Charlie Munger: Driving rich people out is pretty dumb for states or cities | Hacker News Reader

Charlie Munger: Driving rich people out is pretty dumb for states or cities

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It's insane how some loud politicians were able to rile up opposition by framing the AMZN deal in isolation, as if this was the first and only time New York offered financial incentives to massive, profitable companies.

Atlantic Yards, Hudson Yards, 1WTC, MetroTech, Yankee Stadium... all of these projects, and many more, were negotiated and ultimately included large financial incentives or subsidies by various governments to the developers and to the big business tenants.

Virtually every big bank has, at some point, threatened to move out of NYC, or at least large quantities of back-office, technology and operations staff. It's all to get tax benefits and concessions from the city and state governments.

The idea that every other NYC business is paying their "fair share" and Amazon was expecting, or getting, special treatment, is ludicrous.

Amazon did it to themselves by turning this HQ2 search into a circus. It's pretty clear that they knew where they wanted to go from the start and tried to use this as leverage to squeeze out as much out of NYC and DC as possible.

It's also obvious that they're using HQ2 to build up political leverage in Seattle.

As a software engineer who lives and grew up in Queens it would have been nice to have amazon in new york but we don't really need them. LIC is growing fast and we'll have no problem getting someone else to come in and take the space that amazon would have occupied.

>> LIC is growing fast

Don't you realize much (most?) of LIC's growth is from businesses attracted to the area by various pre-existing government incentives, such as:

Commerical Expansion Program (tax abatements), Accelerated Sales Tax Exemption Program, Commercial Revitalization Program (property tax abatements), Commercial Rent Tax Special Reduction, Energy Cost Savings Program, Industrial & Commercial Abatement Program, Industrial Business Zone Relocation Tax Credit, NYCIDA Commercial Office Space Incentives, Open Industrial Uses Sales Tax Exemption Program, Qualified Emerging Technology Company Incentives (tax reductions), Relocation and Employment Assistance Program (tax credits), Sales Tax Exemption for Manufacturers

https://www.nycedc.com/service/financing-incentives

Whatever arrangements or incentives were made to build Cornell Tech, keep in mind that in addition, all donations to Cornell's $7 billion endowment are tax-deductible. I will take a wild guess that it is almost exclusively very rich people who benefit the most from this deduction.

Yes, fully aware of it. I'm actually working out of an incubator that's part of another tax incentive program (START-UP NY https://esd.ny.gov/startup-ny-program) and am not against most economic development programs.

None of the incentives that you mention are in any way relevant to Amazon story since the incentives you mention are available to all businesses and thus are fair and just in exactly the way the Amazon deal was unfair and corrupt.

1200 million - NYS Excelsior Jobs Program

https://esd.ny.gov/excelsior-jobs-program

897 million - Relocation and Employment Assistance Program (REAP)

https://www1.nyc.gov/site/finance/benefits/business-reap.pag...

386 million - Industrial & Commercial Abatement Program (ICAP)

https://www1.nyc.gov/site/finance/benefits/benefits-industri...

All of the above were available prior to Amazon's HQ2 search, and remain currently available for any company that fulfills the requirements. Go ahead and complain about the $500 million "capital grant" if you want, but $2.5 billion was taking advantage of existing, established, programs anyone can participate in. The only thing "corrupt" are the politicians who managed to convince people like yourself, who seem unable to perform a Google search, that LIC would be better off without this project.

source for figures: https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-que...

Sorry but being opposed to this incentive targeted exclusively and non-competitively at Amazon, #4 in market cap, does not mean being opposed to incentives.

Non-competitively? Seriously man, where do you get your news? Over 100 cities submitted proposals, and LIC's was not the largest incentive package.

https://www.curbed.com/2017/10/19/16504426/amazon-hq2-bid-ur...

Wikipedia says 238 proposals: https://en.wikipedia.org/wiki/Amazon_HQ2

Pretty sure the opposition is opposed to those as well...

Without them, "the opposition" would likely be living in a city without Yankee Stadium or Barclays Arena, with a huge hole in the ground in Lower Manhattan, no High Line, a dilapidated Central Park, and most importantly, a whole bunch of their employers having waved bye-bye in the 1990s-2000s. Come to think of it, lots of "the opposition" would never have even moved to NYC had their job been located in Charlotte, or Kansas City, or Connecticut.

It's easy to look at New York City today and just assume its always been a clean, safe, prosperous megalopolis with strong business activity, and therefore it always will be. However, that perspective would be very wrong.

I have no strong conviction about the merits of their view, really. I'm just pointing out that painting them as hypocritical in regards to the Amazon deal, as in your original post, is not really well-founded.

Sorry, but it is entirely hypocritical to benefit from tax subsidies in all kinds of ways, such as being employed by a company receiving large tax credits/incentives, taking the mortgage interest deduction, enjoying parks and recreational activities funded by other people's taxes, and certainly, use of the great, yet heavily subsidized, NYC subway/bus system. I'm sure residents of Syracuse and Rochester love helping to pay for the NYC Subway (/s) and they also would have warmly welcomed Amazon (not /s)

http://interactive.nydailynews.com/project/mta-funding

Giving insufficient tax breaks, that other people don't have access to, is "driving rich people out"?

You know what I think is pretty dumb for states and cities? Letting the rich play them against each other in a race to the bottom.

But I do find it puzzling how such deals are even legal. Isn't the law supposed to be the same for everyone - including tax law?

But I do find it puzzling how such deals are even legal. Isn't the law supposed to be the same for everyone - including tax law?

The same for everyone....do you mean everyone paying 0% taxes, or the max, close to 50% (state + federal) ?

>>In New York, California, Connecticut, Maryland and New Jersey, the top 1 percent pay a third or more of total income taxes. Now a handful of billionaires or even a single individual like Mr. Tepper can have a noticeable impact on state revenues and budgets. https://www.nytimes.com/2016/05/01/business/one-top-taxpayer...

> the top 1 percent pay a third or more of total income taxes.

The richer they get and the poorer everyone else gets, the more this statistic makes it look like they're shouldering the entire tax burden.

NYC is full of rich people. Giving the richest man in the world a tax break and access to a prime location in the largest city in the country to drive out middle class people would be dumb.

Except that's already SOP in New York. You're familiar with One57, the skyscraper with $100 million apartments? It received over $60 million in tax abatements. And the first $100 million apartment's owner paid less than $20,000 in property tax in 2014.

https://www.6sqft.com/one57-received-66m-in-tax-breaks-in-ex...

I know that it is and understand that amazon got a pretty standard package. Just because it happens all the time doesn't mean that it's right.

> They don't burden your schools, the police department, your prisons.

They do. They tend to campaign to eliminate having tax money funding the schools, since they don't use them or only want private schools.

Is it bad at any scale?

What if Amazon were promised an even more ridiculous amount in taxpayer money, like $50 billion or $100 billion? Would his opinion be the same?

There has to be a limit to corporate giveaways in the form of tax breaks and subsidies. The reward system shouldn't keep tilting toward larger and larger companies.

Rich Person A decides to live in NJ. Taxes and all, NJ gets from him $22 million a year. They are y rich people in NJ. State gets cute and says, if we raised their taxes by 10%, we'll have $294 million more and they will not feel it. In reality, NJ stands to lose them all, because eventually they will move, not to Cuba or Russia, but to a US state, like Florida.

So NJ /NY would have a lot less to spend on highways, schools, cops etc because a handful of rich people were taxed out.

NYC /NY stood to make billions from Amazon. Now they get zilch.

Your argument implies a race to the bottom in which the only way to "win" is not to play, since otherwise you drive taxes for megarich as near 0 as you can bear.

I prefer the approach where if we lose them, "tough nuts." Revenue should be robust and diversified, and losing no individual source should be a death blow. Similarly, good services and local effects should be the goal to draw people in, not handouts, as this aligns incentives _far_ better while still maintaining workable bases of revenue. This is not to say "ONLY tax the rich", the parent post seemed to me to be making the wise argument that there's a line here, but the fact that the focus is so much on these few individuals makes me think we're already off in left field, and bowing to them further isn't the direction I want to move in, even if it may cause a temporary revenue hit.

So yes, "they (NY) get zilch." But they've also made a strong statement about corporate handouts (my own opinions aside about whether it was a smart choice or not) and will not stop being NY and will not stop being desirable because of this; FLA is not going to supplant them even if amazon decides to go there alongside whatever megarich actually care enough about the taxes to _not be in NY_. (Now, NY's inability to develop infrastructure within reasonable cost may do that over the next hundred years or so, but that's to be seen, and I don't think losing a few billionaires is going to make or break that)

It would have been a strong statement about corporate handouts if they had refused to play up front or even better cited the philosophy you’ve outline and how they’ve enshrined it in the law. What I pick up on is the elected officials are disconnected from a vocal wing of their own party and NY has significant political uncertainty and a growing tax income problem that is impacting g their ability to address infrastructure needs. Maybe businesses don’t care or maybe they think Dallas or Atlanta is a friendly place to do business we’ll grow there.

A strong statement was made. Don't come to New York and expect any tax incentives. I am sure that the message was received in corporate boardrooms all over the world.

Enjoy the deafening silence of no major companies moving to New York

States with the highest taxes often have the most rich residents. Look at California and NY.

Turns out the rich are willing and able to pay more to live in desirable areas.

Same with companies, taxes and tax breaks enter the equation but have less impact than candidate talent pool, total cost of living.

A region can accommodate only so many rich people. Once the cops, teachers and plumbers are crowded out by real estate prices, you're overcapacity

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