Amazon’s “second headquarters” may be no such thing
economist.com
economist.com
Game theory means almost no single state can resist the temptation.
But it has the net effect of pushing the tax burden down onto smaller companies who are competing with the Amazons of the world.
The Los Angeles Stadium (Ram) is now estimated to cost $4.9 billion when finished in 2020 and also house LA Chargers. The stadium is supposedly completely privately funded but significant tax breaks are expected. I suppose more concrete details will emerge when its finished.
The Las Vegas stadium (Raiders) is supposed to cost $1.9 billion with $750 million in tax payer money and $1.1 billion from Raiders themselves. It is also supposed to finish in 2020 and officially be owned by the Las Vegas Stadium Authority and shared with UNLV.
So each stadium has its own deals.
Supporters typically claim that the economic benefit of a sports team offsets this cost, but the benefit is in fact completely negligible or even negative.
https://en.wikipedia.org/wiki/Relocation_of_professional_spo...
Additionally, the NFL is a "non-profit" organization somehow!!
EDIT: Errrr it used to be tax exempt until Cory Booker made them cut the bull
In Washington, we gave an $8.7 billion tax break to the aerospace industry (read: Boeing) a few years ago. Look how that turned out for us.
It seems like y'all are doing pretty well. Can you elaborate?
>> But it has the net effect of pushing the tax burden down onto smaller companies who are competing with the Amazons of the world.
I.e., even if we need a solution to "sclerotic tax increases", this is not a good one, because the solution only works for massive companies.
Pure and simple corporate greed.
"Hey, we have HQ2 for sale. Name your price."
"...hey, highest-bidders, we actually only have two smaller satellite offices for sale; each of you gets one for the prices you named."
Can't speak for NYC, but I hope Virginia refuses to honor any corporate welfare packages as a result of what's basically an entirely legal form of bait and switch.
It's a testimony to the wealth and power of NoVA and NYC that they scoff at 25,000 high paying jobs. I'm from Wisconsin, for instance, and we will have handed over roughly 4 to 5 BILLION dollars when it's all said and done.
And that was for only HALF the jobs that NoVA is getting. (Each job likely paying LESS than what most of the Amazon jobs will pay.)
I'm not jealous or anything. You guys know your value. Good for you. Self-Awareness is sorely lacking in the US these days. But I'm just pointing out that as corporate welfare goes, you guys in the coastal elite cities are in the best positions in the country. You're able to give out the least because all the good knowledge economy corporations basically have to be there in any case.
If anything, Amazon QuarterHQ3 can go in Wisconsin (though my primary pick for this purpose might instead be a more disaster-resistant part of Florida) and QuarterHQ4 can go in the heart of Texas. It might draw some of the groupthink apart a bit and into areas that actually need new blood, or at least need some blood drawn from NorCal.
I just think you're being a little idealistic and naive. You're attempting to advance what seem to be almost quasi-political objectives using the market. But market participants in NYC or NoVA don't really care if Wisconsin needs new blood, or if SF has too much groupthink. Those are not issues the market is meant to address. You only set yourself up for more frustration and failure trying to use what are at their root market based devices to achieve these sorts of quasi-political goals.
This is very much philosophy rather than practical rules, and perhaps you were speaking on a practical level rather than a philosophical one. But too many people seem to think that corporations (and governments) have some inherent right to exist and do what they chose, and forget that both exist only with our collective permission.
...
> I just think you're being a little idealistic and naive.
In reading your initial reply to me and this subsequent comment of yours, it seems you're more focused on scratching an itch for a debate. I have no interest:
My initial reply to you was entirely fantastic; it had absolutely no basis in reality. I can assure you that my personal pipe dream of dispersing rational and grounded ideologies for the sake of making more states purple during elections was not intended to be confused with a legitimate argument.
I do hope someone else gives you the debate you're seeking. I'm just informing you that that wasn't the intent of my initial reply to you. I still stand by the idea that it's in everyone's best interests for Amazon to plant large satellite offices in locations that aren't thought-centers because they're more likely to get the tax breaks that they need and they won't have any issues attracting the necessary talent (it's Amazon), but I won't entangle that argument with my dreams.
Cheers
>My initial reply to you was entirely fantastic; it had absolutely no basis in reality...
As long as you realize this, it's good. But there have been so many comments on HN the past week or so putting forth ideas of the sort you, rightly, see as more fantasy based that it's become difficult to ascertain exactly when someone is being serious. Such people have to be "sobered up" if we're going to effectively concert in seeking a solution to the larger problem:
The "winner take all" nature of the tech economy.
Must we always have such a narrow monetary view of everything?
The primary job of governments is to be for the people, meaning the primary objective function must be the wellbeing of the people.
Increasing the tax base may or may not be a suitable means towards that goal -- but certainly it's not an end in itself.
I agree it does seem crazy but if these businesses bring about a net benefit to where they are located it can't be all bad?
I'm not familiar with the US tax system but in the UK, and much of Europe, the system is lagging behind the real world of business by a measure of decades.
For example, EU forces Ireland to collect taxes from Apple, because it deemed such rebates to be illegal state aid. See https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
What member countries really should do is similar to the revenue tax that was recently proposed. But not exactly, because that's a pretty blunt tool. Instead, the calculation should go something like this.
# Exclude payments to/from subsidiaries.
global_revenue = all external revenue
global_expenses = all external non-tax costs
global_profit = global_revenue - global_expenses
global_tax = this_country_tax_rate * global_profit
country_tax = this_country_revenue / global_revenue
* global_tax
Require the company to estimate and pay this tax quarterly, and provide reasonable fines for underpayment. Granted the first two lines might be difficult to compute, so you would only do this for companies big enough to be worth going through the trouble for.
Disclaimer: not a tax policy expert. Would love to be corrected. Please poke holes.
I think the EU has done a pretty good job to find a balance here: when Ireland joined the EU in the 70s, it was among the poorest countries west of Moscow and north of Morocco. It became one of the largest recipients of net transfers over the next 30 years, but everyone knew that their chances of catching up required some economic competitiveness, and that it would take decades to pull even in terms of "Features" (infrastructure, local market etc)
Low taxes were therefore the only viable path to attract investments. That scenario is explicitly accepted even among those advocating for coordinated taxation.
In the case of Ireland, everything actually worked out extremely well: Speaking something almost resembling the english language, and having the strength of character to make peace with the English, Ireland established world-class universities and a rather remarkable knowledge economy in just one generation.
Dude... not cool.
This is an extreme case, but I had a previous employer, a large multinational conglomerate, that moved my particular product team's home office twice in six years. Both moves were motivated by tax incentive. The cities would place conditions on how many jobs they had to "create" in order to get their perks, and they would "create" those jobs by relocating people from some other office in a town that was no longer giving them tax breaks.
The Foxconn deal in Wisconsin has been criticized for being a bad deal for several important reasons,
- Wisconsin competed and surpassed the tax incentive offers from Michigan and Ohio making for a tight margin,
- I've heard claims Foxconn has a reputation for making promises and then scaling back their plans. It's looking like this has happened. Foxconn change their factory plans from 'Generation 10.5 facility' to 'Generation 6 facility',
- Foxconn has promised to hire 13,000 employees at the plant. Scaled back plans might reduce those numbers to 3,000,
- Foxconn says not enough qualified engineers in Wisconsin, and may employ Chinese Engineers at the plant.
- Foxconn project went ahead without an environmental impact statement and will use over 5 million gallons of water per day from Lake Michigan,
When people vote with their paycheck, a tax incentive deal is certainly a political win. At least for this Foxconn deal, it remains to be proven if the deal is a net long term improvement for workers in Wisconsin.
Wisconsin has suffered underemployment in a depressed employment environment. Even with these downsides, maybe it's the deal that Wisconsin needs. And really, what's the impact to me if Wisconsin residents suffer from negative environmental impacts from this plant--I don't live there.
https://www.jsonline.com/story/money/business/2018/08/23/fox...
https://www.jsonline.com/story/news/politics/2018/04/25/dnr-...
https://www.businessinsider.com/why-foxconns-wisconsin-facto...
https://www.theguardian.com/cities/2018/jul/02/its-a-huge-su...
https://www.jsonline.com/story/opinion/contributors/2018/06/...
https://www.forbes.com/sites/stuartanderson/2018/11/06/why-f...
> Amazon is uniquely large impact
Amazon's impact happens regardless of them offering jobs in your city. If you want to address their impact on local business then you the city should work out a local tax on good delivered to the city. Preventing Amazon to bring jobs in a city has zero impact on lost retail jobs!
> makes no sense to cut tax deals
A city should offer incentive for potential new employers, promise to augment public transport, accelerate the red tape to build their building (maybe the city hires more people temporarily to deal with that extra work?), possibly cut tax for the first few years in exchange of some written commitment. But I agree with you that it has to be financially sound long term, a tax break for ever that ends up being subsidized by the tax payer makes no sense except for somebody looking for re-election.
All those employees will also bolster the community with purchases and what not.
Incentives for small local community buisnesses that care about your community should be a higher priority for all Americans.
Seeking favors and special treatment under false pretenses is bad. Amazon is in the wrong, clearly, since they actively misled others.
If my city got a second headquarters for Amazon, I would have been ecstatic.
Price obfuscation is bad for the payer (taxpayers in this case). The goal should be to be as clear and transparent as possible.
Would you have been ecstatic if that came at a cost of $5000 a year (out of your pocket)? There's a really big problem with these competitions in that the world sees the benefits (and even benefits that are more wishful thinking than actual) but they don't see the cost.
Maybe a simpler way to look at the issue is to ask why local governments don't pay people to move into their cities. After all, growth is a good thing, more people means more jobs, more jobs means more income, more stuff gets sold, more tax revenue comes in. All the supposed benefits that come from the Amazon HQ apply equally to paying people to move to the city. Yet it's rare to hear anyone argue for that policy.
> Maybe a simpler way to look at the issue is to ask why local governments don't pay people to move into their cities.
Vermont is doing that right now. https://www.nytimes.com/2018/06/01/us/vermont-moving-money.h... . The problem with that approach is that people usually move to where the jobs are, so paying corporations to move is more effective than paying people to do so.
Amazon could have at least let unchosen smaller cities believe they were seriously considered.
The announcement and the mundanity of the finalist cities was pretty shitty to all the smaller towns Amazon insinuated could be in the running.
I live in on the finalist cities, but I also have good friends in a nearby regional hub who made a good faith effort.
It would have been one thing to tell them "We didn't select you." It's something different to say "We're still considering cities, but definitely not yours."
It’s sad that politicians always think they are smarter than anybody else, that “this time it won’t happen” or simply that, even considering negatives, the opportunity is still too good to pass. Unfortunately, nobody ever got re-elected for saying no to this sort of opportunities.
The dynamics in such a situation are simply a prisoner's dilemma. Meaning: without cooperation, bidding for and getting HQ2 is net positive for the city. Nobody really sees much of a problem here, and your (and the sibling comment's) tiresome invocation of the lazy stupid-corrupt-politician-cliché is, as always, superfluous.
The actual issue is that, quite obviously, Amazon would expand and hire more employees anyway. This competition exploits the dynamic mentioned above to move money from the public to Amazon in a zero-sum game.
And the total loss of this scheme is even larger than "just" billions in taxes: when Amazon makes this decision based on the subsidies they are promised, they (by definition) must put lesser weight on all the factors that would otherwise dominate the decision. So they will end up at a location with lower quality-of-life, higher prices, or some other trade-offs. Amazon is essentially asking cities to pay them for crippling itself, and for compromising their employees happiness. Which, come to think of it, really does not strike me as the set of priorities one would expect from a stable company with a long-term focus and healthy values.
Anyway, that's why somewhat sane jurisdictions such as the EU put limits on subsidies and bespoke tax deals: it's cooperation that, when managed fairly, benefits everyone.
There's still competition between locations, but it's about quality-of-life, infrastructure, or education, instead of a voluntary effort to impoverish.
The fault, therefore, is the American fetishisation of market-based mechanisms[0], the seemingly endless willingness to starve public administrations of resources without any regard to their actual, absolute levels, and a somewhat pathological fear of showing weakness by treating any situation cooperatively, instead opting to turn everything into some sort of competition that at least guarantees the sweet payoff of others losing even worse.
[0]: This is particularly interesting here: The dedication to a free market runs so deep, that voters and politicians are essentially turning down the possibility to form a cartel amongst themselves. I one were to believe they are doing this knowing- and willingly, one would have admire it as a rather rare display of altruism in the service of a larger principle.
Conflating incentives, pricing, and competition drives me nuts. They're orthogonal concerns.
Like conflating capitalism and corporatism. Corporations are anti market, driven to eliminate competition. Duh. But criticize corporatism and you're branded an anti capitalist nut bar.
It's almost as if there's a massive disinformation campaign about how economies work.
Once the cities agreed to the deals with such growth prospects in mind, and given the huge demand from other cities, Amazon bait and switched these saps. They get to have their cake and eat it too, NYC and DC, non-HQ2 premises, but just satellite offices. Well, that could have been done without the theater, though the buzz was tantamount to free advertising for them and ratcheted up all the incentives.
While Amazon made a lot of correct decisions and is now a giant, without the benefit of 'internet tax', it simply could not grow this fast, to some extent the taxpayers carried it over the past two decades. Maybe it's time for it to consider paying back something instead of being intrusive like this stupid 2nd HQ propaganda.
Based on the hilariously large stack of cities willing to bid on their presence, I'm guessing it'll be a while before that effect (to the extent it even exist) is a constraint.
Here we are. All the little startups have grown up and are now the entitled little snowflakes we treated them like through their infancy on to corporate welfare adulthood.
Hope I don't jinx it!