by allowing cities to undercut eachother in an attempt to get the HQ in their city?


> cities in the same country shouldn't be competing with eachother

I feel like the US government is set up to allow just this sort of thing, though. States running themselves like countries and all...


We definitely should want competition in the governance market. But it needs to take the form of neutral rules instead of sweetheart deals for particular firms. It’s the latter that I would like to ban. The U.S. constitution has an analogous clause, the prohibition of "bills of attainder" against individuals.


The citizens of that city enjoy the wealth that Amazon brings to the area. Cities, rightly, salavate over businesses that bring in outside money because that's how an area gets wealthier.


You're not considering the negatives that come with 25k new jobs suddenly appearing in a city. The Denver metro area in particular is already struggling to manage the influx in transplants - this would only make it worse.


Allowing it starts a race to the bottom. Playing city off city to bypass planning, get subsidies, preferential infrastructure. And that's assuming we know where all the money's going. That's the thing with local government; it's a warren of people you've never heard of waiting to be inappropriately influenced.

In the end it's only a multinational and a very local economy getting a boost. The public purse as a whole takes a very serious hit.

Remember that Amazon needs to build this stuff somewhere. They don't need a subsidy to achieve this.

That is not to say that all subsidies all awful, they just need to be managed at the level where the people getting the benefit are the same as those paying the price.


It's baffling to see such comments not giving any indication of grasping the rather basic mechanism behind the idea of restricting such race-to-the-bottom competition.

The number of jobs and investment are fixed. For the nation as a whole, these competitions only forgo tax revenue that instead goes to Amazon's shareholders.

And you can't just make the argument from the winning city's perspective. The right approach is something like the 'Veil of Ignorance': imagine being randomly assign to live in some city/town, and find a policy that maximizes your expected utility.

I also don't quite understand the heroic pose you strike for handing out subsidies. It's not like such self-impoverishment requires any skills on the part of the administration, except a willingness to sell out your citizen. Cooperating with other jurisdictions to form a cartel against such competitions would increase everyone's tax revenue, and still allow you to compete with factors that actually benefit your citizen, like good infrastructure or education.


Monopsony is the same kind of problem as monopoly, but on the buyer side. If you think we should have laws to limit monopoly power, then yes, we also should have laws to limit monopsony power. If not, then not.

We also have laws to make sure government purchases are made by means of suppliers bidding on government contracts. Giving out arbitrary tax breaks should probably go through a similar process for the same reasons.


Right. Everybody's pointing out the race-to-the-bottom for cities, but another bad side effect is that it's unfair to competitors (particularly small and medium businesses that don't have the same sway).


If nobody bids, then some town somewhere gets benefits worth $X.

Once a town bids, then some town somewhere gets a small fraction of the benefit, and Amazon gets the remainder.


Because "you" in this case is "a city government made of individuals who may personally benefit from this while not actually benefiting the area you represent". Also, you're allowed to bid to the point where it's a net negative for those individuals in the long run because you're just bad at math or because Amazon misrepresents the cost.

While we're at it you, the single individual in charge of making this decision, may be in favor of something but your community may be entirely opposed to it, but they can't vote you out until the bid was already placed and you bankrupted the city.

Also, you may be burning the current citizens for the prospect of these future citizens that the company might bring with it. You're hoping to drive out all those gross poor people and replace them with smiling rich tech managers. Never mind that you have no actual plan for where these gross poor people will go, that's their problem. You're building the beautiful city of the future, and you can't make an omelette without breaking some eggs amirite?


> Why use the law to stop me from bidding?

Because the data shows it won't be wild for your town. It won't reverse economic decline, and everyone's lives will not improve. You are being prevented from locking your local governing body into a poor deal (whether because you don't know better as a politician, or because you do know better but don't care, as you'll be out of office by the time it matters [which happens so often it's cliche at this point]). I might be more amiable if you're willing to personally guarantee the financial benefits out of your own wealth, so you have skin in the game (alternatively, the law could require a supermajority of voters support the measure, with a minimum voter turnout requirement).

These measures to protect against tragedy of the commons are not new, nor the arguments such as yours against such protections.


So, if the data shows it'd be bad for the town, why the town is bidding? It may be that town management is incompetent, or corrupt - but then isn't it up to the town population to oust the incompetent management and elect a competent one? Isn't it for the local DA to prosecute corruption?

Otherwise one should argue not to mess with the little decisions like Amazon HQ but solve the actual problem - if local government can be incompetent, and we can't afford that, then all local affairs should be managed by the central government (which, as everybody knows, is always the most competent and incorruptible). Limiting local power just in case of one Amazon HQ makes no sense - if the local government being able to make mistakes is the problem, then this problem should be solved by removing this ability.

If, however, we do think it's good to allow local governments to govern, then if their decision is to bid for Amazon HQ and they think it's good for their town, why should we interfere and tell them it's not?


>>if the data shows it'd be bad for the town, why the town is bidding? It may be that town management is incompetent, or corrupt - but then isn't it up to the town population to oust the incompetent management and elect a competent one?

The thing is, it can be a terrible idea, the government can still do it, and we can then elect new officials to replace them. These things aren't mutually exclusive. The problem is, voting out the idiots that gave away all the town's tax money to Amazon doesn't mean you get the money back. The town is still FUBAR by the debt and infrastructure strain, which now limits the ability of the new government to make proper decisions which leads to calls of incompetency which leads to them being voted out etc etc etc.

>>If, however, we do think it's good to allow local governments to govern, then if their decision is to bid for Amazon HQ and they think it's good for their town, why should we interfere and tell them it's not?

Really? Just defer to authority? There's a wide range of options between "Let the government do whatever it wants if that's what it thinks is right" and "Never let the government do anything because it upsets someone". People protest decisions all the time. Government officials make mistakes and implement bad policy ideas all the time. Government is a living thing. The town can say "let's do this stupid thing that will ruin us" and the people can rise up, make sure that doesn't happen, and elect an official that will put a law on the books making sure that thing never happens. AND THEN, 20 years later when circumstances have completely changes and the whole picture is different, they can then remove those restrictions as for being antiquated and problematic! Democracy in action!


> The problem is, voting out the idiots that gave away all the town's tax money to Amazon doesn't mean you get the money back

Sure, but tax laws can be changed. In fact, if the town inhabitants tell Amazon now "we do not support the deal our management has made, and will kick them out and manage things differently", Amazon probably would not consider this deal a done thing - it's much easier to change taxes than to move headquarters.

> The town is still FUBAR by the debt and infrastructure strain

So, the solution is to make upstream government to prevent downstream government from ever making a mistake, because if downstream government makes a mistake, it can have long-term consequences. But upstream government can't make such mistakes, presumably? The only way it works that I can see is that because you can't prove a hypothetical, you can't win an argument for doing something - because doing something can always lead to a mistake, while if you are doing nothing, you can't conclusively prove doing something would be better, since it's a hypothetical. So, the ideal situation is when any action of the local government that can potentially lead to a mistake is banned.

> Really? Just defer to authority?

Do you have any other choice? Somebody has to make the decision. Either it's the inhabitants of the town, as represented by the government they themselves elected, or it's the central government which of course always knows better and has everybody's best interest in mind and is never corrupt or mistaken. Who else would that be? The decision has to be made somewhere by somebody. Some people here advocate it should be centralized government because local governments can do stupid things. This makes no sense.

Or, we can take poll on HN and mandate by law that everybody should do whatever it says. That would surely work wonders.

> Government is a living thing.

Surely, but what is being advocated here is to take the authority from local government, because it can lead to a bad outcome. As if authority of the central government can't.


If your problem is with short-term thinking that is not in alignment with the people on the ground, force referenda and independent third-party evaluations. I might even trust a federal board that stalls poor action. But to fully ban? No thank you.


Those would be a fair compromise between our positions.


> It won't reverse economic decline, and everyone's lives will not improve.

Then the Seattle city should be in ecstasy now. But I think from the news I read, the locals seem worried, lest happy about it.


Lets forget about the specifics about what it truly does to the state/town in the long term. Given the jobs it's fairly clear Amazon would have built this some place in US regardless of the tax break and would have created the jobs and tax revenue associated with that. By competing like this even if a particular city/state gains more benefit than before the country as a whole looses that tax break from it's total potential revenue right?


The thing is, once somebody starts offering incentives, then everybody has to because anyone who doesn't get's left behind so after the dust settles everything is the same except everybody now collects a lot less taxes, it's a classic prisoner's dilemma.


This is only a bad thing if you assume that tax dollars in the government's pocket benefit society more than those dollars in the bank accounts of private individuals. I think that assumption is far to generous to the efficiency of government, especially in the US.

IMO having Amazon in paying half as many taxes in Buffalo is probably a lot better for NY state than them paying full taxes in NY.


> This is only a bad thing if you assume that tax dollars in the government's pocket benefit society more than those dollars in the bank accounts of private individuals. I think that assumption is far to generous to the efficiency of government, especially in the US.

That makes the assumption that the government won't just raise taxes for everyone else and simply move the money from private citizens bank account to Amazon's bank account.

> IMO having Amazon in paying half as many taxes in Buffalo is probably a lot better for NY state than them paying full taxes in NY[C]. (I'm assuming you dropped a C at the end of that sentence)

In practice NYC just drops it down to 1/4 of the taxes and Amazon moves back to NYC and everything is the same as before accept they got out of paying 75% of their taxes.

This exact thing happened in Kansas City where KS and MI both used tax breaks to lure companies across the state line.


[flagged]


> The socialists want...

Few substantive comments start like this. Would you mind refraining from injecting ideological flamebait?

https://news.ycombinator.com/newsguidelines.html


sounds like a public official gambling with public money. While may be not fully outlawing, some serious limits should be put on on such a risk taking.

At least there should be requirement of a level playing field. How come that granting tax benefits and various other huge privileges to say Foxconn or Amazon is supposedly good for local economy while granting such perks equally to other businesses isn't a good thing? Shouldn't the first thing government to care about be the level playing field and not skewing it in favor of chosen players? I mean a typical Joe can't just come down to your Colorado town and setup business on the same conditions as Amazon or Foxconn. Why such an injustice?


I’m sympathetic to that view. Anyone who can bring as many jobs of that much value should be welcome. Not Amazon alone. If you can bring 25k employees at an average wage of $109k, we’ll be happy to have you. I’m even all right with some sliding scale with a reasonable minimum.

If You’re afraid of public officials gambling with private money, force referenda.


>Anyone who can bring as many jobs of that much value should be welcome.

i'm curious why a 10 employee company with the same $109K wouldn't be eligible for the same tax breaks, etc.?

Foxconn is getting from Wisconsin close to $300K per each of 50K/year job ($4B for 13K jobs). Why such a perk isn't available to a 10 or 100 employee company?

Interesting that be it red or blue state/government when it comes to Big Business both are completely overpowered and taking the position of full submission. And that is why laws limiting such overpowering are needed. It isn't laws limiting the power of local/state government, it is laws limiting the power of Big Business in dealing with local/state government, i.e. limiting the perks/breaks Amazon/Foxconn can extract from a government.


Because the benefits don’t scale down. For a 25k person office I’m looking at revitalization of my city’s downtown, support restaurants, etc. Through scale they’re actually creating a lot of value. If a ten-man team comes to town no new restaurants will result. So you can’t get the same gain.


while the [non]scaling of benefits argument does have a lot of merits in theory, to show that it isn't the primary reason on practice : imagine that the 10-man team comes to town simultaneously with Amazon, then it is kind of obvious that addition of their $109K salaries would provide proportionally the same benefits as those Amazon salaries. Yet that 10-man team would still not get the same tax breaks/etc. Because the benefits are _forced_ from the government by Amazon for Amazon, and not _given_ by the government to the businesses satisfying some criteria of being beneficial for the locality.


Prevent the race to the bottom is the mindset of "there should be one single unified government that has all the leverage".

I prefer to give leverage to the citizens: let them decide if they want to subsidize amazon or not, as opposed to governors and elected officials that profit disproportionately more.


I would agree with that for sure. The big issue here is it's a few people making a decision in secret. You put your offer in a referendum and let the population vote, I'm totally cool with that.

Unfortunately, what usually happens is that a dozen people make a deal for a huge population that affects them in a big way.


> First, Congress could pass a national law banning this sort of corporate bribery.

That doesn't sound like what they were getting at.

Sounded to me like they were attacking Amazon because they were playing the field.


The next paragraph outlined a federal tax of 100 percent on subsidies that don't lead to taxpayer benefit (like infrastructure improvements to accommodate 50k+ new residents).

The two also don't have to be mutually exclusive. You can look at what Amazon did and say "That's not a business practice that should be followed," while still saying "State and Local governments shouldn't be allowed to offer funds in this manner."


The ‘bribery’ could be referring to the actions of the public servants: offering ‘bribes’ to corporations to entice them to do something (e.g., building a new HQ or factory in that politician’s jurisdiction).


> What Amazon did was playing the field; why not get a bonus for letting others compete; rather than taking nothing because it was already decided?

You are assuming they were seriously considering the other cities, rather than making a show in order to secure as favorable terms as possible from the cities they were already planning on.


You mean you weren't deeply surprised by their decision to be near the actual and financial capitals of the US?!?!


That still left a bunch of cities in the running, all just a train ride away from DC and NYC. Shame on Dallas and Denver, I guess, though.


A slow train ride away its not like you have TGV lines connecting major hubs in the USA


> Rather than punish Amazon, punish the public servants who thought a large tax break for years, or real estate deals, would really be big enough to draw the company in.

They are reacting to incentives, just like Amazon is. They are stuck in a tragedy of the commons, and each is trying to play the field, as best as they can.

I'd place the blame on the agent with more power (Amazon), and the one that initiated this spectacle (Amazon).


> They are reacting to incentives

That they are, but only to say 'I created 50k jobs; re-elect me.'

To me, that's not much as an incentive but a plea for holding power. At the end of the day the public servants have limited time to make things happen. Companies don't.

If you go buy a new car, you haggle with the dealer. That's just something you do. You have total control to walk out (you have more power,) and you wanted the new car (initiated.)

Yes the dealer will be upset that you haggled, but they still get paid commission, even at a reduced rate. You go home happy, because you got what you wanted, the dealer is happy to have gotten something over their competitor (and the money doesn't hurt); win-win.


I mean, it's part of a city council's job to develop a vibrant local economy.

Getting an Amazon HQ, as a cornerstone employer in their city achieves that. Or at least, that's the general economic consensus.

> If you go buy a new car, you haggle with the dealer. That's just something you do. You have total control to walk out (you have more power,) and you wanted the new car (initiated.)

If a dealer offers me a shitty deal, I can go across the street, to another car dealer. Likewise, if my offer sucks, there's no shortage of other people buying cars.

How many companies are wooing cities with 50k jobs, right now?


How many vibrant jobs and companies could there be if the cities used all that money to boost local smaller businesses? By the numbers, small businesses dominate larger businesses in job creation, etc. People seem to forget that 'revenue' and 'profit' from these gigantic ass companies don't come back to the 'hometown': they're owned globally, and it gets spread around.


> By the numbers, small businesses dominate larger businesses in job creation,

Of course, they do! Small businesses are less efficient, and have to employ more people to get the same amount of work done.

But optimizing for this is anathema in an ideological climate where the lowest price for the customer is the most important thing, all consequences be damned.

Also, many towns hope to, in theory, attract more employment through satellite industries, that spring up around the big company. These satellites won't be getting any tax breaks.


Blaming someone doesn't fix the underlying issue. Forbidding special tax treatment to individuals and other entities is a realistic solution and easy to execute.


It shouldn't be illegal to demonstrate that you are dumber than Jeff Bezos.

Really, this is what it comes down to...Bezos outplayed the cities. He'll never get a deal like this again, but since he only wants to make a splash like this once, there's no incentive for him to appear as a fair bargainer.


Why? One small group of people make the decision, the entire city of millions suffer.


[dead]


We've asked you many times to please post civilly and substantively, but it isn't happening so we've banned the account. We're happy to unban accounts if you email hn@ycombinator.com and we believe you'll follow the guidelines going forward.

https://news.ycombinator.com/newsguidelines.html


So you are saying it is ok for a city to offer incentives for a business to move there, but it not ok for a business to take advantage of this?


No, it's common sense.

> If the system allows for tax cheating

Do we really need to argue that allowing tax cheating is the root cause? Even the way you phrased it makes it sound like you agree.


Completely disagree that it's a problem or that it needs a solution and completely disagree it should be solved at the national level. If communities want to mortgage certain parts of their cities, that is their prerogative. It's growing tiresome reading all of this non-representative nonsense about wanting to change how other peoples' communities spend their money. This is no different than saying every state should tax income or tax businesses a certain way. The same reasons in favor apply.

The real problem with articles like these is that they say something is a problem and just expect you to magically believe it is. They throw out large numbers given in tax breaks and just say "poof, this is a problem" as though the readers automatically assume paying less in taxes is a problem. There are many people that believe that in many cases money is better spent elsewhere and the taxes are too high in the first place. There are many others that believe it is ideal to give to the job creators. And many others believe companies providing disproportionate benefits deserve disproportionate concessions. Whether you believe this or not is less important than your ability to understand why others do. The absence of that understanding, and similar dissonance across other issues, aptly explains our current political spectrum. But at least, for the time being, those that disagree with this article can still have these kinds of financial choices at the community level.


I mostly agree with your sentiment (as I understand it), but I think your approach is overly simplistic. Specifically, this:

> If communities want to mortgage certain parts of their cities, that is their prerogative.

That (usually) works OK for small communities with residents paying for their decision, for example a condo complex community debating whether to build a pool or a playground. For HQ2-scale projects the decision to mortgage parts of a city is done by bureaucrats that have no long-term financial stake in the result: they are here today, gone tomorrow. Letting them decide such things (often in secrecy) is way too cavalier. My 2c.


> is done by bureaucrats that have no long-term financial stake in the result

This is true in many cases (and not in others, such as sports team funding which are often voted on). If we want to have a more nuanced discussion about transparency and direct representation on financial decisions of a certain size (a hot button issue concerning being able to vote on property taxes in my state), that would be reasonable. But it's hard to have these kinds of discussions with pro-tax/anti-company-concession advocates shouting so loudly.

In the meantime, on the scale of politicians with less representation to their constituency, using a federal level mallet is the exact opposite of representative. The city I live in gave large tax breaks and land to companies moving in, seemingly unfairly so compared to existing local companies, but if most of us didn't like the outcome (which most of us do and applaud their appetite for growth/prosperity) we'd have no problem running the mayor and councilmen out of town.


And with the mayor run out of town, you'd still be left holding the bill.


Of course, as I might be with a new road project or any other commitment. As is Amazon even if their CEO is fired. I suppose I don't understand the relevance of pointing out the obvious here. If we're asserting fraud, that is a different discussion, otherwise we live with decisions by decision makers, some beyond their term.


> For HQ2-scale projects the decision to mortgage parts of a city is done by bureaucrats

Requiring these sorts of subsidies to be approved by a majority of a city's voters wouldn't be a bad restriction to put in place. I'm a New Yorker, and I'm fine with the blood money we had to pay to ensure we got Amazon. But I'd feel much better if I knew it was supported by a majority of voting New Yorkers.


You voted on it by proxy: electing your officials who approved the deal.


If local officials, elected by local residents, are not allowed to make such decisions, then who is?


What about residents? Olympic bids for example have been way less popular with the residents then with the officials, recently.


Local officials are not coming out of thin air - local residents are the ones who are electing local officials.


You are moving gloal posts. Residents have more legitimacy than officials. And often differen views, cf. Olympic applications.


I'm not sure how did you reach this conclusion. My position is: locality needs to be in charge of these decisions. From my perspective, the easiest way to that is to treat local officials as a proxy to local residents.

Now, you can argue that "some decisions" must be subject to a popular vote of local residents, but this is not the argument that I was engaging with - it's more of an implementation detail of "locality needs to be in charge of these decisions" principle.


Agree completely. To some people, the tradeoffs between having Amazon come with a couple tax breaks and not having Amazon come at all is worth it. Nobody put a gun to the heads of these city officials - everyone knew what was going on and city officials went along willingly.

If Amazon had chosen Detroit or some city in America's heartland, the national press would have been praising Amazon for "spreading the wealth". Instead of getting mad at Amazon, policy makers should look at why Amazon chose these locations and seek to replicate these conditions elsewhere.


It's anti-competitive against companies too small to pull this type of stunt though.

It feels wrong to have everyone playing by different rules. Why should my small business across the street pay for Amazon's public services because they're able to make every city in the country race to the bottom?


Why should you pay more than the person getting the bulk discount for buying more items at a time? Why should you pay more than the person that negotiated the better car deal? That's what's happening here, a negotiated bulk discount. You can argue negotiations and discounts are unfair, but I'd argue it's unfair to outlaw conditional discounts at this high of a level. And even if you and the majority of your peers believe it is unfair, you can only vote in officials that agree, but luckily those in other communities than you can disagree about fairness and have it their way too.


Except that the law is not supposed to be a car deal but supposed to be the same for all actors.

Or do you also think you should be able to pay to ignore all laws in general?

If I follow your logic, I think a fair tool for cities and state should be the possibility to have tariffs for everything coming from outside the city/state. So now to attract Amazon not only can you say "if you come here you won't pay tax" but more importantly you can say "if you DON'T come here we will tax 50% of every sale you make in our city". Now suddenly I think many people here would not sound so keen on the idea.


It's doggone impossible replicating cities that became central shortly after the creation of the United States, or even earlier. If Amazon had picked Austin or Pittsburgh you might have had a better argument, as those are seen as up-and-coming tech hubs. Instead, they boringly chose cities that are already central to American economic and political life.


The argument for Austin or Pittsburgh isn't too different than an argument for NYC or Washington, DC.

My point is that there are cities in the United States that attracting talent, creatives, and business investment and instead of crying foul, we should learn about what they're doing and seek to replicate it.

If Amazon had chosen Austin or Pittsburgh, plenty of people would still be complaining, although Maybe not as much as NYC and Washington.


They would be complaining for fueling rent prices and gentrification in those cities. But the complaint about NYC/DC is that they are cities that have been well-established for centuries, which makes the whole contest seem like a sham that was rigged in favor of predetermined winners from the beginning.


>> If communities want to mortgage certain parts of their cities, that is their prerogative.

This is not the community choosing to do so via, say, a referendum. This is an elected official making these decisions on behalf of, and without any input from, the community.

You might say, "but that's why we elect politicians!" But it's not so simple. People elect politicians to run the everyday affairs. A megacorporation asking your city for incentives in return for jobs and massive investment should be regarded as an extraordinary occurrence, and should be decided via a public vote.


It's not an extraordinary occurrence though, your state probably already hands out billions in subsidies, investments, and no recourse loans.

If you don't trust your representative to act in your best interest in a negotiation then that's what's broken.


>>It's not an extraordinary occurrence though, your state probably already hands out billions in subsidies, investments, and no recourse loans.

Not to a single entity.


> should be decided via a public vote

Completely agree, but I am having a hard time reconciling that with my belief that if a citizenry wants to remove the handcuffs of its leaders to make these moves, they should be able to. I think transparency in public spending and negotiations is what we should be asking for at a higher level.


those same bureaucrats make billion dollar promises to public employee unions that are not sustainable but you won't see nearly the protest against that as with this deal. pension deals that are given for promise of reelection support. promises the politician won't have to be there when the city, state, or county, cannot pay them out. This is happening all across the US with estimates in the hundreds of billions of unfunded liabilities.

tax breaks to corporations at least have the promise of taxable income directly or indirectly later on. so if we are to claim there need to be limits on those types of expenditures we need to be honest and make it for all promises above a certain dollar amount.


It's worth noting that in Europe things like this are illegal: http://ec.europa.eu/competition/state_aid/overview/index_en.....

So the idea that it would just be too hard to make this illegal (which I see in at least a few comments) is wrong. We could have laws at the federal level that prevent it. (I'm sure there would be constitutional challenges but that's a separate--and in my view surmountable--issue.)


Is what happened with Amazon really fundamentally different than the state building a hospital, staffed by private practice doctors, or a university?


Fully agree on principle -- but enforcement remains problematic:

https://www.bbc.com/news/business-37444780

An erratically enforced law may be worse than no law at all.


Its hard to make ego illegal. Politicians pull this stunt a lot to "make their city better", but it really comes down to a desire to be seen as a builder even if the cost / benefit just isn't there. Look at all of the rhetoric politicians use when giving speeches about a new stadium. If you get to sit in a box seat and see thousands of fans, its hard not to see it as a success.

The really sucky part is that a lot of people really want the X but don't understand how much their politicians gave up for X. Its often murky and people aren't experts in finance or city budgets. But that new stadium / HQ really looks cool right?


"Its hard to make ego illegal."

It's very easy to make subsidizing individual companies illegal.


Given all the tools that are at a politicians disposal, it actually is rather hard to stop all the paths a city can use to participate in this kind of thing since a lot of it is based on what they do everyday.


I'm not sure I agree.

If it's made illegal to subsidize individual corporate interests through tax incentives, direct subsidies, what else can be done?

Zoning? That to me is actually a legit thing. If Amazon wants to build 5 buildings next to downtown, on land that isn't currently zoned for that - it makes perfect sense to consider that. For any company frankly. It's the cities job to accomodate various interest with zoning.

So what else is at a politicians disposal?

No much.

Maybe guaranteed contracts ... but even then, that's not such a bad thing so long as the company is getting value. Moreover, I don't think cities are big users of any of their local companies things.

Bombardier always threatens to leave Montreal as they try to get giveaways elsewhere ... it's not like Phoenix Arizona, which was going to give Bombardier a big chunk of cash to open a factory there is going be buying jets or snowmobiles.

So I think that 'making it illegal' would definitely quash most of this activity.

And FYI if politicos try to bend the rules, they open themselves up to lawsuits.

So I think it's possible.


If it's made illegal to subsidize individual corporate interests through tax incentives, direct subsidies, what else can be done?

Its really not that hard to make the incentive for all companies but write it specifically so it only fits one. Ask any HR Director writing job descriptions that they intend to hire an H1B for. We have plenty of laws that are rather easy to get around. It really would take some serious changes in how city councils are allowed to operate.

And who is going to limit them? Cities are not self limiting. Maybe a petition in states like California and North Dakota, but certainly not the state government since those politicians get to sit in the box seat too.


I don't understand your argument.

Municipalities have no influence over H1s. But even then, providing choice access to H1 programs is not the problem here. That might even be beneficial, moreover, that's a national program.

"And who is going to limit them?" "Cities are not self limiting."

??? The law. If it's illegal for a city or state to give money to private companies that there's not much need for populist oversight, because it's against the law.

You do realize most government officials generally follow the law right?


Municipalities have no influence over H1s. But even then, providing choice access to H1 programs is not the problem here. That might even be beneficial, moreover, that's a national program.

Its an example that shows how a law that is meant to limit an actor (in this case a company) that does not truly limit that actor.

??? The law. If it's illegal for a city or state to give money to private companies that there's not much need for populist oversight, because it's against the law.

Is the city going to pass that law? Is the state? No. Neither will limit their own power. Maybe a citizen passed initiative would work.

You do realize most government officials generally follow the law right?

Someone has to pass that law.


Your argument was: "Given all the tools that are at a politicians disposal, it actually is rather hard to stop all the paths a city can use to participate in this kind of thing since a lot of it is based on what they do everyday."

My agument is simply that a law could be passed, which would mostly solve the problem.

Now you're saying 'well a law has to be passed'.

Yes. Of course. It has to be passed.

But if a law is passed, and it certainly could ... then there's little politicians could do to get around it.

Your argument about 'politicians can do a lot' - of course they can if they are free to do as they please. Nobody is debating that 'politicians can give subsidies if they want'.

"It's hard to make ego illegal"

Again - no it's not hard at all.

Just literally make it illegal to subsidize, and then it'll stop.

Obviously that's no small feat.


Look, I saying that there is no way a law is going to get passed and there is a very high likelihood that such a law would be ineffective due to the basic nature of the powers a city needs to govern itself. I gave an example of another such law (H1B) that is worked around when its scope is even stricter than the governing of a city and the powers needed for such.

It's very easy to make subsidizing individual companies illegal. was your original statement. Now we have Just literally make it illegal to subsidize, and then it'll stop. Obviously that's no small feat.

The crafting of such a law without destroying the governance of a city is an amazingly hard problem to which I have not seen one city, state, or petition that has attempted it.


"and there is a very high likelihood that such a law would be ineffective due to the basic nature of the powers a city needs to govern itself"

I think this is not true.

You haven't made any reasonable arguments in this regard - i.e. haven't demonstrated how a) the law could not be enforced or b) how the city needs to subsidize in order to function

A law banning direct corporate subsidies would work really well.

"The crafting of such a law without destroying the governance of a city"

I totally disagree. Cities generally do not directly subsidize businesses.

As for getting the law passed, yes, I'm with you there. Very hard. It couldn't be done at a state level because states compete, so it'd have to be done at the national level.


> Why the hell are U.S. cities spending tens of billions of dollars to steal jobs from one another in the first place?

First, US, at this point doesn't have a shortage of jobs, it has a shortage of good jobs. In case of Amazon, it creates good jobs, then it is a demand and supply problem.


I've interviewed about 100 programmers who just passed their 366th day at Amazon and are looking to get the hell out. Further down the ladder their people are pissing in bottles and collecting food stamps. The only person at Amazon with "a good job" is Bezos himself.


For most employers satisfied, happy, and content workers are just underexploited. If they aren't miserable you aren't getting your monies worth.

Its a legitimate mindset way too much of the business world in the US believes despite the psychological evidence that content and happy employees are more productive.

The consequence of such a widely held backwards rewards structure is that in almost any job there is someone else doing something even worse that is more than willing to take your spot to reduce their misery by a fraction.


I feel like there is some selection bias there - you certainly aren't going to be interviewing very many people who are happy with their current job at Amazon.


It is pretty out of touch statement, if you read it carefully. There are probably 1000 people waiting in line to fill those 100 people's jobs. The good jobs you described, decent pay without labor or stress, I do believe they exist, but it is not common, and surely won't become the norm.


The author wants to prevent a race to the bottom on taxes. A race to the bottom would be bad if taxes are fair or already too low. But if taxes were too high, a race to the bottom (or just the threat of one) would be a good thing, as it could keep unreasonable tax rates in check.

To put it differently: if companies and individual workers were not able to shop around for the tax regimes they prefer, what would prevent cities and states from raising taxes to unreasonably high levels? Taxes are kept in check by the threat of companies and high-earning taxpayers moving somewhere else.

I would rather live world where taxation is subject to a race to the bottom than in a world where nothing prevents unfairly high tax rates. The latter is definitely worse.


I'm fine with jurisdictions competing on taxes, but you have to lower them for everyone. No special tax breaks for individual companies. Provide a level playing field for everyone.


Taxes are kept in check by voters not electing politicians that support too high tax rates. In a democratic society, there is no need for that kind of competition.


Ads, assuming ads based on the status that was popping up in the bottom left, constantly refreshing should be illegal. I got to the point of trying to hover over the link about the people not having standing to sue Ohio to see the URL and couldn't read it because yet another thing was being pulled down after 5 or so minutes on the page. I sat there for a little bit to see how long it'd take to trigger again and the answer is "not long."

As for the topic at hand: I'm against the practice. I'm also against the practice of cities paying for stadiums to lure (or keep) sports teams to their city. And in a lot of cases, it isn't even owned by the city at that stage, but rather the team owner. It is nuts. Quite frankly, as great as it is to get an expansion team to come to your big city for revenue reasons (hopefully. Marlins don't appear to be doing much for Miami, for example), it is also advantageous for the team to move to a bigger city as it increases the pool of potential fans buying tickets, memorabilia, etc. Also, I'd hope that a city I lived in would not pay for the bid to host the Olympics or similar event (tons of money goes into building the stadium and hosting, revenue comes in but not enough to offset, and then you hope you can do something with the building after but in a lot of cases, you can't. Montreal springing to mind here). Also reminded of Curt Schilling's company and Rhode Island. Though honestly, I'm not really all that mad at the companies for engaging in it, so much as cities for taking part in it.


Ok, assume city A offers Amazon one million dollars in tax breaks. If Amazon moves to city A, city A will not receive one million tax dollars from Amazon. If instead Amazon turns down city A and moves to city B, then city A will STILL not receive one million tax dollars from Amazon. City A will NEVER receive one million tax dollars from Amazon, no matter what Amazon decides to do. What am I missing?


It's not a net loss to the local government. It's a loss to Amazon's competitors that don't get those tax breaks. That local government is picking winners rather than provide a level playing field, and enriching themselves in the process. It's essentially bribery for favors but payed with tax revenue instead of under-the-table cash.

By all means, lower your taxes if you think it will attract jobs. But lower them for everyone.


"One million dollars in tax breaks" means City A agrees to receive (N-1) million instead of N million from Amazon (and its employees).

"Tax break" doesn't necessarily mean "effective taxes are set to zero".


You're not missing anything. It's essentially a zero-sum prestige race, it doesn't make any economic sense.

related to your point, obviously whenever Amazon relocates parts of its staff, some other place loses an equivalent amount of tax revenue, so Americans overall are never better off, but are guaranteed to play localities off each other in an attempt to hand out corporate gifts in a race to the bottom.

We have arrived at a point where not companies compete between each other for economic growth and innovation, but the public competes itself into the ground so that businesses don't have to.


If Amazon moves to city A, it will pay out far more than 1 million in taxes, that's the point. Cities do have an incentive to compete.


Having read the very interesting and thoughtful debate arguments being made in the comments here, I have nothing more to add than to state that this isn't anything new, even if the exact means employed and the parties involved are.

It's a textbook "tragedy of the commons" where, as @konschubert said, the USA los{es,n} out for every dollar spent. But this was never about maximizing revenue/growth/benefit for America, it was cities trying to edge out one another for their own local maxima.

This is also a textbook bidding process, with players holding the cards close to their chest and trying to give up as little as they can while undercutting the competition by as small a margin as they could. The only way to win in a prisoner's dilemma is to collectively not play, something that numerous psychological studies have found to be something humans just aren't good at.

The only part of this that should be illegal (and probably is) is the reveal that there are two HQ2.5s.


how is that probably illegal? For that to be fraud they would had to have contracts with the contestants the specify otherwise.


the game of local governments competing to lure big corps with handouts deserves most of the blame. However it is interesting that this game is a result of a prisoners-dilemma phenomenon: although all local governments would be better off if they collectively agreed or otherwise cooperated to NOT entice big corps with special handouts (as the big corps will build in one of them anyway without any subsidy), however all it takes is for one major local government to start waving some incentives for the rest to give in to the game. CNN did a good video on this phenomena: https://www.cnn.com/videos/cnnmoney/2018/03/13/amazon-hq2-or...


I learned years ago that most RFPs are a massive waste of time and effort. But why should the process be illegal? If cities want to compete, so be it. If the citizens don't like it, then vote out the city council. Corruption is illegal... This headline and article are link bait, at best.


> the Supreme Court avoided a final judgment on the matter by finding unanimously that the plaintiffs did not have standing to bring the suit.

Perhaps existing businesses have a standing to bring a suit by arguing that they already provide jobs. Maybe they already receive a proportional tax benefit?


Why federal government (that's article's argument) should be in the business of deciding what kind of agreement local government and private company had reached?

Whenever feds post RFPs for their projects, they put a lot of conditions that company must comply with in order to even be considered. How is this different from what Amazon does?

Amazon has fiduciary duty to their shareholders; local governments have responsibility to their constituents. If both are aligned - why anybody else should have a say in the matter?

You may like or dislike the contract, but as long as both parties are not coerced into the contract (surprise: the city can opt out from bidding!), who cares? The last thing this country needs is more fed involvement.


> Why federal government (that's article's argument) should be in the business of deciding what kind of agreement local government and private company had reached?

Assuming the private company isn't doing purely in-state business, the Commerce Clause, and, if it's not either a natural person or an in-state entity, insofar as corporations and other artificial juridical persons are creatures of the chartering governments, the Compact Clause.


Sure. Only the moment federal govt decides to use that to restrict Amazon's (any company's, really) ability to choose locations, said location will be moved outside of US altogether. Who'll benefit from that?


The federal government already uses it's commerce clause powers in a way which limits the range of wage and working condition arbitrage between domestic jurisdictions; this limitation clearly hasn't stopped all new facilities from being sited in the US, even though it limits what deals jurisdictions can cut to attract facilities.

The idea that limiting other race-to-the-bottom avenues similarly would inherently being catastrophic is not supported by good reasoning or evidence.


Tech companies are so constrained to the West Coast that the HQ2 talent show was a big deal in the first place. It's incredibly doubtful that they have the capacity or the will to move outside the U.S.


Canada is right around the corner.


If Amazon had wanted Toronto for HQ2 they would have chosen Toronto for HQ2.


This happened in Scotland a few years ago. Scottish Enterprise and the embryonic Scottish Parliament enticed Hyundai's semi-conductor business to set up shop in Dunfermline. Millions were spent on inducements on Hydundai for them to then pull out of the deal and go somewhere cheaper.

Ironically the building is now occupied by one of Amazon's distribution centres, no doubt funded by more public money and employing staff on zero hour contracts with terrible conditions (which the Scottish press reported on).

I wonder why we can't spend these vast sums of money nurturing local indigenous SME's and startups (and I don't mean the sort that involve glorified ToDo lists).


Government should ban the subsidization of any specific companies.

Maybe they can give subsidies to businesses under a certain size, or maybe industries wherein there are several players ...

But individual corporate subsidies are irresponsible.

Should be illegal.


> Congress should institute a federal tax of 100 percent” on corporate subsidies, Jack Markell, a former governor of Delaware, wrote in The New York Times. “This would not include investments in public infrastructure, work force development or other investments that can attract employers while also providing a significant long-term benefit to taxpayers

That's an awfully ill-defined criteria. And anyways contractors for building roads or towing cars, for example are incredibly corrupt too.


Amazon is going after the federal market in a major way, they MUST expand in the Virginia market. They really have little choice if they plan to support the federal government. They would have moved into the area regardless, crystal city is right next to the pentagon and close to dc. So I think they would have picked that area regardless knowing they prefer urban areas for office locations.


When I first heard Crystal City, I was thinking first that you couldn't pay me enough for that commute, but then on reflection, if they pay bay-area prices you could afford to have a house between I-395 and the Potomac which would make your commute under 30 minutes.


Cooperation between cities and cartel is no illegal. Cities were caught in a prisoner dilema and forgot to cooperate.


the best answer is the town should just have a vote, "we're going to offer between x and y incentives. yes/no?". That's the easiest and most appropriate way to handle it, let the town decide they're the ones paying the taxes anyway. If the people want to go for it then fine.


What is wrong with it? It's a market solution to Amazon ending up in a city that wants it the most.

Logically, the people who believe "Amazon ruined Seattle" should support a system where the cities that actually want Amazon there can incentivize it to come there and thereby avoid other places.

More

Applications are open for YC Summer 2019

Guidelines | FAQ | Support | API | Security | Lists | Bookmarklet | Legal | Apply to YC | Contact

Search: