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Amazon HQ2 finalists should refuse tax breaks, say nearly 100 economists

235 points by champagnepapi 9y ago

thibautg 9y ago
That’s a real Prisoner’s dilemma. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma
grecy 9y ago
Like I said in the other thread, it's sad this is even legal. Here in Africa when Authorities allow obscenely rich people/companies to get away without paying their legally-mandated share of taxes it's called "bribery". Apparently in America it's just "business". Citizens should be protesting in the streets about this. Their educated, healthcare and infrastructure sucks because of it.
- throwaway1254 9y ago
  Are you sure you know what you are talking about?
  - grecy 9y ago
    The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff. As a result, things that are tax-payer funded in the USA are lacking compared to other OECD countries. It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal. I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying.
    - ams6110 9y ago
      All the Amazon employees pay taxes, as you note. Taxing Amazon itself on top of that just leaves it with less resources to pay employees. And why should a city reap an extra tax windfall when an Amazon decides to locate there? Amazon isn't really going to add much burden to city services.
      - s73ver_ 9y ago
        So it’s ok that Amazon just passes their tax burden onto their employees?
    - jack6e 9y ago
      > I'm not allowed to not pay my taxes But you ARE allowed and entirely free to move to cities with lower tax rates, or states with no income tax at all, or any other location that provides you a better balance of income to tax costs. Amazon is an entity with the same rights to make decisions about re-locating to the locality with the most advantageous income/cost ratio.
      - grecy 9y ago
        > But you ARE allowed and entirely free to move to cities with lower tax rates Absolutely. But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses. Oh, but if I just get rich enough.... they I won't have to pay taxes the same as the common-folk.
        maxxxxx 9y ago
        That's what's bothering me too. Give the same conditions to all businesses not just a favored one.
        pzh 9y ago
        > But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses. That’s only because your tax contribution is very small and you don’t have leverage. If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people.
        jasode 9y ago
        >If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people. That's exactly right. E.g. Michigan has designated NEZ zones[1] offering tax breaks (e.g. sometimes half the tax rate) to attract potential homeowners to distressed neighborhoods like inner city Detroit. Sure, residents in another wealthy city (like Bloomfield Hills) in Michigan might complain they don't get the same tax subsidies as downtown Detroit but it still doesn't change the fact that governments will offer tax incentives for certain people (not just companies) to justify a desired economic outcome. Detroit has to make those tax concessions because residents are fleeing and the city suffers from a lower tax base. The more desirable cities like San Francisco don't have to make the same tax concessions. (I make no comment on whether NEZ actually works as intended or whether it is a net positive economically.) http://www.detroitnews.com/story/opinion/2016/06/22/detroit-tax-breaking-point/86268916/ http://www.detroitnews.com/story/opinion/2016/06/22/detroit-...
    - lolsal 9y ago
      > It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal. Amazon will absolutely be helping pay for things that they get a benefit from. I think you're misunderstanding the exchange that is happening. To oversimplify, it's basically this: City: We'll give you tax breaks, decent infrastructure, low property prices and a good pool of local technical talent Amazon: We'll give you tech jobs, lots of tax revenue from the business, lots of tax revenue from our employees and raised property values. > I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying. Not paying your taxes and receiving tax breaks are completely different. Do you take deductions on your taxes? Even the standard deduction? Those are tax breaks.
    - mbell 9y ago
      > The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff. Not that there aren't issues with our tax system but this is completely inaccurate[1]. It can certainly be argued that the top end of earners should pay more, but they already do carry the overwhelming majority of the income tax burden. [1] https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
    - deleted 9y ago
      [deleted]
- codingdave 9y ago
  I agree, but protesting in the streets is not the right response. If we do that, businesses can just smile at us as they go about their business anyway. A better answer is to get involved in public government - instead of protesting, the residents of those cities should be packing their city council meetings and planning meetings, making their voices heard directly with the people who are putting these packages together for Amazon.
  - frgtpsswrdlame 9y ago
    It's not like those politicians are going to listen to the people in their city council meetings either. Local politicians careers are going to get made off of whether they get the deal not to count the money at stake. I've been slowly coming to the conclusion that all our methods of peaceful protest are basically no longer working, the people in power have effectively cut us off from influencing them without (1) a big chunk of money or (2) committing a crime (ie you must register protests in advance, you can't march anywhere unexpected, say, a politicians house, etc.)
    - codingdave 9y ago
      Maybe it depends on your town. Last time I saw my council taking a step I didn't like, I started knocking on doors around town, letting everyone to know to come to the meeting. Hundreds of people showed up, and the council changed the plans to match the will of the people.
  - grecy 9y ago
    It seems to work pretty well in places like for example France. Have you seen what happens when a politician tries to take away a single sick day or reduce their already-world-leading maternity leave? .. millions march in the streets for days and you can bet your bottom dollar come election time the responsible politician is swiftly voted out. Those people care about what is happening in their country and how it impacts them. They know it's more important than football and cheap beer. Americans have forgotten how to participate in Democracy.
    - 9y ago
- muninn_ 9y ago
  One one hand I agree. On the other hand, how is a state like Indiana supposed to attract a company like Amazon?
- djrogers 9y ago
  That’s a really simplistic and overly cynical view of what’s happening here. It’s also completely incorrect - bribes are paid to people, there are no mayors or city councils getting payoffs here... Imagine you run a city where you tax businesses 1% of foo. For every dollar of foo tax you collect form a business, you actually collect another $0.50 in related taxes from company employees - buying lunch, staying in your hotels, etc. Let’s call that your bar tax. A new company wants to move in that earns 3x as much foo as any other business in your town, but they are also looking at other towns that tax foo at 0.5% or even don’t tax foo at all. You can choose to tell them to go elsewhere, or you can give them an incentive - you’ll cut your foo tax to 0% for 10 years, knowing that you’ll be collecting more bar tax with the company there than you would with them not there. At this point the calculation is simple - will having New Company in your city cost you more than you’ll be getting in bar tax? And if so, might it still be worth it in the long run to take those losses for 10 years until the foo tax kicks back in? If not, don’t do it. The point is, this is not clear cut either way.
  - uiti8484 9y ago
    Yeah it really is simple: Richest man in the world Richest company in the world Plain history of boon doggles coming to town screwing locals All this does is continue to validate corporateocracy Fuck these clowns Where is everyone else’s handout? Here you go, Jeff, let’s boost YOUR wealth very plainly on the backs of others There’s some free market competition huh? Are you rich? You win tax breaks! Hey, why not give fat breaks to new players. Let them fill warehouses of crap to sell online. But no, kiss the rings It’s simple and obvious and this mystifying with prognostications you can’t possibly validate because you’re no visionary with the ability to see the future (and are plainly ignoring the past [sports stadiums, etc]) is nonsense
  - Cthulhu_ 9y ago
    It's a business getting a payoff - worse, it's getting government assistance and Amazon is getting unfair treatment (if they give Amazon a x% tax break, they should give that same tax break to all other businesses currently in that jurisdiction + anyone wanting to start a business there - else they're unfairly giving Amazon an advantage, which is bad for competition)
- Cuuugi 9y ago
  You contradicted yourself there. It is legal, and therefore they are not getting out of their legal mandates. The American tax code is far from perfect, with the scales favoring whoever can afford the best tax attorney. With that said, i think you are grossly oversimplifying the issue. The corporate tax rates (before the recent reforms) were the highest in the developed world. Amazon has every right to negotiate where they move their offices.
- rayiner 9y ago
  Fun fact: the U.S. spends more on education per student than any country but Switzerland, Norway, and Luxembourg. We probably don’t spend more on transit, because most cities here aren’t designed for it, but New York for example spends more per subway rider than London. We also spend more public dollars on healthcare per person than Canada, Sweden, France, etc. Our total government spending per person (excluding defense spending) is higher than Canada’s, despite the fact we provide less services. Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class.
  - afjl 9y ago
    Is the education spending comparing the actual dollar amount or is it adjusted for PPP? Or is it by percent of federal/state/municipal spending?
    - rayiner 9y ago
      It’s PPP adjusted: https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf. See page 207. I was incorrect: it’s Norway, Luxembourg, and Switzerland ahead of the US.
      - afjl 9y ago
        Gotcha. Thanks for the link
  - thesmallestcat 9y ago
    I get the sense that proportionally more US education spending is lost to graft than in those European countries (from the top down to teachers who come in and don't teach).
  - gamblor956 9y ago
    Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class. Blatantly false. Our statutory tax rate may have been one of the highest in the Western World, but the effective tax rates before the Trump tax plan were some of the lowest after deductions and credits are taken into account.
deleted 9y ago
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jawns 9y ago
What could be happening is: * Amazon has already chosen its HQ2 city, for a variety of business-related factors that have nothing to do with tax incentives. * But it would like tax incentives if it can get them. * So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives. If this were a teen movie, the cities would eventually find out that Amazon has been playing them. They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue. Here in real life, it would be great if all of the finalist cities were to band together and say, "We're withdrawing all tax incentives we previously offered. Choose us for us, not for what tax money we're willing to sacrifice." But a HUGE part of such a pact is that the cities need to find a way to punish any city that doesn't join the agreement, such as with economic sanctions. I'm not totally sure whether it would be possible to craft sanctions that might deter defecting from the pact, especially with so much potential upside on the line, but that's sort of what has to happen for the pact to work. One other thing to consider, which is part of the economists' argument, is that having the HQ2 city forgo millions or billions in taxes is ultimately bad for Amazon. HQ2 is going to have employees who will have to live in that city, and it is in their best interests to have well-funded public services.
- dazc 9y ago
  'So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.' Isn't this what already happens with businesses that have the potential to employ a lot of people? In the UK, at present, there are plenty of firms playing this game of 'we're thinking of shifting operations to mainland Europe' just to see what concessions they can get from the Govt.
  - pjc50 9y ago
    > we're thinking of shifting operations to mainland Europe More like "we need to know what the legal regime will be for import/export of goods and services will be in a year's time, so please get your act together before we have to assume the worst".
  - dionidium 9y ago
    This happens at every scale. For example, Centene announced a few years ago that they were moving from St. Louis County into Downtown St. Louis (a separate city), but eventually decided to stay, ultimately receiving a package of tax incentives from their home city just about equal to what St. Louis City was offering. Does it really matter to "St. Louisans" on which side of this silly, arbitrary border they build their HQ? This system is ridiculous.
mi100hael 9y ago
I'll be the one to voice disagreement and say I have no problem with cities offering tax breaks for large development projects like this. The lasting benefit to cities like Columbus, Indy, and Pitt would definitely be far more than even a couple billion in tax breaks. You're talking a fundamental change in direction from being a has-been manufacturing town to a national technology leader. Doubling real-estate values for current residents. Enormous increases in sales/property/income tax revenues. It's an investment with very real returns for these places.
- flipfloppity 9y ago
  Yeah, but the point is that Columbus, Indy, etc. don't stand a chance of actually getting picked. They're just being used as leverage to get Boston/NYC/DC to play ball.
  - eksu 9y ago
    Isn’t that point based on the possibly incorrect assumption Columbus doesn’t have a chance? And if their odds really are slim, wouldn’t the rational choice for Columbus to make be to offer tax breaks? Like, why is the actor that is Columbus concerned at all if they put some sort of pressure on Boston/NYC/DC? (I think HQ2 will be Columbus or Denver).
    - pythonaut_16 9y ago
      I agree. I think Amazon cares a lot more about logistics and future growth than the specific tax incentives being offered. The prevailing claim that Amazon has already chosen and is trying to extract better incentives seems wrong to me. If that was the case Amazon could have approached ~5 cities from the start with a plan for each and put a far stronger competitive pressure on them. I think what this is really about is getting the cities to do the leg work of the research and initial planning process. Amazon wasn't going to put together 200 initial site proposals and 20 more detailed ones. By letting the cities make the proposals Amazon can look at far more potential sites than if they had done the research internally.
JustAnotherPat 9y ago
NY/NYC offering tax breaks to them almost makes me vomit. The ONLY point of trying to get them to open up in NYC is to get more tax money from them. It should be as much as possible. NYC doesn't need another 50k people here and however many barista jobs they will 'indirectly' create. We need better infrastructure and housing first. Last time I checked, we don't even have enough schools planned for all the people we have.
- aggronn 9y ago
  I hope you'll reconsider this position. Its not a zero-sum game. More economic development doesn't come at the expense of infrastructure/public services. Economic development is what funds those things. The economics involved here are well understood. Lack of schools and infrastructure exists because there isn't enough money or political will, and adding economic development doesn't exacerbate that. Its meant to be a solution for the problems you're concerned about.
  - throwaway2048 9y ago
    its not a solution if taxes are getting dodged.
paulus_magnus2 9y ago
There were discussions: is it time to break up google et.al [1], with no clean indication of when someone is "too big". Obviously "too big" is when politicians are compelled to be involved in investment decisions of the company. Call it "too big to fail", "crony capitalism" or "market distorting monopoly power". https://www.nytimes.com/2017/04/22/opinion/sunday/is-it-time-to-break-up-google.html https://www.nytimes.com/2017/04/22/opinion/sunday/is-it-time...
nopinsight 9y ago
Interestingly, Paddy Power currently has Boston at no.1 (2/1) followed by Atlanta (5/1) and Austin (11/2). Most people would probably think that Atlanta and Austin are better suited than Boston or at least neck-and-neck. The total number of talent available from Boston-area universities might make a difference though. http://www.paddypower.com/bet?action=go_event&category=SPECIALS&ev_class_id=45&ev_type_id=22711&ev_id=13023353 http://www.paddypower.com/bet?action=go_event&category=SPECI...
- Apocryphon 9y ago
  I am very skeptical that the people setting those odds are aware of the specifics of American geography or economics, given that they had San Jose on the board before the actual finalists were announced.
CodeSheikh 9y ago
Greedy realtors would want this to happen in their city as it will inflate property values and fill their pockets deep. They certainly can influence city officials (via campaign funds etc.) to throw tax incentives at Amazon which will come from the pockets of tax payers. It would be interesting to have city wide referendum where constituents get to vote on such matters.
- gxs 9y ago
  |Greedy realtors Wouldn't this apply to anyone who wants this in their town? Greedy people who want more money in their paychecks. Greedy cities who want a larger tax base. Greedy local business who want to benefit from consumers with more money. If you dig deep enough, everybody is "greedy." In this case, if a realtor's incentive is aligned with the city and its people, isn't it a good thing they are lobbying for the HQ to be in their city?
amelius 9y ago
A more general question: shouldn't such tax breaks simply be illegal? And another question: aren't such tax breaks already illegal, if you view them as selective (anti-competitive) government subsidies?
- darkstar999 9y ago
  They should be. It would be absurd for a city to give an income tax break to a billionaire for moving in (but I will boost the economy by buying lots of stuff and hiring staff to serve me!). So why is it different for big business?
- afjl 9y ago
  I wouldn't argue that tax breaks should be "illegal", but rather be proportional to the marginal utility that the company brings to the city (job market, investment, spending, etc) and inversely proportional to the marginal cost that the company brings to the city (infrastructure spending, housing, over-burdening of existing city resources).
acd 9y ago
One could argue that tax breaks are anti competitive in according to anti compete laws. If one big company gets lower tax than their competitors that is unfair competition. Here is a ruling against Boeing calling it "Prohibited subsidy" https://www.seattletimes.com/business/boeing-aerospace/in-new-case-wto-expected-to-rule-against-states-tax-breaks-for-777x-plants/ https://www.seattletimes.com/business/boeing-aerospace/in-ne...
cratermoon 9y ago
The New York Times covered in 2012 the negative effects on cities giving tax breaks an incentives to corporations: http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ban...
perseusprime11 9y ago
Is there a list of the 20 finalists for HQ2 cities?
- darkstar999 9y ago
  Yes, you could have found them just as quick by typing that into a search engine!
  - perseusprime11 9y ago
    You are right! I could not find any when they announced but I should have checked again. Here they are others: - Atlanta, GA - Austin, TX - Boston, MA - Chicago, IL - Columbus, OH - Dallas, TX - Denver, CO - Indianapolis, IN - Los Angeles, CA - Miami, FL - Montgomery County, MD - Nashville, TN - Newark, NJ - New York City, NY - Northern Virginia, VA - Philadelphia, PA - Pittsburgh, PA - Raleigh, NC - Toronto, ON - Washington D.C.
perseusprime11 9y ago
I would like to see some numbers in support of their core argument- “incentives do not alter business location decisions as much as is often claimed and are less important than more fundamental location factors." Bentonville, Arkansas is a great counterexample to this notion. Take a look at their economy over years after Walmart set up their headquarters there. From wikipedia: "The Northwest Arkansas economy was historically based upon agriculture and poultry. In recent decades, NWA has seen rapid growth and diversification of its economy based upon the three Fortune 500 companies based there, Walmart, Tyson Foods, and J.B. Hunt, while also seeing a growing University of Arkansas and cultural amenities sector. Although impacted by the Great Recession, NWA's economy fared better than most peer metropolitan areas, the state of Arkansas and the United States overall. Between 2007 and 2013, the region saw unemployment rates significantly below those of peer regions and the national average; while also seeing a 1% net growth of jobs. The NWA gross domestic product grew 7.0% over the aforementioned time period, and bankruptcies, building permits and per capita incomes are returning to pre-Recession rates.[23] The professional, education and health care sectors of the Northwest Arkansas economy have been growing steadily since 2007. Between 2007 and 2013, the region has seen a growth of 8,300 jobs in the region, with 6,100 added in education and health professions and 4,300 jobs added in the leisure and hospitality jobs related to the region's cultural amenities.[23] "
dcosson 9y ago
This article is complete fluff, does anyone have sources of books or studies (or even better blog posts) on the topic of city subsidies? There are a lot of comments on here saying this is illegal, but it's not at all clear to me why this is a bad idea. Here in SF, as I understand it there were a lot of tax subsidies to bring Twitter and other companies here into the city. Now the city is booming, and although that has caused other problems like strain on infrastructure and housing, these are solvable problems. They seem like much better problems to have than a failing economy. (Not to mention, they have much deeper causes as well that should have been addressed regardless, it's just that now it's become quite urgent). As another data point, there was a good Freakonomics podcast recently with the governor of Rhode Island, and she basically claimed that tax incentives to bring companies like GE into the state (in addition to other programs like job training) were responsible for the economic turn-around they've seen. Over the past few years they've gone from having one of the worst unemployment rates to somewhere around average for the country. Rather than knee-jerk oppose this competition, it seems like we should move the conversation to "Okay, you're offering these tax incentives for Amazon. Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it."
- tinymollusk 9y ago
  The cause and effect of tax breaks causing company migration isn't clearly established. Further, you'd need to consider what the city's tax revenues would have looked like without those companies HQ being located there. Finally, (and this, to me is the least interesting argument, but people from SF seem to love it): is the gentrification that ensued universally "good"?
- afjl 9y ago
  > Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it. I like this plan. I imagine forcing them to buy certain amounts of municipal bonds on a semi-regular basis could effectively "force" them to give back to the city.
deleted 9y ago
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jnordwick 9y ago
> Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development. This group of economists just claimed the government can grow better than Amazon. This isn't some random company or a football stadium that produces very little; this is one of the best performing, highest growth companies ever created. I'd give the kitchen sink away to get a FAANG company in my district if I were in charge. This is a group of almost entirely liberal economist who've never seen a tax they didn't like. Claiming the government can grow better than Amazon, and I wonder where is the proof of this?
randyrand 9y ago
what is so bad about governments competing with each other for citizens and corporations? gov competition is a good thing.
OliverJones 9y ago
This kind of stuff has been going on for decades. It's perfectly legit for an elected government to offer incentives to a company thinking of building a plant. But governments get their pockets picked ALL THE TIME. It goes like this: Company: we want to build a new office / factory. Give us an incentive. Elected official: yes yes yes. How about lower taxes? Company: is that your final offer? Elected official: we'll subsidize construction. Company: Deal. Months go by. Gripping and grinning. Official wins re-election for bringing in "jobs." Company builds plant, hires some people... Company: we're moving to Central America. Elected official: but, but, but, you said.... Company: business is business, suckahs. We're outta here. ------------------ A possible answer to the problem. Use a formula that gives companies financial incentives to employ people, and terminates government liability when companies stop employing people. It can be as generous as required. But it depends on actual employment. Company: New plant? Elected official: yes yes yes. We will refund you 80% of the FICA withholding tax you pay for hourly employees at your new location. We'll send you the money within 30 days of you sending us proof you paid that tax, after each payroll. Company: Is that your final offer? Elected offical: How about 95%?
intrasight 9y ago
I'm a big fan of Richard Florida (who spearheaded this), and I'm glad to see many supporting it. But I think that it's more about messaging than having any likelihood of getting cities to behave differently.
se30b 9y ago
Any person or entity that manages to avoid paying taxes ends up doing a good deed. All tax money is wasted on making society worse, and contributes to growth of cancerous institutions that ultimately ONLY harm society.
- CabSauce 9y ago
  Have a source?
- therealdrag0 9y ago
  > "All tax money is wasted on making society worse" lol really? Then go live somewhere that has no functional government, like some undeveloped place in Africa (sorry a good specific example escapes me). There you can live your libertarian dream.
purplezooey 9y ago
It's a great idea. They should refuse them.
monksy 9y ago
This is one of the (many) reasons that I don't want to see them come to chicago.
matt_s 9y ago
The pull is the 50,000 jobs right? If that averages out to $100k/person then that is approx $5B per year going into that local economy (minus Fed income tax but some of that comes back at state level right?). They aren't going to immediately post 50,000 jobs or relocate 50,000 people right? So that $5B/year doesn't happen til they are all there. If any incentives are to be there, it should be based on number of employees they staff up in that area... they don't hit a number, they don't get incentives.
w0m 9y ago
It's can be ~impossible to get proper funding for a new subway for existing users, but if it brings 50k new good jobs also? That subway can get approved much more easily. Chicken/Egg scenario in many cases. Re: specific company tax exemptions - Pittsburgh as an example. Steel left, the city was in a depression. The city then gave a sweet heart deal to UPMC, who then expanded massively and became the states largest private employer. That coupled with good universities (Fore and it's offspring) led to the tech revival the city is currently enjoying. Does Pittsburgh need Amazon? Maybe, maybe not - but it could* be incredibly helpful, time will tell.
cma 9y ago
If only the states could form some kind of "union" where they could avoid this kind of thing.

235 points by champagnepapi 9y ago

That’s a real Prisoner’s dilemma. https://en.wikipedia.org/wiki/Prisoner%27s_dilemma https://en.wikipedia.org/wiki/Prisoner%27s_dilemma

grecy 9y ago

Like I said in the other thread, it's sad this is even legal. Here in Africa when Authorities allow obscenely rich people/companies to get away without paying their legally-mandated share of taxes it's called "bribery". Apparently in America it's just "business". Citizens should be protesting in the streets about this. Their educated, healthcare and infrastructure sucks because of it.

throwaway1254 9y ago
Are you sure you know what you are talking about?
- grecy 9y ago
  The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff. As a result, things that are tax-payer funded in the USA are lacking compared to other OECD countries. It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal. I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying.
  - ams6110 9y ago
    All the Amazon employees pay taxes, as you note. Taxing Amazon itself on top of that just leaves it with less resources to pay employees. And why should a city reap an extra tax windfall when an Amazon decides to locate there? Amazon isn't really going to add much burden to city services.
    - s73ver_ 9y ago
      So it’s ok that Amazon just passes their tax burden onto their employees?
  - jack6e 9y ago
    > I'm not allowed to not pay my taxes But you ARE allowed and entirely free to move to cities with lower tax rates, or states with no income tax at all, or any other location that provides you a better balance of income to tax costs. Amazon is an entity with the same rights to make decisions about re-locating to the locality with the most advantageous income/cost ratio.
    - grecy 9y ago
      > But you ARE allowed and entirely free to move to cities with lower tax rates Absolutely. But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses. Oh, but if I just get rich enough.... they I won't have to pay taxes the same as the common-folk.
      - maxxxxx 9y ago
        That's what's bothering me too. Give the same conditions to all businesses not just a favored one.
      - pzh 9y ago
        > But I can't negotiate with those places to get a special tax rate just for me. There is no "Dan's tax rate" that is different from everyone elses. That’s only because your tax contribution is very small and you don’t have leverage. If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people.
        jasode 9y ago
        >If 60% of the residents of a city leave, you can bet the city will quickly lower or remove taxes to try to attract more people. That's exactly right. E.g. Michigan has designated NEZ zones[1] offering tax breaks (e.g. sometimes half the tax rate) to attract potential homeowners to distressed neighborhoods like inner city Detroit. Sure, residents in another wealthy city (like Bloomfield Hills) in Michigan might complain they don't get the same tax subsidies as downtown Detroit but it still doesn't change the fact that governments will offer tax incentives for certain people (not just companies) to justify a desired economic outcome. Detroit has to make those tax concessions because residents are fleeing and the city suffers from a lower tax base. The more desirable cities like San Francisco don't have to make the same tax concessions. (I make no comment on whether NEZ actually works as intended or whether it is a net positive economically.) http://www.detroitnews.com/story/opinion/2016/06/22/detroit-tax-breaking-point/86268916/ http://www.detroitnews.com/story/opinion/2016/06/22/detroit-...
  - lolsal 9y ago
    > It's madness that a multi-billion dollar company doesn't have to help pay for things they get direct benefit from, and frankly it is supposed to be illegal. Amazon will absolutely be helping pay for things that they get a benefit from. I think you're misunderstanding the exchange that is happening. To oversimplify, it's basically this: City: We'll give you tax breaks, decent infrastructure, low property prices and a good pool of local technical talent Amazon: We'll give you tech jobs, lots of tax revenue from the business, lots of tax revenue from our employees and raised property values. > I'm not allowed to not pay my taxes, and that's a drop in the bucket compared to what Amazon should be paying. Not paying your taxes and receiving tax breaks are completely different. Do you take deductions on your taxes? Even the standard deduction? Those are tax breaks.
  - mbell 9y ago
    > The average citizens of America have to foot the bill for everything funded by taxpayers, while the uber-rich (Amazon in this case) get special exemptions and don't have to pay for that stuff. Not that there aren't issues with our tax system but this is completely inaccurate[1]. It can certainly be argued that the top end of earners should pay more, but they already do carry the overwhelming majority of the income tax burden. [1] https://taxfoundation.org/summary-latest-federal-income-tax-data-2016-update/ https://taxfoundation.org/summary-latest-federal-income-tax-...
  - deleted 9y ago
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codingdave 9y ago
I agree, but protesting in the streets is not the right response. If we do that, businesses can just smile at us as they go about their business anyway. A better answer is to get involved in public government - instead of protesting, the residents of those cities should be packing their city council meetings and planning meetings, making their voices heard directly with the people who are putting these packages together for Amazon.
- frgtpsswrdlame 9y ago
  It's not like those politicians are going to listen to the people in their city council meetings either. Local politicians careers are going to get made off of whether they get the deal not to count the money at stake. I've been slowly coming to the conclusion that all our methods of peaceful protest are basically no longer working, the people in power have effectively cut us off from influencing them without (1) a big chunk of money or (2) committing a crime (ie you must register protests in advance, you can't march anywhere unexpected, say, a politicians house, etc.)
  - codingdave 9y ago
    Maybe it depends on your town. Last time I saw my council taking a step I didn't like, I started knocking on doors around town, letting everyone to know to come to the meeting. Hundreds of people showed up, and the council changed the plans to match the will of the people.
- grecy 9y ago
  It seems to work pretty well in places like for example France. Have you seen what happens when a politician tries to take away a single sick day or reduce their already-world-leading maternity leave? .. millions march in the streets for days and you can bet your bottom dollar come election time the responsible politician is swiftly voted out. Those people care about what is happening in their country and how it impacts them. They know it's more important than football and cheap beer. Americans have forgotten how to participate in Democracy.
  - 9y ago
muninn_ 9y ago
One one hand I agree. On the other hand, how is a state like Indiana supposed to attract a company like Amazon?
djrogers 9y ago
That’s a really simplistic and overly cynical view of what’s happening here. It’s also completely incorrect - bribes are paid to people, there are no mayors or city councils getting payoffs here... Imagine you run a city where you tax businesses 1% of foo. For every dollar of foo tax you collect form a business, you actually collect another $0.50 in related taxes from company employees - buying lunch, staying in your hotels, etc. Let’s call that your bar tax. A new company wants to move in that earns 3x as much foo as any other business in your town, but they are also looking at other towns that tax foo at 0.5% or even don’t tax foo at all. You can choose to tell them to go elsewhere, or you can give them an incentive - you’ll cut your foo tax to 0% for 10 years, knowing that you’ll be collecting more bar tax with the company there than you would with them not there. At this point the calculation is simple - will having New Company in your city cost you more than you’ll be getting in bar tax? And if so, might it still be worth it in the long run to take those losses for 10 years until the foo tax kicks back in? If not, don’t do it. The point is, this is not clear cut either way.
- uiti8484 9y ago
  Yeah it really is simple: Richest man in the world Richest company in the world Plain history of boon doggles coming to town screwing locals All this does is continue to validate corporateocracy Fuck these clowns Where is everyone else’s handout? Here you go, Jeff, let’s boost YOUR wealth very plainly on the backs of others There’s some free market competition huh? Are you rich? You win tax breaks! Hey, why not give fat breaks to new players. Let them fill warehouses of crap to sell online. But no, kiss the rings It’s simple and obvious and this mystifying with prognostications you can’t possibly validate because you’re no visionary with the ability to see the future (and are plainly ignoring the past [sports stadiums, etc]) is nonsense
- Cthulhu_ 9y ago
  It's a business getting a payoff - worse, it's getting government assistance and Amazon is getting unfair treatment (if they give Amazon a x% tax break, they should give that same tax break to all other businesses currently in that jurisdiction + anyone wanting to start a business there - else they're unfairly giving Amazon an advantage, which is bad for competition)
Cuuugi 9y ago
You contradicted yourself there. It is legal, and therefore they are not getting out of their legal mandates. The American tax code is far from perfect, with the scales favoring whoever can afford the best tax attorney. With that said, i think you are grossly oversimplifying the issue. The corporate tax rates (before the recent reforms) were the highest in the developed world. Amazon has every right to negotiate where they move their offices.
rayiner 9y ago
Fun fact: the U.S. spends more on education per student than any country but Switzerland, Norway, and Luxembourg. We probably don’t spend more on transit, because most cities here aren’t designed for it, but New York for example spends more per subway rider than London. We also spend more public dollars on healthcare per person than Canada, Sweden, France, etc. Our total government spending per person (excluding defense spending) is higher than Canada’s, despite the fact we provide less services. Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class.
- afjl 9y ago
  Is the education spending comparing the actual dollar amount or is it adjusted for PPP? Or is it by percent of federal/state/municipal spending?
  - rayiner 9y ago
    It’s PPP adjusted: https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf https://www.oecd.org/edu/EAG2014-Indicator%20B1%20(eng).pdf. See page 207. I was incorrect: it’s Norway, Luxembourg, and Switzerland ahead of the US.
    - afjl 9y ago
      Gotcha. Thanks for the link
- thesmallestcat 9y ago
  I get the sense that proportionally more US education spending is lost to graft than in those European countries (from the top down to teachers who come in and don't teach).
- gamblor956 9y ago
  Additional facts: countries like Canada, France, Germany, etc., tax their corporations less than we do. Our taxes are a lot lower, but mainly because we have much lower taxes for the middle class. Blatantly false. Our statutory tax rate may have been one of the highest in the Western World, but the effective tax rates before the Trump tax plan were some of the lowest after deductions and credits are taken into account.

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jawns 9y ago

What could be happening is: * Amazon has already chosen its HQ2 city, for a variety of business-related factors that have nothing to do with tax incentives. * But it would like tax incentives if it can get them. * So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives. If this were a teen movie, the cities would eventually find out that Amazon has been playing them. They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue. Here in real life, it would be great if all of the finalist cities were to band together and say, "We're withdrawing all tax incentives we previously offered. Choose us for us, not for what tax money we're willing to sacrifice." But a HUGE part of such a pact is that the cities need to find a way to punish any city that doesn't join the agreement, such as with economic sanctions. I'm not totally sure whether it would be possible to craft sanctions that might deter defecting from the pact, especially with so much potential upside on the line, but that's sort of what has to happen for the pact to work. One other thing to consider, which is part of the economists' argument, is that having the HQ2 city forgo millions or billions in taxes is ultimately bad for Amazon. HQ2 is going to have employees who will have to live in that city, and it is in their best interests to have well-funded public services.

dazc 9y ago
'So it acts like it hasn't made up its mind and gets a bunch of potential suitors to woo it with tax incentives.' Isn't this what already happens with businesses that have the potential to employ a lot of people? In the UK, at present, there are plenty of firms playing this game of 'we're thinking of shifting operations to mainland Europe' just to see what concessions they can get from the Govt.
- pjc50 9y ago
  > we're thinking of shifting operations to mainland Europe More like "we need to know what the legal regime will be for import/export of goods and services will be in a year's time, so please get your act together before we have to assume the worst".
- dionidium 9y ago
  This happens at every scale. For example, Centene announced a few years ago that they were moving from St. Louis County into Downtown St. Louis (a separate city), but eventually decided to stay, ultimately receiving a package of tax incentives from their home city just about equal to what St. Louis City was offering. Does it really matter to "St. Louisans" on which side of this silly, arbitrary border they build their HQ? This system is ridiculous.

mi100hael 9y ago

I'll be the one to voice disagreement and say I have no problem with cities offering tax breaks for large development projects like this. The lasting benefit to cities like Columbus, Indy, and Pitt would definitely be far more than even a couple billion in tax breaks. You're talking a fundamental change in direction from being a has-been manufacturing town to a national technology leader. Doubling real-estate values for current residents. Enormous increases in sales/property/income tax revenues. It's an investment with very real returns for these places.

flipfloppity 9y ago
Yeah, but the point is that Columbus, Indy, etc. don't stand a chance of actually getting picked. They're just being used as leverage to get Boston/NYC/DC to play ball.
- eksu 9y ago
  Isn’t that point based on the possibly incorrect assumption Columbus doesn’t have a chance? And if their odds really are slim, wouldn’t the rational choice for Columbus to make be to offer tax breaks? Like, why is the actor that is Columbus concerned at all if they put some sort of pressure on Boston/NYC/DC? (I think HQ2 will be Columbus or Denver).
  - pythonaut_16 9y ago
    I agree. I think Amazon cares a lot more about logistics and future growth than the specific tax incentives being offered. The prevailing claim that Amazon has already chosen and is trying to extract better incentives seems wrong to me. If that was the case Amazon could have approached ~5 cities from the start with a plan for each and put a far stronger competitive pressure on them. I think what this is really about is getting the cities to do the leg work of the research and initial planning process. Amazon wasn't going to put together 200 initial site proposals and 20 more detailed ones. By letting the cities make the proposals Amazon can look at far more potential sites than if they had done the research internally.

JustAnotherPat 9y ago

NY/NYC offering tax breaks to them almost makes me vomit. The ONLY point of trying to get them to open up in NYC is to get more tax money from them. It should be as much as possible. NYC doesn't need another 50k people here and however many barista jobs they will 'indirectly' create. We need better infrastructure and housing first. Last time I checked, we don't even have enough schools planned for all the people we have.

aggronn 9y ago
I hope you'll reconsider this position. Its not a zero-sum game. More economic development doesn't come at the expense of infrastructure/public services. Economic development is what funds those things. The economics involved here are well understood. Lack of schools and infrastructure exists because there isn't enough money or political will, and adding economic development doesn't exacerbate that. Its meant to be a solution for the problems you're concerned about.
- throwaway2048 9y ago
  its not a solution if taxes are getting dodged.

paulus_magnus2 9y ago

There were discussions: is it time to break up google et.al [1], with no clean indication of when someone is "too big". Obviously "too big" is when politicians are compelled to be involved in investment decisions of the company. Call it "too big to fail", "crony capitalism" or "market distorting monopoly power". https://www.nytimes.com/2017/04/22/opinion/sunday/is-it-time-to-break-up-google.html https://www.nytimes.com/2017/04/22/opinion/sunday/is-it-time...

nopinsight 9y ago

Interestingly, Paddy Power currently has Boston at no.1 (2/1) followed by Atlanta (5/1) and Austin (11/2). Most people would probably think that Atlanta and Austin are better suited than Boston or at least neck-and-neck. The total number of talent available from Boston-area universities might make a difference though. http://www.paddypower.com/bet?action=go_event&category=SPECIALS&ev_class_id=45&ev_type_id=22711&ev_id=13023353 http://www.paddypower.com/bet?action=go_event&category=SPECI...

Apocryphon 9y ago
I am very skeptical that the people setting those odds are aware of the specifics of American geography or economics, given that they had San Jose on the board before the actual finalists were announced.

CodeSheikh 9y ago

Greedy realtors would want this to happen in their city as it will inflate property values and fill their pockets deep. They certainly can influence city officials (via campaign funds etc.) to throw tax incentives at Amazon which will come from the pockets of tax payers. It would be interesting to have city wide referendum where constituents get to vote on such matters.

gxs 9y ago
|Greedy realtors Wouldn't this apply to anyone who wants this in their town? Greedy people who want more money in their paychecks. Greedy cities who want a larger tax base. Greedy local business who want to benefit from consumers with more money. If you dig deep enough, everybody is "greedy." In this case, if a realtor's incentive is aligned with the city and its people, isn't it a good thing they are lobbying for the HQ to be in their city?

amelius 9y ago

A more general question: shouldn't such tax breaks simply be illegal? And another question: aren't such tax breaks already illegal, if you view them as selective (anti-competitive) government subsidies?

darkstar999 9y ago
They should be. It would be absurd for a city to give an income tax break to a billionaire for moving in (but I will boost the economy by buying lots of stuff and hiring staff to serve me!). So why is it different for big business?
afjl 9y ago
I wouldn't argue that tax breaks should be "illegal", but rather be proportional to the marginal utility that the company brings to the city (job market, investment, spending, etc) and inversely proportional to the marginal cost that the company brings to the city (infrastructure spending, housing, over-burdening of existing city resources).

acd 9y ago

One could argue that tax breaks are anti competitive in according to anti compete laws. If one big company gets lower tax than their competitors that is unfair competition. Here is a ruling against Boeing calling it "Prohibited subsidy" https://www.seattletimes.com/business/boeing-aerospace/in-new-case-wto-expected-to-rule-against-states-tax-breaks-for-777x-plants/ https://www.seattletimes.com/business/boeing-aerospace/in-ne...

cratermoon 9y ago

The New York Times covered in 2012 the negative effects on cities giving tax breaks an incentives to corporations: http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-bankroll-corporations.html?pagewanted=all http://www.nytimes.com/2012/12/02/us/how-local-taxpayers-ban...

perseusprime11 9y ago

Is there a list of the 20 finalists for HQ2 cities?

darkstar999 9y ago
Yes, you could have found them just as quick by typing that into a search engine!
- perseusprime11 9y ago
  You are right! I could not find any when they announced but I should have checked again. Here they are others: - Atlanta, GA - Austin, TX - Boston, MA - Chicago, IL - Columbus, OH - Dallas, TX - Denver, CO - Indianapolis, IN - Los Angeles, CA - Miami, FL - Montgomery County, MD - Nashville, TN - Newark, NJ - New York City, NY - Northern Virginia, VA - Philadelphia, PA - Pittsburgh, PA - Raleigh, NC - Toronto, ON - Washington D.C.

perseusprime11 9y ago

I would like to see some numbers in support of their core argument- “incentives do not alter business location decisions as much as is often claimed and are less important than more fundamental location factors." Bentonville, Arkansas is a great counterexample to this notion. Take a look at their economy over years after Walmart set up their headquarters there. From wikipedia: "The Northwest Arkansas economy was historically based upon agriculture and poultry. In recent decades, NWA has seen rapid growth and diversification of its economy based upon the three Fortune 500 companies based there, Walmart, Tyson Foods, and J.B. Hunt, while also seeing a growing University of Arkansas and cultural amenities sector. Although impacted by the Great Recession, NWA's economy fared better than most peer metropolitan areas, the state of Arkansas and the United States overall. Between 2007 and 2013, the region saw unemployment rates significantly below those of peer regions and the national average; while also seeing a 1% net growth of jobs. The NWA gross domestic product grew 7.0% over the aforementioned time period, and bankruptcies, building permits and per capita incomes are returning to pre-Recession rates.[23] The professional, education and health care sectors of the Northwest Arkansas economy have been growing steadily since 2007. Between 2007 and 2013, the region has seen a growth of 8,300 jobs in the region, with 6,100 added in education and health professions and 4,300 jobs added in the leisure and hospitality jobs related to the region's cultural amenities.[23] "

dcosson 9y ago

This article is complete fluff, does anyone have sources of books or studies (or even better blog posts) on the topic of city subsidies? There are a lot of comments on here saying this is illegal, but it's not at all clear to me why this is a bad idea. Here in SF, as I understand it there were a lot of tax subsidies to bring Twitter and other companies here into the city. Now the city is booming, and although that has caused other problems like strain on infrastructure and housing, these are solvable problems. They seem like much better problems to have than a failing economy. (Not to mention, they have much deeper causes as well that should have been addressed regardless, it's just that now it's become quite urgent). As another data point, there was a good Freakonomics podcast recently with the governor of Rhode Island, and she basically claimed that tax incentives to bring companies like GE into the state (in addition to other programs like job training) were responsible for the economic turn-around they've seen. Over the past few years they've gone from having one of the worst unemployment rates to somewhere around average for the country. Rather than knee-jerk oppose this competition, it seems like we should move the conversation to "Okay, you're offering these tax incentives for Amazon. Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it."

tinymollusk 9y ago
The cause and effect of tax breaks causing company migration isn't clearly established. Further, you'd need to consider what the city's tax revenues would have looked like without those companies HQ being located there. Finally, (and this, to me is the least interesting argument, but people from SF seem to love it): is the gentrification that ensued universally "good"?
afjl 9y ago
> Now you need to commit to building enough housing to meet their projected job growth at HQ2 over the next decade, as well as a public transportation plan to keep up with it. I like this plan. I imagine forcing them to buy certain amounts of municipal bonds on a semi-regular basis could effectively "force" them to give back to the city.

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jnordwick 9y ago

> Worse, they divert funds that could be put to better use underwriting public services such as schools, housing programs, job training, and transportation, which are more effective ways to spur economic development. This group of economists just claimed the government can grow better than Amazon. This isn't some random company or a football stadium that produces very little; this is one of the best performing, highest growth companies ever created. I'd give the kitchen sink away to get a FAANG company in my district if I were in charge. This is a group of almost entirely liberal economist who've never seen a tax they didn't like. Claiming the government can grow better than Amazon, and I wonder where is the proof of this?

randyrand 9y ago

what is so bad about governments competing with each other for citizens and corporations? gov competition is a good thing.

OliverJones 9y ago

This kind of stuff has been going on for decades. It's perfectly legit for an elected government to offer incentives to a company thinking of building a plant. But governments get their pockets picked ALL THE TIME. It goes like this: Company: we want to build a new office / factory. Give us an incentive. Elected official: yes yes yes. How about lower taxes? Company: is that your final offer? Elected official: we'll subsidize construction. Company: Deal. Months go by. Gripping and grinning. Official wins re-election for bringing in "jobs." Company builds plant, hires some people... Company: we're moving to Central America. Elected official: but, but, but, you said.... Company: business is business, suckahs. We're outta here. ------------------ A possible answer to the problem. Use a formula that gives companies financial incentives to employ people, and terminates government liability when companies stop employing people. It can be as generous as required. But it depends on actual employment. Company: New plant? Elected official: yes yes yes. We will refund you 80% of the FICA withholding tax you pay for hourly employees at your new location. We'll send you the money within 30 days of you sending us proof you paid that tax, after each payroll. Company: Is that your final offer? Elected offical: How about 95%?

intrasight 9y ago

I'm a big fan of Richard Florida (who spearheaded this), and I'm glad to see many supporting it. But I think that it's more about messaging than having any likelihood of getting cities to behave differently.

se30b 9y ago

Any person or entity that manages to avoid paying taxes ends up doing a good deed. All tax money is wasted on making society worse, and contributes to growth of cancerous institutions that ultimately ONLY harm society.

CabSauce 9y ago
Have a source?
therealdrag0 9y ago
> "All tax money is wasted on making society worse" lol really? Then go live somewhere that has no functional government, like some undeveloped place in Africa (sorry a good specific example escapes me). There you can live your libertarian dream.

purplezooey 9y ago

It's a great idea. They should refuse them.

monksy 9y ago

This is one of the (many) reasons that I don't want to see them come to chicago.

matt_s 9y ago

The pull is the 50,000 jobs right? If that averages out to $100k/person then that is approx $5B per year going into that local economy (minus Fed income tax but some of that comes back at state level right?). They aren't going to immediately post 50,000 jobs or relocate 50,000 people right? So that $5B/year doesn't happen til they are all there. If any incentives are to be there, it should be based on number of employees they staff up in that area... they don't hit a number, they don't get incentives.

w0m 9y ago

It's can be ~impossible to get proper funding for a new subway for existing users, but if it brings 50k new good jobs also? That subway can get approved much more easily. Chicken/Egg scenario in many cases. Re: specific company tax exemptions - Pittsburgh as an example. Steel left, the city was in a depression. The city then gave a sweet heart deal to UPMC, who then expanded massively and became the states largest private employer. That coupled with good universities (Fore and it's offspring) led to the tech revival the city is currently enjoying. Does Pittsburgh need Amazon? Maybe, maybe not - but it could* be incredibly helpful, time will tell.

cma 9y ago

If only the states could form some kind of "union" where they could avoid this kind of thing.