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Comment by smallgovt | Hacker News Reader

I think it's sad that the vocal minority was able to alter this decision. As the letter mentions, the project would have brought $27b in revenue to the state. This magnitude of revenue is material considering the fact that the state only collected $76b in taxes in the last reported fiscal year.

I think there's reason to debate whether large corps should be able to hold an auction like this, but given the place we find ourselves in today, there's no question this would have been a huge win for NY.

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The $27B is a present value sum of future cash flows, not an annual revenue.

Thanks, corrected. Even so, still a ton of revenue.

Not a ton of revenue if you are have expenditures for required new infrastructure, such as road and public transport, to accommodate offices.

The 3b wasn't an annual figure either.

> there's no question this would have been a huge win for NY.

But a loss for the US as a whole, assuming the HQ still gets built, but without special tax exemptions.

The overwhelming majority of the tax deals were/are available to other employers in the state as well. IIRC, only the land/building deal was specific and a version of that is likely to be available to whomever decides to build on the site.

Empire State Development was to award Amazon a cash grant of $325 million from taxpayers. This is corporate welfare and a kind of corruption. Congress should ban all government subsidies that are one-off and negotiated in secret with individual companies. There's an equal protection under the law issue.

As an attorney, I’m curious as to how you think a constitutional equal protection issue is at stake here. I’m unaware of any case law that would suggest so.

I'm curious why Congress has chosen not to regulate (or ban) the grant of tax incentives to companies as enticements for development; this seems to easily fall under the interstate commerce clause. All states lose out when they compete against each other in this way.

There was actually a case where the court of appeals held these types of tax breaks to violate the commerce clause, but in 2006, the Supreme Court dismissed the case on a procedural issue (that the taxpayers did not have standing). See the below article for more.

https://www.citylab.com/life/2018/01/the-case-for-the-case-a...

States can’t expressly discriminate against foreign (i.e., out of state) businesses, but it’s never been held that they can’t subsidize local businesses. Whether the latter amounts to the same thing as the former is an interesting academic question, but the law doesn’t yet say so.

Here's an article by a graduate of GW law arguing it could be an equal protection issue: https://taxprof.typepad.com/files/65st0033.pdf

I didn't actually read it, so I'm not sure how sound his argument is. Even if plausible, it's obviously just an article by a recent law grad and not actually the clear controlling law today.

This entire deal was incredibly poorly timed. While the national Amazon roadshow was raging on, the truth behind another high-tech government deal was being exposed. Foxconn received massive benefits from Wisconsin on the promise of manufacturing jobs, and they were equivocating right around the time of the announcement that NY might be on the shortlist.

Even if other companies were eligible for most of the deal, the fact that even a small part of it might have been specific to Amazon meant that the Foxconn story and fallout became a relevant part of the discussion

They will just get the exemptions from the next highest bidder in the list.

How so? It's all state and local tax credits, not federal. How the state of NY runs its finances has no bearing on the US as a whole. It will of course be a benefit to wherever those jobs end up, but that's it.

Actually no, because other locations would have given tax incentives, too. In fact, LIC wasn't even one of the highest ones by that metric. For example, Newark was offering $7bn:

https://www.seattlebusinessmag.com/business-operations/new-j...

It's also important to realize that the majority of that $3bn would have come from pre-existing programs open to any company moving to LIC.

$27B over 25 years. So the loss of revenue is a little more than one billion a year.

And even that seems high. From the proposal, “Amazon will have an annual payroll of $3.75 billion. …There’s been nothing like it in history,”

Payroll tax for amazon is about ten percent: https://www.payroll-taxes.com/state-tax/new-york

So, wouldn’t that mean the revenue loss is just 300M a year. And given they are forgiving 3B of that, the revenue over 25 years ends up being 4.5B over 25 years, which is even less.

Here are the assumptions built into that $27B number, which was generated by proponents of the deal: https://www.democratandchronicle.com/story/news/politics/alb...

Finally, there are 20M people in New York. So 1.2B of amazon revenue per year (high end) equates to $60 a person at the end of the day.

> I think there's reason to debate whether large corps should be able to hold an auction like this

It wasn't an auction. As the letter points out, each location put in a single, sealed bid, invisible to everybody else. There were no multiple rounds of bidding, as is typical for an auction.

You've literally described a silent auction.

https://en.m.wikipedia.org/wiki/First-price_sealed-bid_aucti...

Ah, I stand corrected, thanks!

No, you mean a blind auction.

Eh, a sealed first-price auction is still an auction. It’s fair to call it that.

I'm glad they dropped it. There are some grounded concerns:

* Amazon is one of the most successful enterprises in human history and should not require support from taxpayers beyond their voluntary patronage of Amazon itself.

* Most of these "deals" were put together secretly without input from the public. Millions (or in NY's case, billion+) of dollars were packaged and presented without community input or oversight

* While amazon is talking about bringing middle and upper-income jobs to these communities, overall amazon has a documented history of paying poverty wages despite its tremendous financial success

* State and local governments probably shouldn't be diverting billions of their citizen's tax revenue to lure corporations who will only impact a tiny subset of their citizenry. Does the taxpayer in Buffalo New York benefit if their tax money goes to fund some HQ in Queens, if the bulk of the state's tax capture is just "handed" right back to Amazon?

With that said, there's nothing wrong with large organizations asking state and local governments to expedite things like site identification, planning, zoning, permitting, licensing, environmental studies, etc since you're talking about a MASSIVE undertaking during a short window of time. But beyond that, governments should avoid a race to the bottom with this stuff.

Would the bulk of the taxes paid by Amazon be paid back? The article said that Amazon would get $3 billion in existing credits (i.e. not deal specific, just business tax credits) and would be paying ~$27 billion. Seems like a steal for NY.

Look at this beyond the scope of Amazon.

If the basic premise here is that any company should get a tax break if they are capable of hiring enough workers whose tax payments would exceed their employer's tax payments, all you're doing is just shifting the tax burden onto the workers in the form of regressive income, sales, and property taxes.

For there to be an actual increase in tax revenue for the state via income tax, those workers would have to be receiving higher salaries than they would have otherwise, would they not? Or emigrating from somewhere else, which they would be unlikely to do if they are not receiving an increase in compensation.

You assume there is no economy of scale for government spending. For example, building a road to serve 10 million people may be cheaper per capita than a road for 1 million people. Same on the revenue side: doing a single large deal for $27B is probably cheaper than doing a thousand deals for $27M.

> * Most of these "deals" were put together secretly without input from the public. Millions (or in NY's case, billion+) of dollars were packaged and presented without community input or oversight

> * State and local governments probably shouldn't be diverting billions of their citizen's tax revenue to lure corporations who will only impact a tiny subset of their citizenry.

I haven't been following this closely. What did New York offer Amazon that it does not offer any other company? In the linked article the author states that Amazon would have been claiming existing tax credits. Did they receive anything else (not offered to any other new businesses)?

If so, the linked article seems to be presenting the argument in bad faith.

If not, you seem to be describing the offer in bad faith.

Rezoning and eminent domain, resulting in massive windfall for Plaxall https://www.crainsnewyork.com/real-estate/plastics-company-a...

(Yes, some of that land is being purchased in a private sale, but its value is now significantly greater because of the city's rezoning and ability to stich-together workable parcels through eminent domain)Long island City residents aren't terribly happy about that.

Then there's the whole Excelsior tax credit scheme which Amazon really stretches. It's normally just 6.85% of wages per net new job. Amazon's is significantly greater. https://esd.ny.gov/excelsior-jobs-program

Use of eminent domain is disgusting and that alone is enough to kill the deal IMHO. Using eminent domain for a private business is wrong. It seems like New York does that too often.

Yes, the letter asks us to believe that Amazon, after a lengthy nationwide search, ultimately chose a deal that only offered credits that were already on the books.

If the benefits of the deal are already available to all comers, why doesn't Amazon just continue with its plan?

Amazon isn't taking money from the government. They're getting a relief of $3 billion IF they fulfill their promise. I'd take 25k-40k jobs for my people over $3 billion in taxes any day. As the director quoted the governor, the best social program is still a job.

Many companies in New York create jobs for the state. Some even more than Amazon, and generate even greater amounts tax revenue.

Are they too entitled to tax relief?

Amazon is a tremendously successful company. You start handing it tax breaks and you begin walking down the path of making it a government-sanctioned monopoly.

This is what detractors of the deal keep saying. You can speculate on the organic growth rate of the NY economy all you want. But at the end of the day, there are 25,000 - 40,000 jobs which definitely won’t be coming to Long Island City now.

That's not obviously true.

The land is still there. Other companies could use it. Unless everything Amazon might have purchased goes totally undeveloped, the impact is less than the 25k jobs.

And given the time horizons involved, I'd take that bet.

Anyone else who proposes to develop at the scale that Amazon was proposing, would likely be achieving similar tax incentives as to what Amazon was offered. Particularly since the terms of the deal were made public, that becomes an anchor point for any similar discussions.

There is no question that organic growth will eventually create 25,000-40,000 jobs. But the net present value (NPV) of that future job creation is significantly reduced after applying the discount. So even the same number of jobs is not a comparable economic impact.

So the state should have been happy to give 26B in subsidies then? They could bank the 1B and have 25k to 40k jobs.

The math isn’t as clear as you are making it out to be. Google or companies like it will change their investment whether amazon is there or not.

I’m not sure if it was a typo on your part, or you might be misinformed of what the actual deal was that was struck. From TFA;

“Amazon was to build their headquarters with union jobs and pay the city and state $27 billion in revenues. The city, through existing as-of-right tax credits, and the state through Excelsior Tax credits - a program approved by the same legislators railing against it - would provide up to $3 billion in tax relief, IF Amazon created the 25,000-40,000 jobs and thus generated $27 billion in revenue. You don't need to be the State's Budget Director to know that a nine to one return on your investment is a winner.“

The crucial point is that there is no cash to bank! The politicians statements that the “money could have been better spent on xyz” was a lie.

The deal was to reduce taxes on future revenue if and only if Amazon met specific (lofty) investment and job creation requirements.

”Make no mistake, at the end of the day we lost $27 billion, 25,000-40,000 jobs and a blow to our reputation of being 'open for business.'”

Giving amazon the ability to not pay taxes is a subsidy. My question is whether it would still have been a good detail if NY had removed 26B of their tax burden because of the economic benefit?

Where is the line in your view? How much help is too much for a company?

The purpose of city government is collection of taxes from one set of people and expenditures of revenue to another set of people, in an effort to serve the greater good of the community.

The economics which determine where the “line” is, is set by the market of people/companies willing to move into and invest in the city, the services and infrastructure and regulation and talent pool they require to be able to function effectively in the city, and the tax burden they are willing and able to shoulder relative to other available tax/service/infra/talent bundles available elsewhere and their own profit margins.

And all that is a calculation companies perform within and between municipalities when selecting where to grow and invest.

And also a similar calculation made by the residents who move into and out of a city based on the services, infrastructure, tax rate, and companies that are present.

Some economicist must have modeled all this and drawn all the supply/demand curves, and the equations which show how certain curves shift in response to taxes or stimulus or investment in any of the various areas.

The short answer is at the bottom of the letter — a 10:1 return on investment would have been a massive win for any development agency.

Maybe there is a way to model the breakeven point accounting for all the various future cash flows. Maybe we can make a list of all the similar projects and their expected ROI and rank them, e.g. as a dollars per job created number, or a ratio of tax dollars forgiven versus tax dollars collected.

But very subjectively a good deal is one that leaves the community better off in the long run. There’s no way to know this a priori, but all the evidence points to this deal being a truly massive loss for this community.

Amazon can do things for a locale that no amount of simple tax revenue can do. Because they can profitably employs tens of thousands of people. It’s actually the most important function of a city, to enable profitable sustainable jobs for its residents. It’s not, in fact, simply all about the Benjamins.

Here is how the 27B was calculated: https://www.democratandchronicle.com/story/news/politics/alb...

Even if you believe all those numbers, that is $60 a year per New York resident in revenue. New York City itself has 4M jobs: https://www.labor.ny.gov/stats/nyc/

Amazon would have been a small part of that. So whether HQ2 should located in NYC and whether the residents around it would be hurt or helped are all valid questions. This isn’t going to make or break New York City or New York in general by any stretch of the imagination.

NYC tech scene is still booming, Google et al. is still on a hiring spree there.

In this case, yes. $2.5 billion of the $3 billion amazon was getting were credits open to any company.

The letter addresses this, they're "as of right" credits open to all.

The letter says the next biggest company deal with jobs was 1,000 people. So no, there aren’t many other compnies bringing 25k jobs. Especially ones with average incomes of $150,000.

What's wrong with giving Amazon billion dollar for building an office? Just to put it in perspective, lets say they would create 30000 jobs with average pay of $80000/year. That is $2.4 billion in just salaries over single year. According to random tax calculator I found online it is about 0.7 billions in taxes every year. This is crazy ROI. If I could put money which would have 70% safe yearly return that would be insanely awesome investment.

foxconn made very similar promises in wisconsin. that worked out really poorly indeed.

GE made similar promises in boston. that’s worked out really poorly indeed.

And amazon's incentives were tied to the number of jobs and how much they paid.

so were GE’s.

So how did Boston get fleeced? (genuinely curious, not overly familiar with the GE situation.)

kind of a slow moving crap fest. They’re going to repay some tax breaks, at least in theory, but we’ve dropped 160mil into renovations for a site that probably will never happen.

https://www.universalhub.com/2019/ge-give-back-87-million-ta... , https://www.universalhub.com/ge has a long running chronology.

Amazon would have to first hire those people. And the NYC labor market is already pretty efficient and saturated. It would basically push a lot of IT and related job wages up, for not much direct benefit - other than dumping a big cashflow on the city. (Which pushes up real estate and other prices.)

I'm not saying having HQ2 there would have no positive effects, it'd have absolutely contributed to the growth of the tech scene. But it'd have probably accelerated the arrival of other problems, which is something the city might not be ready to tackle.

> Most of these "deals" were put together secretly without input from the public. Millions (or in NY's case, billion+) of dollars were packaged and presented without community input or oversight

The letter specifically addresses this. That $3B was effectively a loan with massive ROI.

I think, based purely on the separation of concerns, it'd be good if states wouldn't finance loans to companies.

It's problematic, because it's hard for states to provide equal treatment (ever firm should be equal in the eyes of the law), states shouldn't be in the business of analyzing business plans and taking on risk.

That said, NY would have probably benefited from HQ2, though it's not that there's a lack of upward forces on the salaries of those jobs there, not to mention real estate.

"loan" is here a figure-of-speech, not an actual loan. It was a $3b tax incentive, where amazon would still be paying $27b in taxes over the same period.

Interesting. None of your concerns have anything to do with New York. Each would apply anywhere Amazon would choose to build.

Yes, that’s largely the point. I don’t think Amazon (or any company like amazon) should receive massive tax credits for jobs it needs to create anyway.

> Does the taxpayer in Buffalo New York benefit if their tax money goes to fund some HQ in Queens, if the bulk of the state's tax capture is just "handed" right back to Amazon?

You have to be exceptionally uninformed to believe that taxpayer money from Buffalo was being used to lure Amazon.

In reality, Amazon was getting a $3bn discount on their tax bill, which would have still come out to $27bn over the same period. The majority of this $27bn would go to the state. Given that western New York gets more in state funding than it pays in taxes, this would have been net positive for Buffalo [1].

Second, Amazon would have brought 25k high paying jobs to LIC, at an average pay of $150k/year. In addition, there would have been thousands of secondary jobs in construction, restaurants, building management, and so on. All that state tax money is now going to Virginia and Tennessee.

[1] https://www.politifact.com/new-york/statements/2016/oct/14/c...

edit: go Sabres!

This reads a bit like "we could've used that 3 billion to pay for teachers". This logic is flawed because the 3b is created by Amazon in the first place.

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