Amazon HQ2 finalists should refuse tax breaks, say nearly 100 economists | Hacker News Reader

Amazon HQ2 finalists should refuse tax breaks, say nearly 100 economists

venturebeat.com

235 pointschampagnepapi210 comments

What could be happening is:

* Amazon has already chosen its HQ2 city, for a variety of business-related factors that have nothing to do with tax incentives.

* But it would like tax incentives if it can get them.

* So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.

If this were a teen movie, the cities would eventually find out that Amazon has been playing them. They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue.

Here in real life, it would be great if all of the finalist cities were to band together and say, "We're withdrawing all tax incentives we previously offered. Choose us for us, not for what tax money we're willing to sacrifice."

But a HUGE part of such a pact is that the cities need to find a way to punish any city that doesn't join the agreement, such as with economic sanctions. I'm not totally sure whether it would be possible to craft sanctions that might deter defecting from the pact, especially with so much potential upside on the line, but that's sort of what has to happen for the pact to work.

One other thing to consider, which is part of the economists' argument, is that having the HQ2 city forgo millions or billions in taxes is ultimately bad for Amazon. HQ2 is going to have employees who will have to live in that city, and it is in their best interests to have well-funded public services.

'So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.'

Isn't this what already happens with businesses that have the potential to employ a lot of people?

In the UK, at present, there are plenty of firms playing this game of 'we're thinking of shifting operations to mainland Europe' just to see what concessions they can get from the Govt.

> we're thinking of shifting operations to mainland Europe

More like "we need to know what the legal regime will be for import/export of goods and services will be in a year's time, so please get your act together before we have to assume the worst".

This happens at every scale. For example, Centene announced a few years ago that they were moving from St. Louis County into Downtown St. Louis (a separate city), but eventually decided to stay, ultimately receiving a package of tax incentives from their home city just about equal to what St. Louis City was offering.

Does it really matter to "St. Louisans" on which side of this silly, arbitrary border they build their HQ? This system is ridiculous.

> Does it really matter to "St. Louisans" which side of this silly, arbitrary border they build their HQ?

For those that pay taxes and use things paid for by taxes, it matters. The services on the other side of that silly, arbitrary border is paid for with different funds and gets to make its own decisions about how money is spent or saved.

> This system is ridiculous.

Yes, but an alternative would be...what? Federally-mandated local-tax rates and policies or something? I like that my city (not on the HQ2 list) can control what it spends its money on and can decide if giving tax breaks to X would lead to suitable growth in Y and make the trade-offs with its tax-base in mind.

>Yes, but an alternative would be

A federally mandated blanket prohibition on city tax incentives that companies can use to play cities off against one another.

>I like that my city

Can participate in this race to the bottom?

I don't see the value in making cities compete with one another for jobs with tax breaks. It's simply a mechanism to create subsidies to big business because they are big that drains city budgets.

My point: If the city decides the breaks are worth it, then the city has ended up ahead.

Your point (I think): It's competing with other cities and taking less tax in doing so. So it may end up _less_ ahead than if there were no competition. Since every city is doing this, it makes sense to keep under-cutting other cities until the net-gain is effectively just larger than zero.

Nobody forces the city to participate or offer incentives. This article advocates that they shouldn't.

A city should be clever about its incentives and make them align with what the company wants so the outcome isn't so zero-sum.

Many cities do this with zoning - only allowing waterfront building permits if the developer also builds parks or whatever. These increase the property-values for the developers while paying for a public-good that everyone can use.

Something similar here may be to offer tax credits toward infrastructure near the campus. E.g. don't demand the taxes directly but instead force the company to build new roads.

This is more or less an accounting-trick of course, but imho it's a lot less zero-sum and actually forces the company to consider how their incentives (or requirements) will actually benefit them.

If you prohibit all tax-incentives, cities are effectively forced to pre-build or promise services to make themselves attractive to companies. This can lead to huge amounts of waste (4-lane roads that could have been 2 for example) and cities defaulting on bonds to build such things when the company ends up choosing another city etc. I don't know if this is much better than requiring clever accounting.

>Nobody forces the city to participate or offer incentives.

The fact that cities need jobs and an inflow of money in order to function means that they're forced.

It's like saying that nobody forces you to take a job coz the park bench is always an option.

It's effectively no different than any other part of the US economy. If I'm happy living under the bench, I don't need a job. I decide what I want, I work and charge for it, and I can get what I want as a result.

A city also has property taxes which make up a large portion of my city's budget. I pay ungodly sums in property taxes for a not-that-expensive condo. The city gets away with this because the location is desirable and we have great public-transit.

Because of the property tax revenue, the city does give some companies a tax-break. But also because of the property tax, citizens keep a close eye on things, so most tax-breaks around here end up looking like forced-improvements or other public-goods.

Each city is different and will find the best way to fund itself. Saying they can't pay less for something they want forces the funding problem elsewhere.

My city has ridiculously low property taxes. I still pay the same amount I would because supply and demand determines prices, it's just that money goes to rentier landlords or to an investment portfolio's CDO via a mortgage instead of to schools and public services.

The reason your condo was relatively cheap is because your city has high property taxes.

Yup - each city is free to change their tax structure (for residents and businesses) in a way that makes sense for them.

Your city may decide it wants to drive out rent-seekers by hugely taxing rental income or raising property taxes on rentals. This would effectively be a business tax. And the town next-door could decide it wants condo real-estate development to attract young urbanites, so it might notice your town's changes and offer tax-free rental income for N years. This allows each city to benefit their tax-base/residents the best.

I'm not exactly sure why cities having the 'freedom' to get played off against one another or to let rentiers suck wealth out of the system is such a good thing. I'd rather politicians didn't have the "freedom" to knuckle under pressure from plutocratic forces and just told large companies and rich individuals to go fuck themselves when they come around demanding handouts.

The problem is deeper than that. This isn't Chicago competing against St. Louis. This is St. Louis competing against St. Louis. There's a reason I don't separate the finances of my kitchen from the finances of my living room. The whole household is the right unit of measure. Chopping up one "city" into 90+ smaller "cities" is a legal fiction. In some very real sense -- in almost every real sense -- it's just one city. All these nonsense ways of chopping it up further are an historical accident. It's all contingent bologna.

That sounds like a real pain. New Jersey is famously divided into extremely small towns and it leads to lots of redundancy and waste and probably unhealthy competition between the towns.

To be honest, the problem may be the dividing of the cities as such. The solution may instead tax and run all of them as a single block (e.g. minimize city government in favor of county) or even combine into a single city.

This is moving the goalpost of the conversation above a bit, but my point is that the problem may not necessarily be "cities compete," the problem may be with the local bureaucracy. This can manifest in lots of ways like you describe.

You're just rephrasing the part that's ridiculous, which is that this sort of hyper-local competition for resources results in worse outcomes for all sides. St. Louis County comprises 90+ municipalities, each of which is presumably vying for Centene's tax money. Somebody working at Centene might drive across a dozen of these cities each morning on their way to work. That's absurd.

Yes, as you say, it obviously matters who wins and who loses, but this is a system that's generating an enormous number of unnecessary losers.

Or, on a micro level, "I'm quitting because this other company is offering me a 10% raise and another week of vacation."

This is an extremely muddled analogy. Local municipalities competing for a company headquarters is basically nothing at all like an individual considering different job offers, across a whole bunch of very important dimensions. It's hard to find any relevant way in which they're alike.

Can a US city legally apply economic sanctions to another US city in another state, or would that be considered as affecting "interstate commerce" and preempted or something?

I don't think US cities have that kind of power. Sanctions are considered a diplomatic tool when dealing b/w Sovereign Powers; City Governments can argue their dispute in US courts and get a binding resolution that both need to follow.

Do you really think a city council/mayor has the power to enforce sanctions on another city? Generally, it's nation-states with armies that enforce sanctions, otherwise the target of the sanctions just says "Uh, no."

It's already going on!

PROHIBITION ON STATE-FUNDED AND STATE-SPONSORED TRAVEL TO STATES WITH DISCRIMINATORY LAWS (https://oag.ca.gov/ab1887)

In effect, this law means that if any member of California government picks a contractor / supplier / conference in North Carolina, then that person has to pay for any related travel out of their own pocket. The idea is that this will hugely disincentize any one in the California government from doing business with companies located in North Carolina.

I guess we'll have to see if there's ever a legal challenge to it.

The law you posted prohibits the state of California from requiring that any of its own employees travel to a discriminating state, excepting a very broad list of essential purposes. I don't see the contractor thing you're referring to.

You also seem to be describing a case where California is a direct market participant (they're paying the contractors). States are allowed to discriminate in favor of their own citizens (or, I guess, anyone else) when they themselves participate in the market.

Yes, possibly legal. Still a form of economic sanctions though.

It's not just that they don't require employees to travel there, they also don't pay for trips "This bill would prohibit a state agency from ... approving a request for state-funded or state-sponsored travel to ..."

The bill doesn't explicitly forbid government employees (and by extension, the government of California) from doing business with North Carolina - it just adds personal, out-of-pocket cost for doing so. (which probably amounts to the same effect.)

In the scenario you propose, California isn't prohibited from paying to fly NC contractors to CA.

Travel from a prohibited state, including the return flight back, shall be construed as travel “to” the original destination.

It also means that public universities in California can't send their student athletes to play away games in states such as North Carolina.

(I don't follow college sports enough to know whether CA and NC even have any universities in the same conference, though, so it might be moot)

Nope, it only applies to "state employees, officers, or members", which students are not.

No, not really: states (and by extension cities) are prohibited under the Commerce Clause from enacting burdens on interstate commerce of any sort unless they're authorized by Congress or they are themselves a direct participant in the market they're actually regulating, and not just a regulator.

The fact that states cannot do this is basically the root problem with the American system, and doomed the concept of federalism to failure.

Strongly disagree - you cannot have internal sanctions within a country, or it ceases to be a country. Essentially all modern nation-states have full free movement of goods and people internally(+).

(+) China has limited internal free movement and some countries have "special economic zones", enclaves/exclaves and status anomalies like Guantanamo etc.

The US wasn’t designed to be a country. It was designed to be a federation of sovereign states. But the constituent states often can’t practically exercise their sovereignty without being able to discriminate against other states. Voters in California can decide that they’re willing to bear the economic cost of stronger labor protections or higher minimum wages, but neighboring Nevada can easily capitalize on that to undercut Californian companies even in the Californian market.

That forces myriad issues to bubble up to the federal level, which was the exact opposite of the federal design. For example, say we didn’t have the Fair Labor Standards Act, which includes a federal ban on child labor. States could ban child labor within their borders, but that policy would be undermined by neighboring states who could flood the market with cheaper goods produced using child labor. In fact, Congress proposed a Constitutional amendment in the 1920s to ban child labor. In the 1930s, FDR’s threats to pack the Supreme Court resulted in a dramatic expansion in the view of the federal government’s commerce clause power, which obviated the need for an amendment and child labor protections were included in the FLSA in 1938.

The United States tried being a loose federation under the Articles of Confederation. It was a miserable failure, which led to the current Constitution, which was set up with the intention of creating a federal government strong enough to carry out essentially any function necessary to the success of the country. The United States has been a resounding success under the Constitution, growing to become the most powerful and richest nation in the world, and one of the most desirable nations for immigrants.

The articles of confederation failed because they couldn’t ensure adequate funding for the federal government to guarantee internal and external security. Reading more into it than that is ahistorical. The Constitution sought to remedy that, but decidedly did not intend to grant the federal government power to carry out “any function necessary to the success of the country.” Education for example is necessary to the success of the country, but was then and still is now a state issue.

Complete economic integration is not necessary to provision a common defense (e.g. NATO). Inclusion of the Commerce Clause was instead a bit of a submarine trap. While the Constitution was sold to States on the theory that they would continue to be mostly sovereign, having ceded only narrow powers to the federal government, taking away states’ power to control cross-border trade left them castrated. Today, they’re mostly irrelevant except for the layer of inefficiency they add to the whole system.

Economic success isn’t the only concern (and there is no evidence that less economic integration wouldn’t have led to just as much success, and European countries are plenty prosperous with historically far less economic integration). At bottom, people were promised that they wouldn’t become one completely integrated country, but the Constitutional design made that promise a dead letter from the beginning.

> The articles of confederation failed because they couldn’t ensure adequate funding for the federal government to guarantee internal and external security. Reading more into it than that is ahistorical. The Constitution sought to remedy that, but decidedly did not intend to grant the federal government power to carry out “any function necessary to the success of the country.” Education for example is necessary to the success of the country, but was then and still is now a state issue.

It was meant to give the federal government all the powers necessary for the federal government to have to make the country successful. Hence the "necessary and proper" clause. You're of course correct that many functions have been successfully left to the states.

NATO would not work without the United States. It has the same issues the US had under the Articles of Confederation where members try to weasel out of their commitments: http://money.cnn.com/2016/07/08/news/nato-summit-spending-co...

The EU is not stable, has a terrible problem with border security, and the lack of economic integration is certainly a problem (e.g. look at Greece), so I don't think that's an example to aspire to.

> It was meant to give the federal government all the powers necessary for the federal government to have to make the country successful. Hence the "necessary and proper" clause

The Necessary and Proper clause says: "The Congress shall have Power ... To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof."

The "foregoing Powers" refers to the preceding text in Article I, Section 8, which gives Congress power to do things like "provide and maintain a Navy." So Congress has the power to "make all Laws which shall be necessary and proper [to provide and maintain a Navy], ..." It does not have the power to make laws "necessary and proper" generally.

The basic design of the government is flawed. It's supposed to be a federal system, with a limited federal government that provides for a common defense, regulates the currency, etc., but where the states build the roads, provide police services, etc. That was how the Constitution was sold to the public before it was ratified.

But depriving states to control their borders makes that idea unworkable in practice, because it creates a prisoner's dilemma situation. E.g., everyone might want universal healthcare, but each state has an incentive to let the other states do it, and simply let people cross the border for treatment when they get sick. Or, it might be the case that investing in education helps businesses to have a competent work force, but each state has an incentive to let the other states foot the bill, and lure businesses and educated workers after the fact through low taxes.

To provide the services people expect from a modern first-world country, then, the federal government is then forced to give up federalism. It has to dramatically overstep the limited role it was originally envisioned as having.

It would definitely be illegal, and the current administration would almost certainly be hostile to that. We could potentially arrive at a situation where the courts would be willing to look the other way in certain cases though. Or Congress could delegate that power to state/local governments under certain circumstances.

I (and many of my programmer friends) believe this to be correct; and moreover that city is Austin, Texas. There was basically no need for Austin to be a finalist; I don't think the city was particularly interested in getting them (we're already booming and most folks are already grumbling about increasing property taxes and congestion etc.). They already have a pretty big presence in Austin and are expanding rapidly. I'm 99% sure this was a cheap stunt to get some kind of incentive/subsidy from the City. I'm actually very glad there is little popular support for their proposal.

See http://www.statesman.com/news/breaking-news/austin-shortlist....

Quote: > Austin officials said in October that no local financial incentives were included in the city's proposal for the Amazon project.

Agreed; Austin already has the Whole Foods HQ and a huge Apple and Facebook presence. Amazon also has a huge presence just outside Austin in San Marcos.

As an Austinite, I was really proud to see the city offered no financial incentives. Seems they've learned from the Domain issues (locals will understand this reference.)

I would be happy to have Austin selected as the city for HQ2. On local FB groups I have said I didn't think it would happen due to other cities offering better incentives, and I think that's why Amazon ran this contest. Instead of just saying "Austin", they said "Well, Austin...unless somewhere else gives us an unbeatable deal." :-/

Also UT providing a pipeline of top CS talent and a healthy tech scene locally compared to a lot of the other final cities.

In the early days of Whole Foods they built stores with cash and bought land to build shopping centers instead of renting. I believe HQ2 may be the real reason Amazon acquired Whole Foods, because it owned a lot of real estate in Austin.

Amazon favors urban locations for their offices, however. How is a bunch of spread out grocery store land going to help them build enough office space near each other to fit 50,000 employees? What are they going to do with all of the whole foods locations on that property?

Sorry, but the idea that the WF acquisition was to actually end up with a bunch of spread out land that isn't usable for their purposes at a premium far above what they would pay for the land itself is just silly. If it goes to Austin and WF has spare land it might get used, but they would never have made the purchase just for that.

I think my comment went over your head.

Whole Foods started in Austin and has been buying real estate for decades. They famously purchased land based on the percentage of college graduates in an area. They purchased land in urban areas. I don’t why you would assume otherwise. They purchased land and held onto unused real estate to keep their competition from building new stores.

They own a lot of land in prime locations. Often they’re the landlord of all the other business near them. Ever wonder why you see natural pet food stores and eco-friendly dentists next to a Whole Foods? It’s because they own the block.

Let me know if I need to explain this further.

> I think my comment went over your head.

> Let me know if I need to explain this further.

No need to be condescending. However, I think he did have a good point. I can't see Amazon buying Whole Foods to acquire their Real Estate holdings. I also don't see those holdings being valuable in terms of a HQ2 location. I would imagine the HQ building would be similar to the one in Seattle, in the fact that it is downtown and not near an area with college graduates. Also, that building would most likely be a large office building which would be out of place in a area like that.

You seem to think I'm talking about residential areas. I'm talking about downtown Austin real estate.

Here's photo of land Whole Foods owns or leases (mostly owns) in downtown Austin that I pieced together from information in news articles. They likely have much more.

https://i.imgur.com/AxOp9Xl.png

In Atlanta, where I am, everybody pretty much thinks the same... except replace Austin with Atlanta. I suspect people in both cities are biased.

It's hard to argue with the fact that Austin made the shortlist without any incentives. The same doesn't apply to Atlanta.

The short list isn't very short... Somerville made it and I'd be stunned if we were chosen.

It's pretty short compared to the 238 cities that applied (https://www.seattletimes.com/business/amazon/amazon-refuses-...).

I think Boston and Somerville are just two different manifestations of one regional proposal, though they weren't really presented that way far as I know.

The sites in Somerville are actually a much better choice than the Suffolk Downs site offered by Boston. They're a lot closer to the Boston itself and are better situated for housing and transportation. It would also knit together those grim parts of Somerville that are cut off from the rest of the town by Routes 93 and 28.

agree, 20 cities is a lot. i could be wrong, but who really expects LA to make it?

I am a bit confused about Austin as a candidate partly because I thought that Amazon wanted an east coast presence, not mid-country. So it boils really down to Boston, DC, and Atlanta as options.

As another engineer in Atlanta, I’ve got mixed feelings on whether the criteria Amazon put forth is really met. There’s probably more people from Atlanta that leave for tech than stay by a long shot given I’ve probably met more Georgia Tech graduates over my career outside Atlanta than actually in the metro area. Anecdotal evidence aside, there’s been several articles published about Atlanta’s brain drain problem specific to tech (medicine does not seem to apply given CDC and Emory attract world-class doctors just fine). I’m not sure if anyone on HN outside the region can name a single tech company HQed in Atlanta off the top of their head - I certainly couldn’t before I moved here.

Honestly, I associate Atlanta with film/music production more these days and never really tech. Much like Charlotte = banking.

> I thought that Amazon wanted an east coast presence, not mid-country

Amazon never said this, so unsure why you think this.

https://atlanta.curbed.com/2018/1/29/16946010/amazon-hq2-hea...

The five primary criteria driving Amazon’s decision, per GBH, include:

1. “East Coast presence.”

2. “Thriving engineering/surrounding university infrastructure and student pipeline.”

3. “Transportation hub with major growth potential.” ...

Hmm. Those criteria you posted aren't coming from Amazon, they're just the invented criteria of a single analyst at GHB Insights [1], a market research firm based in NYC.

I don't think Amazon has made it public as to which criteria it's using to make this decision.

[1] https://www.cnbc.com/2018/01/22/gbh-insights-atlanta-and-oth...

I'm a little concerned that Atlanta pols are already leveraging Amazon as a form of coercion to influence social policies...at least wait until after we're chosen?

https://www.wsj.com/articles/to-get-anything-done-georgia-po...

Amazon is not the only large company that objects to apparently discriminatory legislation. Just look at Indiana or North Carolina for examples.

It's the market that is influencing social policies, politicians are just responding to that.

I read a very convincing article on how it will most likely be near D.C.

https://slate.com/business/2018/01/amazon-is-totally-putting...

Yep, that analysis is pretty spot-on.

Honestly, I thought it was going to be Washington—Arlington—Alexandria before they even announced the finalists, and the choice of finalists just confirmed it.

I'll be more specific and say the DC area, either eastern Montgomery county, along the red or green line; or near the yellow line in DC or NoVa.

100%. The fact that whole foods HQ is here is icing on the cake.

There's land near the domain that's effectively reserved for it.

Doesn't this is a sense show the system is partially working? Austin, who barely cares to get the HQ and has other attractive properties for tech companies, is offering no incentives, while underdog cities who really want the HQ but have less compelling properties are showing their willingness to try harder. Classic story.

I get the race-to-the-bottom argument, but then what mechanisms can an underdog city use to ever compete?

Efficiency, city's don't need to get bigger. Build a city for it's current residents and more people and companies will want to move there.

Remember, if someone wants to move to a larger city they can. However, being smaller is actually appealing because you get less traffic etc. Further, city's are only important due to it's residents, if everyone moved somewhere else it's not like the land is going to get upset.

> city's are only important due to it's residents

That's the problem, how do you spark the network effect? People don't setup in SF for ironic atari t-shirts, they're there for the talent pool and infrastructure (i.e. the stuff amazon will bring)

People have been talking lately about how Pittsburgh has turned things around.

The Raleigh-Durham area is always talked about as kind of an unappreciated, affordable place for tech people to work. Both downtowns have improved over the past decade or two (like in many small cities), the three big universities have plenty of students, RTP is around, the only thing really against it is the suburban sprawl. I hear they are getting light rail but I've heard people talking about rail in NC since I was a child (30 some years ago).

>the only thing really against it is the suburban sprawl

as much as HN (me included) likes to complain about sprawl, don't forget that there's plenty of people who love the suburbs. Sprawl is not a downside for everybody - the people who like it just call it "affordable single-family homes" and "quiet neighbourhoods" instead of sprawl

Good point and, as a city resident, I wouldn't mind a bit of peace and quiet myself (but would go more extreme and get as rural as possible).

I think on this I was thinking more the requirements of the HQ2 which specifically mentioned mass transit routes.

Also, more generally, the parent was talking about the 'network effect' of SF and the culture there. When you're isolated in your affordable single-family home and commute to your office park that vastly differs from the serendipity and collision of people, thoughts, opportunities that you have living in a denser place where you come across more people daily, one would think. I assume that's why cities are more liberal - that we have to put up with, tolerate, and can empathize with a wider variety of people than the isolation of house->car->work->car->house.

Just speculating there.

> That's the problem, how do you spark the network effect? People don't setup in SF for ironic atari t-shirts, they're there for the talent pool and infrastructure (i.e. the stuff amazon will bring)

In short, you bring them in for other reasons. The most common being Universities, but it can also be Government or Private Sector research labs. One oft overlooked factor in Silicon Valley's success has been the great Universities nearby attracting some of the brightest people from all over the world.

Pittsburgh (CMU), Raleigh-Durham (UNC) and Austin (UT, TAMU) are succeeding in tech for similar reasons.

Underdog cities could and should compete by improving their offering for everyone, rather than making one-off deals with individual companies.

This is challenging too, most cities would much prefer Amazon to a new coal processing facility, for example.

Sure, that sounds nice in theory, but probably isn't practical.

Short of serious corruption, most cities are about as nice as their current tax base allows. Giving a company a tax break to incentivize that company to move into their city allows them to grow their tax base and improve their city for everybody. But it's not like cities are just sitting on potential attractors for employers to move in.

It's not about nice, it's about structure. What sorts of development are they encouraging? Is the main street an endless series of the same chain restaurants, or does it have a livable core? Are they encouraging rental properties to make the it easier to live there? Are they promoting high-priced condos instead to get quick hits of cash?

Policy is a highly subjective thing, but it also takes decades for it to make an impact.

This is capitalism isn't it. What should the government encourage? To let the consumers and the producers decide for themselves.

There's a difference between a well tended garden and one left to do whatever it wants.

Consumers and producers don't always get to decide. If you live in a small town that has a Wal-Mart then it's extremely difficult to compete directly with that store if you're just some independent. People might like your business, but you can't buy at the same volumes, you can't force the hand of city council for tax breaks, you have almost no power in comparison.

Absent good governance then corporations decide everything and we get to "decide" between the options they deign to give us.

> Underdog cities could and should compete by improving their offering for everyone

That's not necessarily true. A city may not want everyone, or they may particularly want Amazon. Competition is competing, one part of which is incentives to localize in an area. Since so many places want an HQ2, it is Amazon's market not that of the cities.

Cities can rail against having to compete in a competition, but those cities likely will not win the competition.

Personally, I think it's one of the three locations in Washington—Arlington—Alexandria. Of all the finalists, it's the only metro area that's broken into three. Every other finalist represents an entire metro area, but Amazon lists DC, NoVa, and Montgomery County as separate finalists. The implication of this is that even if Amazon was going to pick from the finalists at random, that metro area has three times the chances of any other.

On a deeper level, I think it means that they've already decided on putting HQ2 in the Washington—Arlington—Alexandria MSA, but they haven't yet decided what part of the MSA they're going to put it in, and they're going to have the three real finalists duke it out amongst themselves.

It makes sense: Amazon has some pretty deep ties to the area. Their original AWS datacenters are in NoVa. Jeff Bezos owns the Washington Post. Bezos also just bought a house in DC. The area is just as much home to Amazon as Seattle is.

Edit: Also, as a Texan myself, there's no way anything in Texas is going to get HQ2 with our LGBT-hostile state legislature. It's the same reason people are saying that Indianapolis might as well be disqualified due to the Indiana state legislature refusing to pass a hate crimes bill. Given what our legislature tried to pull this year, Amazon isn't going to touch us. And you can bet they'll try again in 2019, and Joe Straus won't be there to stop them.

> Edit: Also, as a Texan myself, there's no way anything in Texas is going to get HQ2 with our LGBT-hostile state legislature. It's the same reason people are saying that Indianapolis might as well be disqualified due to the Indiana state legislature refusing to pass a hate crimes bill. Given what our legislature tried to pull this year, Amazon isn't going to touch us. And you can bet they'll try again in 2019, and Joe Straus won't be there to stop them.

They are up for election this year and even though it seems likely that the Governor won't change, other seats seem much more competitive.

Bezos also just bought a house in DC.

That's where it will be. The Wall Street Journal once noted that about 70% of corporate HQ moves move it closer to the CEO's place of residence.

Bezos didn't move to DC, just bought a house there. He's got plenty of houses.

I agree that the DC area is the most likely possibility for HQ2, but bezos buying a house there is a relatively unimportant indicator.

OK. Other than that, DC is a poor place to move a big administrative operation. No space for a big campus unless you go way out beyond the Beltway.

Montgomery County, MD would be perfect, then. And if they're going for NoVa, there's a lot of space in Loudoun County.

That's a very interesting stat. Bezos has 5 houses that reporters know about [1].

They are in Medina (WA), Beverly Hills (CA), Van Horn (TX), Manhattan (NY), and D.C.

Of these 5 known places, his Beverly Hills, Manhattan, and D.C. houses are close enough to the HQ2 finalists.

If we assume the rumors of Amazon wanting an East Cost presence, then we can narrow it down to NY and D.C.

1. http://www.businessinsider.com/jeff-bezos-owns-five-massive-...

I think this is a good call. Not to mention public transit and good air connections.

As to your edit, I wonder if this is a Bezos way of not-so-subtly trying to push those type of legislatures to change their tune on that and other issues. Maybe beyond wanting to get a sweet tax break deal, there's a bit of soft power and influence Bezos is trying to bring to bear to tell state legislatures that being adverse to things like people's sexuality, women's health, etc. isn't good for business. Might be reading too much into all that but it's interesting to think about.

> But a HUGE part of such a pact is that the cities need to find a way to punish any city that doesn't join the agreement, such as with economic sanctions. I'm not totally sure whether it would be possible to craft sanctions that might deter defecting from the pact, especially with so much potential upside on the line, but that's sort of what has to happen for the pact to work.

It's not - the Constitution was specifically designed to forbid this kind of inter-state warfare (eg things like taxing out-of-state goods differently) and SCOTUS has consistently upheld this (eg Granholm v. Heald).

Except this kind of interstate warfare is exactly what is happening now, with Amazon pitting city against city in an attempt to extract tax breaks.

Yup, the Constitution does not have a good mechanism for dealing with states racing-to-the-bottom, either in taxes or regulatory climate. This isn't really the kind of thing that you can regulate Federally, either, under the Constitution.

The Constitution gets some things right, but it also gets a lot of things wrong. That's why the whole "living document" part is so important.

The whole idea that the Constitution is a living document is a myth. There is a process by which we can alter the Constitution, but it isn't by reinterpretation. The federal government is meant to be constrained in its powers in order to assure the liberties of the citizens.

> The whole idea that the Constitution is a living document is a myth

No, it's not; it's a fundamental inescapable truth of all documents, because meaning is dialogue between the author and the audience, change the audience and the meaning changes.

> Yup, the Constitution does not have a good mechanism for dealing with states racing-to-the-bottom, either in taxes or regulatory climate. This isn't really the kind of thing that you can regulate Federally, either, under the Constitution.

Sure you can; race-to-the-bottom among states only occurs because of the substantial nexus with real interstate and foreign commerce (not a distant potential impact), so even narrow views of the interstate commerce power would give Congress the authority to regulate to control it.

Yep, came here to post the same thing. Any kind of intra-national sanctions regime is a complete non-starter. Though states could have a compact that agrees not to do this sort of thing. That compact might have to be ratified by Congress though.

>They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue.

This is quite how the Constitution of the United States was created by the 13 independent former-colonies of America. The #1 show on Broadway right now covers this.

Even if this were 110% true, I'd still rather have money in Amazon's hands. This isn't a football stadium, it is one of the best growth and tech companies in the world.

Employees best interest is in a better Amazon with a runway growth and stock price. Many employees might not even live in the same city, and the parents and children will be better off with more a stronger 401k, raise, better firm.

Wow. So it's okay for cities to band together and create a so-called oligopoly but everyone is baying for blood if a bunch of companies decide to do the same.

> Here in real life, it would be great if all of the finalist cities were to band together and say, "We're withdrawing all tax incentives we previously offered. Choose us for us, not for what tax money we're willing to sacrifice."

Here, in the same real life Amazon responds: "Oh, we decided you are no longer the finalists. That place in Idaho gets it."

My entire point is that Amazon has likely already chosen its HQ2 location for unrelated business reasons.

But if the finalist cities think that it has not made up its mind yet, and that tax incentives are the primary criterion it is using to make up its mind, then Amazon benefits from them thinking that. It still gets the HQ2 in the city it wants, but on top of that it gets highly competitive tax incentives.

It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them.

> It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them.

Oh that's 100% incorrect. Absolutely everything has a price. The only question is how much would Amazon need to get in tax breaks to offset tiny state issue

I've been beating the same drum from the moment I heard the announcement. I also think the city is Boston and always was (don't live there) and not Austin and definitely not Atlanta.

I agree, as an AMZN shareholder, it's quite ridiculous for this kind of "woo'ing" to occur related to states' economies and income.

This seems like Mary-Sue got in a fight with Bubba, so she goes down the their favorite pub, starts dancing with any handy guy, knowing Bubba will be along chasing her shortly.

It looks like Amazon is flirting with a few other cities to make her beau a bit jealous. And its about as seemly.

> HQ2 is going to have employees who will have to live in that city, and it is in their best interests to have well-funded public services.

Wrong! Amazon paying or not paying taxes would have a small impact on the rest of the city. They are better off saving these billions.

Of course, I consider Amazon's approach borderline illegal. It should be banned, period. For Amazon, and for any other company in the US.

A pact like that would only benefit the city with most incentives that are not tax related. Giving businesses tax incentives is a great way for smaller cities to get their foot in the door. Also, tax incentives is a common tactic by cities and countries to get businesses to move locations.

Like I said in the other thread, it's sad this is even legal.

Here in Africa when Authorities allow obscenely rich people/companies to get away without paying their legally-mandated share of taxes it's called "bribery".

Apparently in America it's just "business".

Citizens should be protesting in the streets about this. Their educated, healthcare and infrastructure sucks because of it.

Are you sure you know what you are talking about?

The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff. As a result, things that are tax-payer funded in the USA are lacking compared to other OECD countries.

It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal. I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying.

All the Amazon employees pay taxes, as you note. Taxing Amazon itself on top of that just leaves it with less resources to pay employees. And why should a city reap an extra tax windfall when an Amazon decides to locate there? Amazon isn't really going to add much burden to city services.

So it’s ok that Amazon just passes their tax burden onto their employees?

> I'm not allowed to not pay my taxes

But you ARE allowed and entirely free to move to cities with lower tax rates, or states with no income tax at all, or any other location that provides you a better balance of income to tax costs. Amazon is an entity with the same rights to make decisions about re-locating to the locality with the most advantageous income/cost ratio.

> But you ARE allowed and entirely free to move to cities with lower tax rates

Absolutely. But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses.

Oh, but if I just get rich enough.... they I won't have to pay taxes the same as the common-folk.

That's what's bothering me too. Give the same conditions to all businesses not just a favored one.

> But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses.

That’s only because your tax contribution is very small and you don’t have leverage. If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people.

>If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people.

That's exactly right. E.g. Michigan has designated NEZ zones[1] offering tax breaks (e.g. sometimes half the tax rate) to attract potential homeowners to distressed neighborhoods like inner city Detroit.

Sure, residents in another wealthy city (like Bloomfield Hills) in Michigan might complain they don't get the same tax subsidies as downtown Detroit but it still doesn't change the fact that governments will offer tax incentives for certain people (not just companies) to justify a desired economic outcome.

Detroit has to make those tax concessions because residents are fleeing and the city suffers from a lower tax base. The more desirable cities like San Francisco don't have to make the same tax concessions.

(I make no comment on whether NEZ actually works as intended or whether it is a net positive economically.)

http://www.detroitnews.com/story/opinion/2016/06/22/detroit-...

> It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal.

Amazon will absolutely be helping pay for things that they get a benefit from. I think you're misunderstanding the exchange that is happening. To oversimplify, it's basically this:

City: We'll give you tax breaks, decent infrastructure, low property prices and a good pool of local technical talent

Amazon: We'll give you tech jobs, lots of tax revenue from the business, lots of tax revenue from our employees and raised property values.

> I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying.

Not paying your taxes and receiving tax breaks are completely different. Do you take deductions on your taxes? Even the standard deduction? Those are tax breaks.

> The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff.

Not that there aren't issues with our tax system but this is completely inaccurate[1]. It can certainly be argued that the top end of earners should pay more, but they already do carry the overwhelming majority of the income tax burden.

[1] https://taxfoundation.org/summary-latest-federal-income-tax-...

I agree, but protesting in the streets is not the right response. If we do that, businesses can just smile at us as they go about their business anyway. A better answer is to get involved in public government - instead of protesting, the residents of those cities should be packing their city council meetings and planning meetings, making their voices heard directly with the people who are putting these packages together for Amazon.

It's not like those politicians are going to listen to the people in their city council meetings either. Local politicians careers are going to get made off of whether they get the deal not to count the money at stake. I've been slowly coming to the conclusion that all our methods of peaceful protest are basically no longer working, the people in power have effectively cut us off from influencing them without (1) a big chunk of money or (2) committing a crime (ie you must register protests in advance, you can't march anywhere unexpected, say, a politicians house, etc.)

Maybe it depends on your town. Last time I saw my council taking a step I didn't like, I started knocking on doors around town, letting everyone to know to come to the meeting. Hundreds of people showed up, and the council changed the plans to match the will of the people.

It seems to work pretty well in places like for example France.

Have you seen what happens when a politician tries to take away a single sick day or reduce their already-world-leading maternity leave? .. millions march in the streets for days and you can bet your bottom dollar come election time the responsible politician is swiftly voted out.

Those people care about what is happening in their country and how it impacts them. They know it's more important than football and cheap beer.

Americans have forgotten how to participate in Democracy.

France is a lot more compact than US, which makes for much more effective protesting - that is also true of other European countries. You can get to Paris from pretty much any point in France in few hours by hopping on a relatively cheap train, and blocking the capital with marches and protesting is a huge deal that people have to listen to. I know the same approach works to some great results in Poland - even if you're a miner from a rural town, you can get to Warsaw on a train in 3-4 hours for about $10 and protest all day long right in front of the parliment and get back home the same night. In US the impact is lessened, because it's very costly and time consuming for a lot of people to get to washington to protest, and protesting in state capitals is not quite as effective(and can still be expensive to get to, depending where you live). Also people don't get such strong employee protections, in EU no one could ever fire you for protesting, but in US if you miss work to go to a demonstration you can be fired without recourse.

I think protesting could work only if you just don't leave til your demands are met, the problem with protests in general is that people tend to organize it for just a day.

Agreed

The best way to protest is tell people you know you disagree and don’t care if the relationship sours because of it

People have to push back against the nonsense their friends and family spew

When someone spews

“It makes sense,” says and outside, “to burden another muni with generational debt for jobs today so we can keep selling trifles.”

You tell them they’re absurd

Grandpa spouting jingoist nonsense? You slap him in the mouth like he did you for swearing

Stop being afraid of each other and push back on plain stupid

> Grandpa spouting jingoist nonsense? You slap him in the mouth like he did you for swearing

Do you want to be slapped by young people in the future, when your politics are no longer fashionable?

This is a nihilistic false equivalence that fails to consider what the actual positions are.

If business can continue as usual, you're not protesting right.

One one hand I agree. On the other hand, how is a state like Indiana supposed to attract a company like Amazon?

That’s a really simplistic and overly cynical view of what’s happening here. It’s also completely incorrect - bribes are paid to people, there are no mayors or city councils getting payoffs here...

Imagine you run a city where you tax businesses 1% of foo. For every dollar of foo tax you collect form a business, you actually collect another $0.50 in related taxes from company employees - buying lunch, staying in your hotels, etc. Let’s call that your bar tax.

A new company wants to move in that earns 3x as much foo as any other business in your town, but they are also looking at other towns that tax foo at 0.5% or even don’t tax foo at all. You can choose to tell them to go elsewhere, or you can give them an incentive - you’ll cut your foo tax to 0% for 10 years, knowing that you’ll be collecting more bar tax with the company there than you would with them not there.

At this point the calculation is simple - will having New Company in your city cost you more than you’ll be getting in bar tax? And if so, might it still be worth it in the long run to take those losses for 10 years until the foo tax kicks back in?

If not, don’t do it. The point is, this is not clear cut either way.

Yeah it really is simple:

Richest man in the world

Richest company in the world

Plain history of boon doggles coming to town screwing locals

All this does is continue to validate corporateocracy

Fuck these clowns

Where is everyone else’s handout?

Here you go, Jeff, let’s boost YOUR wealth very plainly on the backs of others

There’s some free market competition huh? Are you rich? You win tax breaks!

Hey, why not give fat breaks to new players. Let them fill warehouses of crap to sell online. But no, kiss the rings

It’s simple and obvious and this mystifying with prognostications you can’t possibly validate because you’re no visionary with the ability to see the future (and are plainly ignoring the past [sports stadiums, etc]) is nonsense

It's a business getting a payoff - worse, it's getting government assistance and Amazon is getting unfair treatment (if they give Amazon a x% tax break, they should give that same tax break to all other businesses currently in that jurisdiction + anyone wanting to start a business there - else they're unfairly giving Amazon an advantage, which is bad for competition)

Yes, yes I have heard this explanation a million times, but it's utter nonsense.

The whole system was designed with what you said in mind. The company is supposed to pay their taxes (foo) AND the city is supposed to collect the taxes from employees (bar). The whole system needs everyone to contribute their right amount so there is enough money for schools, health care, police, roads, libraries, etc. etc.

Yes, Amazon's foo is very large, because they make a massive amount of profit!! Also the bar they create will be very large, because they have a lot of employees. The fact it's a large amount changes nothing. The city they are in needs BOTH of those to function correctly. With all those massive buildings and employees the city will need new schools, roads, more police, more libraries, etc. etc.

Amazon get to use the roads of the town, the water infrastructure, the elec infrastructure, the education, the police, etc. etc. to make their massive profit.

Who do you expect to pay for all of that, other than Amazon through their foo tax? That's precisely why the foo tax exists, and amazon get to avoid paying it they can make massive profit without paying for the basic stuff - so now the regular citizens need to!

The whole thing requires the full amount of foo+bar to pay for all of that stuff.

But of course we all know America has terrible tax-payer funded services compared to the other OECD countries.

That would be something that goes into the calculation of the tax incentives. If the added infrastructure is going to cost more than the bar tax, than it wouldn't be worth it. What makes you say that the bar tax would be insufficient to cover the extra costs?

Your understanding of how things are funded in the US is very flawed. It's not surprising, since a lot of people outside of the US have very flawed views on how things work here.

The rest of what you're saying is also rather inaccurate as well.

Why don't you correct them if you believe it is inaccurate?

Because I have far more important things to do than correct paragraphs of inaccurate statements.

If you go look at the "design" documents for US municipalities, the various incorporation documents, you will see that they speak directly to abating taxes to incentivize development. Here's an example from 1898 (not sure if this charter is still in effect in the Baltimore):

https://books.google.com/books?id=UVuiQ5HKgqoC&lpg=PA152&ots...

So there are in fact legal mechanisms, deeply rooted in the laws of municipalities. The stuff you are claiming is foundational to making the system work is just wrong.

I didn't go digging for an example that would prove my point, I searched for a city I recalled competing for the HQ2 and went with the second one I searched (The first page of results for Austin didn't turn up an obvious document).

When the EU decided that Apple had not paid enough tax to Ireland, they made Ireland collect the extra tax. Giving tax discounts to favoured corporations is anti-social, and has long been punished at an international level (e.g. via countervailing duties). The amount of double-think required to accept it at a domestic level is astounding.

Sure, favoring particular businesses is ripe for corruption and difficult to justify.

But the other poster is making an argument that tax abatement is somehow against the system, something that is pretty obviously wrong.

They don't want to stick to arguing that it is anti-social or foolish or whatever, they've decided that abating taxes is illegal (even though it is legal) and that it is contrary to how cities are supposed to fund themselves (even though it is written into the foundational documents of many municipalities).

One question because I respect your position: do you believe that cities should have any tools available to incentivize "preferred" companies to come to the city?

I'm guessing your answer would be it can design its tax code so long as the tax code applies to all comers that meet the agnostic definitions therein.

The problem, however, is that opens up the question as to how fine-grained the definitions can become. It's not very hard to write tax regulations that are so narrow they only apply to one company while still on the surface appearing to be agnostic and naming no company.

IMO, it's a sliding scale of specificity and maybe you're right that there is a line somewhere that shouldn't be crossed, but it's more difficult than you suggest to figure out and describe where that line should be.

But of course we all know America has terrible tax-payer funded services compared to the other OECD countries.

That's a feature, not a bug. Quite many of us, including many of the Founders, believed/believe that the proper scope for government is very narrow, basically just "protect individual rights". Quite a few of us think, to this day, that the government is involved in too many taxpayer funded services as it is.

You are, of course, free to disagree with that position. But understand that things (w/r/t taxpayer funded services) operate the way they do here for a reason and not just due to happenstance.

The "Founders" can go fuck themselves. Most of them believed in using state violence to enslave, rape, and murder non-whites, among countless other atrocities.

The "Founders" can go fuck themselves. Most of them believed in using state violence to enslave, rape, and murder non-whites, among countless other atrocities.

I actually agree with you on that. My point was just that the US stance with regards to tax-payer subsidization isn't some accident. And, again, one can choose to disagree with those Americans who want an extremely limited government, but one has to acknowledge that this is a position that is held by many people, for very rational reasons.

> Most of them believed in using state violence to enslave, rape, and murder non-whites, among countless other atrocities

And the rest of them believed that institutionalizing protection of the ability of the first set to do that was an acceptable cost of unity, such that the Constitution is riddled with elements contrived largely for that purpose, only some of which have since been purged by more enlightened successors to the Founders.

> there are no mayors or city councils getting payoffs here

Don't be naive. Do you think mayors are getting their nice positions on company advisory boards after active duty because they are so capable?

The comparison to bribery is, as you describe, inexact. Bribes are principal-agent breakdowns between the governing and the governed. Tax breaks for large companies don't fit that description. They are closer to an anti-competitive preference for large companies.

The problem is this anti-competitive preference counterbalances geographic incumbency bias. It's difficult to say which is worse--Amazon getting preferential treatment over a potentially-rivalrous upstart or the Midwest having no fiscal tools with which to fight coastal dominance.

Yes, characterizing it as bribery is incorrect. It's actually much worse.

I actually agree with him. This is what got several US companies get fined in EU. Bribe is not only when you give money or favors to individual, companies do the same.

It is form of legalized corruption. It is not the same as stimulus for development of certain areas.

You contradicted yourself there. It is legal, and therefore they are not getting out of their legal mandates.

The American tax code is far from perfect, with the scales favoring whoever can afford the best tax attorney. With that said, i think you are grossly oversimplifying the issue. The corporate tax rates (before the recent reforms) were the highest in the developed world. Amazon has every right to negotiate where they move their offices.

Fun fact: the U.S. spends more on education per student than any country but Switzerland, Norway, and Luxembourg. We probably don’t spend more on transit, because most cities here aren’t designed for it, but New York for example spends more per subway rider than London. We also spend more public dollars on healthcare per person than Canada, Sweden, France, etc.

Our total government spending per person (excluding defense spending) is higher than Canada’s, despite the fact we provide less services.

Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class.

Is the education spending comparing the actual dollar amount or is it adjusted for PPP? Or is it by percent of federal/state/municipal spending?

It’s PPP adjusted: https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf. See page 207. I was incorrect: it’s Norway, Luxembourg, and Switzerland ahead of the US.

Gotcha. Thanks for the link

I get the sense that proportionally more US education spending is lost to graft than in those European countries (from the top down to teachers who come in and don't teach).

Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class.

Blatantly false. Our statutory tax rate may have been one of the highest in the Western World, but the effective tax rates before the Trump tax plan were some of the lowest after deductions and credits are taken into account.

Incorrect: https://www.npr.org/2017/08/07/541797699/fact-check-does-the....

E.g. the U.S. statutory rate was 38.9% (federal + the average of state and local rates), the highest in the G20. The effective rate (after deductions, etc.) was 18.6%, the fourth highest. Socialist France was 11.2%, and our neighbor to the north was 8.6%.

U.S. total tax burden is much lower than France, Germany, etc. If you look at where that difference comes from, it's not because those countries tax "corporations and rich people" more. It's because they impose massively higher taxes on the middle class. Look at tax brackets in Germany, France, Denmark, etc. It's typical for either to top bracket or the second-to-top bracket (just a few percent lower) to kick in around 70 thousand Euros.

I'll be the one to voice disagreement and say I have no problem with cities offering tax breaks for large development projects like this. The lasting benefit to cities like Columbus, Indy, and Pitt would definitely be far more than even a couple billion in tax breaks. You're talking a fundamental change in direction from being a has-been manufacturing town to a national technology leader. Doubling real-estate values for current residents. Enormous increases in sales/property/income tax revenues. It's an investment with very real returns for these places.

Yeah, but the point is that Columbus, Indy, etc. don't stand a chance of actually getting picked. They're just being used as leverage to get Boston/NYC/DC to play ball.

Isn’t that point based on the possibly incorrect assumption Columbus doesn’t have a chance?

And if their odds really are slim, wouldn’t the rational choice for Columbus to make be to offer tax breaks?

Like, why is the actor that is Columbus concerned at all if they put some sort of pressure on Boston/NYC/DC?

(I think HQ2 will be Columbus or Denver).

I agree. I think Amazon cares a lot more about logistics and future growth than the specific tax incentives being offered.

The prevailing claim that Amazon has already chosen and is trying to extract better incentives seems wrong to me. If that was the case Amazon could have approached ~5 cities from the start with a plan for each and put a far stronger competitive pressure on them.

I think what this is really about is getting the cities to do the leg work of the research and initial planning process. Amazon wasn't going to put together 200 initial site proposals and 20 more detailed ones. By letting the cities make the proposals Amazon can look at far more potential sites than if they had done the research internally.

IMHO the biggest issue for some of the smaller cities is attracting talent. Good luck getting top notch twenty-something engineers to move to Indy when all of their buddies are in SF, NYC, Boston, etc. Guess I'll eat my words if HQ2 ends up being in the midwest, but this seems like an insurmountable hurdle for the little guys.

Indy has Rose Hulman and Purdue, both of which pump out pretty good software engineers. Are they on par with the SV types? Maybe not, but you're not paying them 300k either.

For what it's worth, I live in Indy and I get emails from Amazon every week trying to get me to work somewhere fairly close to here (like Detroit).

Indy has Rose Hulman and Purdue

University of Illinois has top notch CS grads too, pretty close to Indy. Seems like the most likely reason they made the list.

Indy also has underrated infrastructure - having to host the massive event that is the Indy 500 every year has given the city experience in dealing with large influxes of travelers.

And that's where those H1B come in.

“top notch twenty-something”

LoL

Don't know why they wouldn't. Indy is a major interstate highway and air transport hub. FedEx has a big operation at Indianapolis. Columbus less so, but it's less than an hour away and directly connected by interstate. Both have affordable housing, generally low cost of living, and business-friendly government.

Right. Not to mention in the case of Columbus you have 60,000 students, proximity to other large cities, room for growth, a nice little airport ripe to be ruined by heavy business traffic, and it's the state capitol. A company like Amazon can come into Indianapolis, Pittsburgh, or Columbus and basically dictate what they want - we want this land, we want this infrastructure, we want these flights at the airport - and it can all be accommodate with great benefit to the city as well. The only real downside to either of those three cities, aside from needing a few more tech workers or maybe more public transportation investment, is that they aren't "cool". It's not cool to have low cost of living and no interesting geographic features with mediocre weather.

People who think Amazon is going to set up shop in NYC or LA or something are delusional.

Not the guy who you commented to, but I'm guessing he thinks it's due to the talent pool they can recruit from by locating in a large metropolitan/suburban area.

Do you have a source for this comment or are you speculating?

Speculating, as is true for everyone on this thread unless your name is Jeff Bezos.

Hold on. If they don't get picked, they don't have to go on with the tax break, right? The incentives are conditional.

The cities that don't get chosen, yes. But the thinking is that Amazon has already secretly picked a city years ago (Let's say Washington, DC) who was not originally planning to offer any tax breaks.Then they make a this big show that's basically The Bachelor, causing every city to fall over themselves to offer tax breaks. Once 200+ cities offer tax breaks, then Washington, DC feels compelled to "bid" like everyone else, unknowingly sweetening a deal that has already been "made."

I’m inclined to agree but recognize that this has also been the pitch for subsidizing sports teams and new stadiums at tax payer expense and those have a terrible track record.

For football(American), I agree, but basketball and baseball stadiums see much more use. MLB teams play 81 home games a year. NBA teams play 41 games a year, and basketball stadiums can also double as Hockey Arenas, and concert/convention venues.

NFL teams only play 8 home games a year, and they're usually very big - 60k-100k seats - much too large for almost any other event. These massive buildings might only be used 10 or 12 times in a year. Huge waste of taxpayer money.

There is, in general, no lasting benefit to the cities that give tax breaks to corporations. http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ban...

But this isn't some "in general" deal to pay hundreds of millions to keep some ho-hum factory employing a couple hundred employees. We're talking about a very unique deal involving billions of dollars invested from Amazon and tens of thousands of well-educated, well-paid employees.

Special pleading? Why would this deal have a different outcome than others?

To be fair; their biggest example is a company pulling out after functionally going bankrupt. That's more to do with 'be careful who you play ball with' and general risk of doing business at all than method used. They complain they aren't getting tax revenue they planned ~15 years later - but that also is compared to not getting any revenue from the company not being located there in the first place.

Do i want my city to give Amazon a huge incentive package? Probably not, I think we're moving in a good direction already. Would I be upset if they promised significant public transit improvements as a lure to Amazon? Not at all; long overdue civic improvements that likely will never get approved else-wise.

> not getting any revenue from the company not being located there in the first place

This has to be balanced against the cost to the municipality over the years the company would have been there. The tax breaks and incentives may generate revenue, but as the story notes, the fully burdened cost to the government may wipe out any additional tax revenue. It is proper to ask "what additional costs did taxpayers bear that they wouldn't have if the company had not located there?"

Agreed - it's a balance.

Yeah, it is less like a high school drama, and more like buying a guaranteed tax revenue stream so large that it makes Goldman Sachs jealous.

The exact same thing is said of sports stadiums, WalMart stores, and was said of the steel industry back in the day. Companies have shown they’re perfectly willing to leave as soon as those breaks expire, or they get a better deal elsewhere.

This article is complete fluff, does anyone have sources of books or studies (or even better blog posts) on the topic of city subsidies? There are a lot of comments on here saying this is illegal, but it's not at all clear to me why this is a bad idea.

Here in SF, as I understand it there were a lot of tax subsidies to bring Twitter and other companies here into the city. Now the city is booming, and although that has caused other problems like strain on infrastructure and housing, these are solvable problems. They seem like much better problems to have than a failing economy. (Not to mention, they have much deeper causes as well that should have been addressed regardless, it's just that now it's become quite urgent).

As another data point, there was a good Freakonomics podcast recently with the governor of Rhode Island, and she basically claimed that tax incentives to bring companies like GE into the state (in addition to other programs like job training) were responsible for the economic turn-around they've seen. Over the past few years they've gone from having one of the worst unemployment rates to somewhere around average for the country.

Rather than knee-jerk oppose this competition, it seems like we should move the conversation to "Okay, you're offering these tax incentives for Amazon. Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it."

The cause and effect of tax breaks causing company migration isn't clearly established. Further, you'd need to consider what the city's tax revenues would have looked like without those companies HQ being located there. Finally, (and this, to me is the least interesting argument, but people from SF seem to love it): is the gentrification that ensued universally "good"?

> Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it.

I like this plan. I imagine forcing them to buy certain amounts of municipal bonds on a semi-regular basis could effectively "force" them to give back to the city.

That’s a real Prisoner’s dilemma. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

One could argue that tax breaks are anti competitive in according to anti compete laws.

If one big company gets lower tax than their competitors that is unfair competition.

Here is a ruling against Boeing calling it "Prohibited subsidy" https://www.seattletimes.com/business/boeing-aerospace/in-ne...

The New York Times covered in 2012 the negative effects on cities giving tax breaks an incentives to corporations: http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ban...

Interestingly, Paddy Power currently has Boston at no.1 (2/1) followed by Atlanta (5/1) and Austin (11/2). Most people would probably think that Atlanta and Austin are better suited than Boston or at least neck-and-neck. The total number of talent available from Boston-area universities might make a difference though.

http://www.paddypower.com/bet?action=go_event&category=SPECI...

I am very skeptical that the people setting those odds are aware of the specifics of American geography or economics, given that they had San Jose on the board before the actual finalists were announced.

There were discussions: is it time to break up google et.al [1], with no clean indication of when someone is "too big". Obviously "too big" is when politicians are compelled to be involved in investment decisions of the company. Call it "too big to fail", "crony capitalism" or "market distorting monopoly power".

https://www.nytimes.com/2017/04/22/opinion/sunday/is-it-time...

The pull is the 50,000 jobs right? If that averages out to $100k/person then that is approx $5B per year going into that local economy (minus Fed income tax but some of that comes back at state level right?).

They aren't going to immediately post 50,000 jobs or relocate 50,000 people right? So that $5B/year doesn't happen til they are all there. If any incentives are to be there, it should be based on number of employees they staff up in that area... they don't hit a number, they don't get incentives.

I would like to see some numbers in support of their core argument- “incentives do not alter business location decisions as much as is often claimed and are less important than more fundamental location factors." Bentonville, Arkansas is a great counterexample to this notion. Take a look at their economy over years after Walmart set up their headquarters there.

From wikipedia: "The Northwest Arkansas economy was historically based upon agriculture and poultry. In recent decades, NWA has seen rapid growth and diversification of its economy based upon the three Fortune 500 companies based there, Walmart, Tyson Foods, and J.B. Hunt, while also seeing a growing University of Arkansas and cultural amenities sector. Although impacted by the Great Recession, NWA's economy fared better than most peer metropolitan areas, the state of Arkansas and the United States overall. Between 2007 and 2013, the region saw unemployment rates significantly below those of peer regions and the national average; while also seeing a 1% net growth of jobs. The NWA gross domestic product grew 7.0% over the aforementioned time period, and bankruptcies, building permits and per capita incomes are returning to pre-Recession rates.[23]

The professional, education and health care sectors of the Northwest Arkansas economy have been growing steadily since 2007. Between 2007 and 2013, the region has seen a growth of 8,300 jobs in the region, with 6,100 added in education and health professions and 4,300 jobs added in the leisure and hospitality jobs related to the region's cultural amenities.[23] "

This kind of stuff has been going on for decades. It's perfectly legit for an elected government to offer incentives to a company thinking of building a plant. But governments get their pockets picked ALL THE TIME. It goes like this:

Company: we want to build a new office / factory. Give us an incentive.

Elected official: yes yes yes. How about lower taxes?

Company: is that your final offer?

Elected official: we'll subsidize construction.

Company: Deal.

Months go by. Gripping and grinning. Official wins re-election for bringing in "jobs." Company builds plant, hires some people...

Company: we're moving to Central America.

Elected official: but, but, but, you said....

Company: business is business, suckahs. We're outta here.

------------------

A possible answer to the problem. Use a formula that gives companies financial incentives to employ people, and terminates government liability when companies stop employing people. It can be as generous as required. But it depends on actual employment.

Company: New plant?

Elected official: yes yes yes. We will refund you 80% of the FICA withholding tax you pay for hourly employees at your new location. We'll send you the money within 30 days of you sending us proof you paid that tax, after each payroll.

Company: Is that your final offer?

Elected offical: How about 95%?

Greedy realtors would want this to happen in their city as it will inflate property values and fill their pockets deep. They certainly can influence city officials (via campaign funds etc.) to throw tax incentives at Amazon which will come from the pockets of tax payers. It would be interesting to have city wide referendum where constituents get to vote on such matters.

|Greedy realtors

Wouldn't this apply to anyone who wants this in their town?

Greedy people who want more money in their paychecks. Greedy cities who want a larger tax base. Greedy local business who want to benefit from consumers with more money.

If you dig deep enough, everybody is "greedy."

In this case, if a realtor's incentive is aligned with the city and its people, isn't it a good thing they are lobbying for the HQ to be in their city?

> Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development.

This group of economists just claimed the government can grow better than Amazon. This isn't some random company or a football stadium that produces very little; this is one of the best performing, highest growth companies ever created. I'd give the kitchen sink away to get a FAANG company in my district if I were in charge.

This is a group of almost entirely liberal economist who've never seen a tax they didn't like. Claiming the government can grow better than Amazon, and I wonder where is the proof of this?

It's can be ~impossible to get proper funding for a new subway for existing users, but if it brings 50k new good jobs also? That subway can get approved much more easily. Chicken/Egg scenario in many cases.

Re: specific company tax exemptions -

Pittsburgh as an example. Steel left, the city was in a depression. The city then gave a sweet heart deal to UPMC, who then expanded massively and became the states largest private employer. That coupled with good universities (Fore and it's offspring) led to the tech revival the city is currently enjoying.

Does Pittsburgh need Amazon? Maybe, maybe not - but it could* be incredibly helpful, time will tell.

A more general question: shouldn't such tax breaks simply be illegal?

And another question: aren't such tax breaks already illegal, if you view them as selective (anti-competitive) government subsidies?

They should be.

It would be absurd for a city to give an income tax break to a billionaire for moving in (but I will boost the economy by buying lots of stuff and hiring staff to serve me!).

So why is it different for big business?

I wouldn't argue that tax breaks should be "illegal", but rather be proportional to the marginal utility that the company brings to the city (job market, investment, spending, etc) and inversely proportional to the marginal cost that the company brings to the city (infrastructure spending, housing, over-burdening of existing city resources).

what is so bad about governments competing with each other for citizens and corporations?

gov competition is a good thing.

I'm a big fan of Richard Florida (who spearheaded this), and I'm glad to see many supporting it. But I think that it's more about messaging than having any likelihood of getting cities to behave differently.

NY/NYC offering tax breaks to them almost makes me vomit. The ONLY point of trying to get them to open up in NYC is to get more tax money from them. It should be as much as possible. NYC doesn't need another 50k people here and however many barista jobs they will 'indirectly' create. We need better infrastructure and housing first. Last time I checked, we don't even have enough schools planned for all the people we have.

I hope you'll reconsider this position. Its not a zero-sum game. More economic development doesn't come at the expense of infrastructure/public services. Economic development is what funds those things. The economics involved here are well understood. Lack of schools and infrastructure exists because there isn't enough money or political will, and adding economic development doesn't exacerbate that. Its meant to be a solution for the problems you're concerned about.

its not a solution if taxes are getting dodged.

If only the states could form some kind of "union" where they could avoid this kind of thing.

This is one of the (many) reasons that I don't want to see them come to chicago.

Any person or entity that manages to avoid paying taxes ends up doing a good deed. All tax money is wasted on making society worse, and contributes to growth of cancerous institutions that ultimately ONLY harm society.

Have a source?

> "All tax money is wasted on making society worse" lol really? Then go live somewhere that has no functional government, like some undeveloped place in Africa (sorry a good specific example escapes me). There you can live your libertarian dream.

Is there a list of the 20 finalists for HQ2 cities?

Yes, you could have found them just as quick by typing that into a search engine!

You are right! I could not find any when they announced but I should have checked again. Here they are others:

- Atlanta, GA - Austin, TX - Boston, MA - Chicago, IL - Columbus, OH - Dallas, TX - Denver, CO - Indianapolis, IN - Los Angeles, CA - Miami, FL - Montgomery County, MD - Nashville, TN - Newark, NJ - New York City, NY - Northern Virginia, VA - Philadelphia, PA - Pittsburgh, PA - Raleigh, NC - Toronto, ON - Washington D.C.

It's a great idea. They should refuse them.

Reply on news.ycombinator.com