Amazon’s “second headquarters” may be no such thing(economist.com)
economist.com
Amazon’s “second headquarters” may be no such thing
https://www.economist.com/business/2018/11/08/amazons-second-headquarters-may-be-no-such-thing
96 comments
As long as sports stadiums also fall into that umbrella. They're just a variant of the same concept. I say this as someone who loves watching sports, so no bias from that end.
I dont really get this, are stadiums not paid for by the teams that play there? For example in the UK football teams own/build/run their own stadiums. Are NFL teams subsidised by the state or something?
There is a great blog that covers these stadium deals...
http://www.fieldofschemes.com
http://www.fieldofschemes.com
This video goes in detail about the Stadiums racket, and provide examples and numbers. https://youtu.be/xcwJt4bcnXs
{cough cough} West Ham {cough cough}
Taxpayers pay for the stadiums. The team threatens to leave the city if they don't.
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
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
NFL is a non-profit organization because it doesn't make any money for its owners. Profits are distributed to the member teams that are for-profit and taxed. There is nothing weird about that.
For the record; some of those taxpayers are from tourism taxes (hotel); so in a way, the fans of the sport are paying for the stadium still.
In the US, stadiums are often funded by the taxpayers of the city/county. City governments (although often not the populace) are frequently obsessed with having pro sports teams. It's common to plow hundreds of millions of dollars to build a stadium to either get a new team or convince an existing team to not relocate.
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.
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.
If I was a legislator in a major metropolitan area and a team threatened to leave, I would call bullshit on it. There’s a finite amount of major metro areas in the US (and an even a smaller subset if you remove all the ones that currently have sports teams), so there’s a limit to what’s economically viable if the potential attendance/sales revenue is coming from a dedicated local fanbase. For example, if the NY Jets ever threatened to become the Santa Fe Jets if taxpayers didn’t front a new stadium bill, I would go ahead and let them.
That's not a great strategy, assuming you actually want to keep the team, because relocations aren't exactly rare.
https://en.wikipedia.org/wiki/Relocation_of_professional_spo...
https://en.wikipedia.org/wiki/Relocation_of_professional_spo...
Ask Seattle how they like having their NBA team...
Cities in the US are a bit smarter now. Atlanta refused to pay for the Braves' new stadium. There was a big rush of stadium-building in the 90s as mayors tried to outdo each other.
[deleted]
Sounds a lot like the Olympics and occasionally the World Cup.
The costs of an NFL stadium are usually split between the city (tax payers), the NFL, and the owner. For instance AT&T arena for the dallas Cowboys was supposed to cost $650 million and the city Arlington provided $325, NFL provided $150 loan, and Jerry Jones (the Cowboys) paid the rest. It is speculated that the total cost was $1.3 billion which was mostly footed by Jerry Jones.
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.
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.
These tax breaks really anger me, especially because the actual benefits typically fail to offset the lost tax revenue. And of course you have this race to the bottom as you said.
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.
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.
> Look how that turned out for us.
It seems like y'all are doing pretty well. Can you elaborate?
It seems like y'all are doing pretty well. Can you elaborate?
Because of the tech industry. Boeing has move many, many thousands of high paying jobs elsewhere in recent years, despite the tax breaks. Thus, the tax breaks were colossal wastes of money.
But then they'll just move out of the country. This is a fundamental power imbalance between multinational corporations and governments. Governments are bound by jurisdiction while corporations are not.
If the country in question is the US, the list of alternative countries boils down to Canada. One real consideration that companies have when choosing where to put headquarters is aligning time zones and minimizing travel costs. International competition is a very real deal in Europe, where decamping from, say, France to Germany is unlikely to change all that much, but it is a lot more painful trying to move headquarters from the US to Germany.
Which is why silicon valley is a ghost town? It's not that easy for companies to move to unconventional locations.
It's a natural protection method against government as leviathan. By forcing a country to consist of competing decentralized tax zones, there is a pressure that prevents long run sclerotic tax increases that grow over time and eat away at the industry of a nation.
This comment ignores the problem that parent identified:
>> 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.
>> 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.
This is just Amazon looking for welfare. This is not new. Cabela's was doing it for many years. Asking for tax breaks because they bring "jobs and prosperity" to the town. It turned out to be a plain lie. NFL teams are doing it to many cities. Making few hundred millions in profit while offloading stadium to tax payers. Sears, cboe and cme among other did it to Illinois for millions of dollars in tax breaks.
Pure and simple corporate greed.
Pure and simple corporate greed.
Sounds like bait and switch to me -- quite literally.
"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.
"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.
Got bad news for you. There are a lot of states out there, (ie - all the other ones), that would give a whole lot more, for even a fraction of the jobs NoVA and NYC are getting.
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.
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.
You guys are definitely getting screwed on the Foxconn deal. Congratulations on getting rid of your idiot governor, though.
It's not about paying for value, it's about who is better at bribing politicians.
Share the wealth! There are other benefits to planting two QuarterHQs in places that aren't Virginia or NY:
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.
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.
But none of what you just outlined has any effect on Amazon's bottom line, or on NoVA and NYC's tax base. The job of Amazon is to increase their bottom line. The job of the governments of the NoVA and NYC areas are to increase their tax bases. None of those entities have "draw some of the groupthink apart" or "bring new blood into areas that need new blood" as part of their job descriptions.
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.
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.
The job of Amazon, or any corporation, is not to just "increase their bottom line" nor is the job of governments to "increase their tax bases". Both classes of entity are allowed to exist by communities of human beings in order to make our lives better than they would be otherwise. We're smart enough to know that we don't have all the answers, so we allow people to create different structures under different rules and with different incentives. But the root reason corporation (and governments) are allowed to exist is the public good. A corporation that exists only for itself is just a weak attempt at a gray goo scenario.
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.
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.
> Got bad news for you.
...
> 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
...
> 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
Not looking for a debate at all. (There's not really one to be had.)
>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.
>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.
> The job of the governments of the NoVA and NYC areas are to increase their tax bases.
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.
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.
Auguries for NYC are not good: NY governor Andrew Cuomo joked at a public event that he'd change his name to "Amazon Cuomo" to get HQ2 -- the same day that the WSJ reported the city was only in line for half of it. And more recent reports are saying that he's planning to bypass city zoning authority, which is sure to go down great with everyone was already there...
Really did say a lot about the state of government subsidizing big business that mayors and governors were falling over themselves to offer tax rebates to one of the richest companies on earth.
It says something about the incentive structures affecting politicians. I'd be willing to pay crazy high money for a shiny bauble that I'd get to brag about to all my friends and coworkers, too, if I didn't have to use my own money to pay for it.
The country of Ireland has done much the same on a grand scale, much to their own benefit.
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.
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.
And, thankfully, EU has regulations against such schemes. We can have international treaties and organisations to prevent cases of tradegy of commons.
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...
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...
They did not force them to raise their tax rate though, so it is still highly beneficial to Apple to be in Ireland compared to, say, France.
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.
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.
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.
While their rates are low, the issue was about additional, individual deals that lead to effective tax rates around .5% (instead of the official 12.5%, I believe).
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.
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.
Sure. But are these subsidies still needed? In any case, my proposal was more along the lines of an approach to unilaterally prevent companies from benefiting from off-shoring tax schemes, under the assumption you want to do that. The thing I want holes poked in is the scheme itself, since I'm taking as given that some people want to institute a scheme with this goal.
> Speaking something almost resembling the english language,
Dude... not cool.
Dude... not cool.
Why should the EU care? It seems like these rules exist in order to effectively subsidize more expensive governments. If France did what Ireland did, France would collapse under its own weight, so the EU uses these rules to protect less competitive member countries. So the EU pushes things like minimum tax rates rather than alternatively pushing maximum tax rates. If an EU country proposed a 50% corporate tax, the EU would be ok with that, but if a member proposed a 2% taxe, the EU would lose their mind.
I could see this being more effective for a country than it is for municipalities within a country, simply because it's more difficult for them to leave once they're established.
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.
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.
> if these businesses bring about a net benefit to where they are located it can't be all bad?
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...
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...
How on earth is possible to use more than 20M litres of water a day for a manufacturing plant? O_o
It's ironic to me that the desire is to bring in "jobs", when Amazon has a huge negative impact on local retail jobs.
Retail jobs lost to online shopping are gone regardless of a city hosting an ecommerce company or not. The economy is constantly shifting, it make sense to adapt to it.
Maybe, but Amazon is uniquely large impact, and makes no sense to cut tax deals, etc for them either.
These are orthogonal concerns.
> 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.
> 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.
The competition of the free market leaves little room for morality or justice. The tragedy of the commons strikes again: "if we dont, the other city will get all the benefit and none of the loss" and we are apparently too averse to regulations in the US to actually cooperate in our best interest.
[deleted]
Companies are important to cities, and that means they get privileges. Maybe that’s not fair, but a company with a few thousand employees will pay for quite a few things through income taxes.
All those employees will also bolster the community with purchases and what not.
All those employees will also bolster the community with purchases and what not.
What about existing companies? What about the plethora of small businesses in them? Do they get incentives? After all, they are the majority of the workforce. It’s absurd that large businesses get to use our resources and pay less than small companies, as though our markets weren’t distorted enough.
Small companies also aren't shipping 25,000 people in from all around the country or world to displace your family and friends by raising rent and living costs hundreds of percent. The incentives are given so that already rich individuals get even more rich; so already rich property owners get to drown in profits while the poor and lower middle classes struggle and are segregated out of their cities.
Incentives for small local community buisnesses that care about your community should be a higher priority for all Americans.
Incentives for small local community buisnesses that care about your community should be a higher priority for all Americans.
If there is one aspect of populism I agree with, it's this. Existing small businesses get nowhere near the level of policy protection and corporate welfare multinationals do.
Totally agree. Existing businesses get screwed over to get some shiny big company in. I think part of the problem is media coverage: You don't hear much about 1000 companies with 10 people each but there is a lot of news in a facility with 10000 people and a famous company name. Although I'd argue that the 1000 small companies are much better for for the area.
It's simply competition. When there are multiple sellers, the price drops. Unless state engage in collective bargaining and revenue sharing in some sort of federation, there's no avoiding it.
I honestly can't tell if this is sarcasm or irony.
Government leaders doing whatever it takes to bring jobs and prosperity to their constituents is a good idea.
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.
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.
It’s not a good idea, as it results in a race to the bottom as seen in this and countless other situations. No one has the ability to price in all the effects of a company moving in or not moving in, not to mention the opportunity of corruption that is opened up.
Price obfuscation is bad for the payer (taxpayers in this case). The goal should be to be as clear and transparent as possible.
Price obfuscation is bad for the payer (taxpayers in this case). The goal should be to be as clear and transparent as possible.
> If my city got a second headquarters for Amazon, I would have been ecstatic.
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.
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.
Why do you think it would cost taxpayers extra money to lure Amazon to their city? Corporations and high-income skilled workers pay far more in taxes than they cost the city in public services. If someone pays $20k in local taxes and uses $5k worth of public services, you can give them a 50% tax break to lure them to the city and still make $5k off them.
> 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.
> 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.
Announcing the list of finalists was in poor taste.
Amazon could have at least let unchosen smaller cities believe they were seriously considered.
Amazon could have at least let unchosen smaller cities believe they were seriously considered.
I assume the point was to get people (property owners, other constituents) in those cities put on pressure to the local government to land to deal even with more favorable terns for Amazon
Why? Anoucing early who's out prevents those contenders to spend more money and waste further time with the bid.
They could be notified privately. After all, all details of the negotiations had been private up until that point.
Indeed.
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."
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."
Amazon putting two towns competing against each other in the amount of incentives they'll offer? Reason pretty much nailed it already:
https://www.youtube.com/watch?v=H_eG7leM6ew
https://www.youtube.com/watch?v=H_eG7leM6ew
None of this is really new. Back when factories actually meant big money, entire countries competed to get this or that manufacturer’s plant - every time the plant would have been “the most advanced “, “key to the future of the company” etc etc. Then, a few years after the plant was built and subsidies were collected, they would close the plant and start the carousel again. RyanAir did it with regional airports for a bit. Every supermarket does it with their suppliers.
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.
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.
Politicians aren't quite as stupid as you (and, apparently, everyone else, believes).
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.
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.
"...American fetishisation of market-based mechanisms"
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.
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.
I'm pretty sure politicians know what they are doing and know what it really means. They do it because of the huge publicity impact helps them get reelected. The incentives are misplaced for them to make decisions good for the people. It's our fault as voters for being swayed by these gimmicks.
Costa Rica used to have an Intel fab that accounted for something like 20% of their national exports.
What a brilliantly capitalistic move. Amazon pretends to have a huge, one-locale supply of high-paying jobs and the promising ecosystem of economic activity around that center, and the demand is huge from cities. What if they grow into the next SV or Seattle from this?
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.
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.
As a european the American view of "market" is always fascinating. Most tax breaks and subsidies amazon will get would be totally illegal under EU laws https://en.wikipedia.org/wiki/State_aid_(European_Union)
because they distort the market.
I’d agree with you if Ireland didn’t exist
Yes, but we have to differentiate between general tax competition available to most companies and company specific offers, these are clearly illegal https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
Yeah, we call those satellite offices.
Foxconn in Wisconsin. Football stadiums everywhere. Car plants. This has been going on forever. Why was anybody surprised?
Ive thought all along the second headquarters was just a bargaining chip. The fact that when the location was leaked that they came up with yet another “headquarters” proves it. They are just using it as leverage. These antics should be shut down!
Maybe it's just a scam and advertisement for Amazon? actually not all cities welcome Amazon, so Amazon if you have not totally lost your mind yet, don't push this kind of stuff too much.
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.
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.
> actually not all cities welcome Amazon
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.
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.
Wisconsin governor Walker lost a sure bet at Governorship because of his giveaway to Foxconn. (it's in the name...)
Scott Galloway on the Recode podcast made a good point that the whole “search” was a scam to get tax breaks. Bezos knew where he wanted the second (and third) HQ as they are both within 7 miles of his different homes. I don’t know the truth in that but I don’t doubt it for a second.
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.
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.
The Economist quoted the Onion! "The Onion got it right"
This should be illegal.
FWIW, you can bypass the Economist's paywall by reloading the page and then quickly stopping the reload. The HTML loads but not the js that implements the paywall.
Hope I don't jinx it!
Hope I don't jinx it!
I find the idea that localities are bidding on corporate offices with tax breaks extremely dystopic.
why dont we just wait, and you know, see what amazon actually does.
Paywall bypass:
https://archive.is/osL0A
https://archive.is/osL0A
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.