Rather than punish Amazon, punish the public servants who thought a large tax break for years, or real estate deals, would really be big enough to draw the company in.
What Amazon did was playing the field; why not get a bonus for letting others compete; rather than taking nothing because it was already decided?
Oh, there's some karmic payback for the cities doing what they did. You see, all that inside information that the 236 other cities gave away to Bezos? He gets to keep that:
http://inthesetimes.com/article/21571/the-hq2-scam-how-amazo...
"Amazon now has a treasure trove of non-public information about America’s future, in addition to knowing how much cash cities are willing to part with to land an Amazon facility. And it got all that, along with a giant PR benefit from the bidding war, for free.
If you knew a city was going to build a road in a particular place, you could make a lot of money buying up the real estate there. Imagine that on a national scale and you can see how Amazon will grow far wealthier from the data it collected than even the raw dollars extracted from HQ2’s big winners. In fact, this was the real reason Amazon orchestrated the whole charade."
But knowing how regulation typically works they probably wont help either. They'll probably be over-bearing and quickly out of date, or more likely end up hurting local communities trying to get new business from small-medium scale companies while big mega-corps continue with business-as-usual getting free rewards from the state at the expense of citizens and smaller firms.
this whole episode makes me reflect upon the Tesla Megafactory bidding process where Musk played California off against other states. Ultimately Governor Brown made some comment about how Tesla was just asking for too much and it didn't make sense for California. So it went to Nevada.
And, what I wonder is: is there a consulting firm that serves as an intelligent counter force to Tesla and Amazon et al? Musk and Bezos are supposed to be hyper-smart so is there, say, a branch of Goldman Sachs that can hyper-intelligently advise state/city leaders about this particular kind of divide-and-conquer corporate predation (if that's what it is)?
The problem here is of representation. Ie. the city residents could not agree with their tax money being spent on this.
This is an example where a direct democracy shines, basically any decision which lasts longer than a current politicians' mandate should be voted directly by citizens to align the incentives. Any decisions with effect roughly contained within a voting period could be delegated to 'managers', ie. politicians voted for administration of public things.
The problem today in countries without direct democracy for longer term issues is that they elect these 'managers' to decide on matters vastly exceeding their mandate.
New York City taxpayer here. Fine with it. 25,000 high-income jobs, even if after 10 years, makes the new engineering campus on Roosevelt Island instantly more productive. Those jobs will pay taxes, spend money in the local economy, and drive demand for East River infrastructure improvements.
I do believe that these sorts of subsidies should be required to be put to a popular vote. Wouldn't be a bad state constitutional amendment, actually...
From the perspective of a city, giving $x so that the HQ gets built there instead of some other city might make sense.
From the perspective of the whole nation, the notion of handing out large amounts of money to gain taxes in location A and lose taxes in location B is clearly ridiculous - let the company pick whatever city is most competitive without the handouts, and if some other city wants that HQ, well, they need to provide better services, not just a discount (which essentially is a loss for the combined coffer of all the governments), unless the gov't "one level up" has considered that it's better for national interests that this area needs to be subsidized above others.
For any single city it may make sense to underbid other cities, but for all cities together it makes sense to cooperate/collude so that underbidding doesn't happen.
City residents generally vote against any new development (literally NIMBYism), so it's pretty likely that this would have been something they're against.
But that it is for specific companies both misses the point of a healthy economy and leads to corruption by definition - not being treated equal under the law.
Say I'm running a town in Colorado. You think Amazon is going to set up in DC. Well, I want a shot at that. Having an Amazon HQ in my town would be wild. It could reverse economic decline and everyone's life would likely improve with the added dollars to the local economy. I want to bid on that and go all the way up to my break even. What if it makes it more valuable to move here? I want the shot at that.
Either you give me the chance to do that or you give me megabucks to not do it. But if you're using the law to compete economically we're probably not correctly using comparative advantage.
If it gets net negative for you at some point, don't bid! Why use the law to stop me from bidding?
e.g. imagine no one had offered any incentive to Amazon. They almost certainly would have ended up in NYC and Washington D.C. anyway, but the taxpayers in those locations would be saved footing the bill for their arrival and taxpayers elsewhere would be saved footing the bill for coming up with proposals, which only existed as leverage for Amazon in getting a better deal elsewhere. Likwise competitors with Amazon would not have to contend with a rival who is getting government subsidies. Overall the free market actually benefits from this intervention.
I feel like the US government is set up to allow just this sort of thing, though. States running themselves like countries and all...
In the end it's only a multinational and a very local economy getting a boost. The public purse as a whole takes a very serious hit.
Remember that Amazon needs to build this stuff somewhere. They don't need a subsidy to achieve this.
That is not to say that all subsidies all awful, they just need to be managed at the level where the people getting the benefit are the same as those paying the price.
The number of jobs and investment are fixed. For the nation as a whole, these competitions only forgo tax revenue that instead goes to Amazon's shareholders.
And you can't just make the argument from the winning city's perspective. The right approach is something like the 'Veil of Ignorance': imagine being randomly assign to live in some city/town, and find a policy that maximizes your expected utility.
I also don't quite understand the heroic pose you strike for handing out subsidies. It's not like such self-impoverishment requires any skills on the part of the administration, except a willingness to sell out your citizen. Cooperating with other jurisdictions to form a cartel against such competitions would increase everyone's tax revenue, and still allow you to compete with factors that actually benefit your citizen, like good infrastructure or education.
We also have laws to make sure government purchases are made by means of suppliers bidding on government contracts. Giving out arbitrary tax breaks should probably go through a similar process for the same reasons.
Once a town bids, then some town somewhere gets a small fraction of the benefit, and Amazon gets the remainder.
While we're at it you, the single individual in charge of making this decision, may be in favor of something but your community may be entirely opposed to it, but they can't vote you out until the bid was already placed and you bankrupted the city.
Also, you may be burning the current citizens for the prospect of these future citizens that the company might bring with it. You're hoping to drive out all those gross poor people and replace them with smiling rich tech managers. Never mind that you have no actual plan for where these gross poor people will go, that's their problem. You're building the beautiful city of the future, and you can't make an omelette without breaking some eggs amirite?
Because the data shows it won't be wild for your town. It won't reverse economic decline, and everyone's lives will not improve. You are being prevented from locking your local governing body into a poor deal (whether because you don't know better as a politician, or because you do know better but don't care, as you'll be out of office by the time it matters [which happens so often it's cliche at this point]). I might be more amiable if you're willing to personally guarantee the financial benefits out of your own wealth, so you have skin in the game (alternatively, the law could require a supermajority of voters support the measure, with a minimum voter turnout requirement).
These measures to protect against tragedy of the commons are not new, nor the arguments such as yours against such protections.
Otherwise one should argue not to mess with the little decisions like Amazon HQ but solve the actual problem - if local government can be incompetent, and we can't afford that, then all local affairs should be managed by the central government (which, as everybody knows, is always the most competent and incorruptible). Limiting local power just in case of one Amazon HQ makes no sense - if the local government being able to make mistakes is the problem, then this problem should be solved by removing this ability.
If, however, we do think it's good to allow local governments to govern, then if their decision is to bid for Amazon HQ and they think it's good for their town, why should we interfere and tell them it's not?
The thing is, it can be a terrible idea, the government can still do it, and we can then elect new officials to replace them. These things aren't mutually exclusive. The problem is, voting out the idiots that gave away all the town's tax money to Amazon doesn't mean you get the money back. The town is still FUBAR by the debt and infrastructure strain, which now limits the ability of the new government to make proper decisions which leads to calls of incompetency which leads to them being voted out etc etc etc.
>>If, however, we do think it's good to allow local governments to govern, then if their decision is to bid for Amazon HQ and they think it's good for their town, why should we interfere and tell them it's not?
Really? Just defer to authority? There's a wide range of options between "Let the government do whatever it wants if that's what it thinks is right" and "Never let the government do anything because it upsets someone". People protest decisions all the time. Government officials make mistakes and implement bad policy ideas all the time. Government is a living thing. The town can say "let's do this stupid thing that will ruin us" and the people can rise up, make sure that doesn't happen, and elect an official that will put a law on the books making sure that thing never happens. AND THEN, 20 years later when circumstances have completely changes and the whole picture is different, they can then remove those restrictions as for being antiquated and problematic! Democracy in action!
Sure, but tax laws can be changed. In fact, if the town inhabitants tell Amazon now "we do not support the deal our management has made, and will kick them out and manage things differently", Amazon probably would not consider this deal a done thing - it's much easier to change taxes than to move headquarters.
> The town is still FUBAR by the debt and infrastructure strain
So, the solution is to make upstream government to prevent downstream government from ever making a mistake, because if downstream government makes a mistake, it can have long-term consequences. But upstream government can't make such mistakes, presumably? The only way it works that I can see is that because you can't prove a hypothetical, you can't win an argument for doing something - because doing something can always lead to a mistake, while if you are doing nothing, you can't conclusively prove doing something would be better, since it's a hypothetical. So, the ideal situation is when any action of the local government that can potentially lead to a mistake is banned.
> Really? Just defer to authority?
Do you have any other choice? Somebody has to make the decision. Either it's the inhabitants of the town, as represented by the government they themselves elected, or it's the central government which of course always knows better and has everybody's best interest in mind and is never corrupt or mistaken. Who else would that be? The decision has to be made somewhere by somebody. Some people here advocate it should be centralized government because local governments can do stupid things. This makes no sense.
Or, we can take poll on HN and mandate by law that everybody should do whatever it says. That would surely work wonders.
> Government is a living thing.
Surely, but what is being advocated here is to take the authority from local government, because it can lead to a bad outcome. As if authority of the central government can't.
Then the Seattle city should be in ecstasy now. But I think from the news I read, the locals seem worried, lest happy about it.
IMO having Amazon in paying half as many taxes in Buffalo is probably a lot better for NY state than them paying full taxes in NY.
That makes the assumption that the government won't just raise taxes for everyone else and simply move the money from private citizens bank account to Amazon's bank account.
> IMO having Amazon in paying half as many taxes in Buffalo is probably a lot better for NY state than them paying full taxes in NY[C]. (I'm assuming you dropped a C at the end of that sentence)
In practice NYC just drops it down to 1/4 of the taxes and Amazon moves back to NYC and everything is the same as before accept they got out of paying 75% of their taxes.
This exact thing happened in Kansas City where KS and MI both used tax breaks to lure companies across the state line.
At least there should be requirement of a level playing field. How come that granting tax benefits and various other huge privileges to say Foxconn or Amazon is supposedly good for local economy while granting such perks equally to other businesses isn't a good thing? Shouldn't the first thing government to care about be the level playing field and not skewing it in favor of chosen players? I mean a typical Joe can't just come down to your Colorado town and setup business on the same conditions as Amazon or Foxconn. Why such an injustice?
If You’re afraid of public officials gambling with private money, force referenda.
i'm curious why a 10 employee company with the same $109K wouldn't be eligible for the same tax breaks, etc.?
Foxconn is getting from Wisconsin close to $300K per each of 50K/year job ($4B for 13K jobs). Why such a perk isn't available to a 10 or 100 employee company?
Interesting that be it red or blue state/government when it comes to Big Business both are completely overpowered and taking the position of full submission. And that is why laws limiting such overpowering are needed. It isn't laws limiting the power of local/state government, it is laws limiting the power of Big Business in dealing with local/state government, i.e. limiting the perks/breaks Amazon/Foxconn can extract from a government.
I prefer to give leverage to the citizens: let them decide if they want to subsidize amazon or not, as opposed to governors and elected officials that profit disproportionately more.
Unfortunately, what usually happens is that a dozen people make a deal for a huge population that affects them in a big way.
That doesn't sound like what they were getting at.
Sounded to me like they were attacking Amazon because they were playing the field.
The two also don't have to be mutually exclusive. You can look at what Amazon did and say "That's not a business practice that should be followed," while still saying "State and Local governments shouldn't be allowed to offer funds in this manner."
You are assuming they were seriously considering the other cities, rather than making a show in order to secure as favorable terms as possible from the cities they were already planning on.
They are reacting to incentives, just like Amazon is. They are stuck in a tragedy of the commons, and each is trying to play the field, as best as they can.
I'd place the blame on the agent with more power (Amazon), and the one that initiated this spectacle (Amazon).
That they are, but only to say 'I created 50k jobs; re-elect me.'
To me, that's not much as an incentive but a plea for holding power. At the end of the day the public servants have limited time to make things happen. Companies don't.
If you go buy a new car, you haggle with the dealer. That's just something you do. You have total control to walk out (you have more power,) and you wanted the new car (initiated.)
Yes the dealer will be upset that you haggled, but they still get paid commission, even at a reduced rate. You go home happy, because you got what you wanted, the dealer is happy to have gotten something over their competitor (and the money doesn't hurt); win-win.
Getting an Amazon HQ, as a cornerstone employer in their city achieves that. Or at least, that's the general economic consensus.
> If you go buy a new car, you haggle with the dealer. That's just something you do. You have total control to walk out (you have more power,) and you wanted the new car (initiated.)
If a dealer offers me a shitty deal, I can go across the street, to another car dealer. Likewise, if my offer sucks, there's no shortage of other people buying cars.
How many companies are wooing cities with 50k jobs, right now?
Of course, they do! Small businesses are less efficient, and have to employ more people to get the same amount of work done.
But optimizing for this is anathema in an ideological climate where the lowest price for the customer is the most important thing, all consequences be damned.
Also, many towns hope to, in theory, attract more employment through satellite industries, that spring up around the big company. These satellites won't be getting any tax breaks.
Really, this is what it comes down to...Bezos outplayed the cities. He'll never get a deal like this again, but since he only wants to make a splash like this once, there's no incentive for him to appear as a fair bargainer.