11 ms·

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. *

by 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.
  - ryanianian 9y ago
    > Does it really matter to "St. Louisans" which side of this silly, arbitrary border they build their HQ? For those that pay taxes and use things paid for by taxes, it matters. The services on the other side of that silly, arbitrary border is paid for with different funds and gets to make its own decisions about how money is spent or saved. > This system is ridiculous. Yes, but an alternative would be...what? Federally-mandated local-tax rates and policies or something? I like that my city (not on the HQ2 list) can control what it spends its money on and can decide if giving tax breaks to X would lead to suitable growth in Y and make the trade-offs with its tax-base in mind.
    - crdoconnor 9y ago
      >Yes, but an alternative would be A federally mandated blanket prohibition on city tax incentives that companies can use to play cities off against one another. >I like that my city Can participate in this race to the bottom? I don't see the value in making cities compete with one another for jobs with tax breaks. It's simply a mechanism to create subsidies to big business because they are big that drains city budgets.
      - ryanianian 9y ago
        My point: If the city decides the breaks are worth it, then the city has ended up ahead. Your point (I think): It's competing with other cities and taking less tax in doing so. So it may end up _less_ ahead than if there were no competition. Since every city is doing this, it makes sense to keep under-cutting other cities until the net-gain is effectively just larger than zero. Nobody forces the city to participate or offer incentives. This article advocates that they shouldn't. A city should be clever about its incentives and make them align with what the company wants so the outcome isn't so zero-sum. Many cities do this with zoning - only allowing waterfront building permits if the developer also builds parks or whatever. These increase the property-values for the developers while paying for a public-good that everyone can use. Something similar here may be to offer tax credits toward infrastructure near the campus. E.g. don't demand the taxes directly but instead force the company to build new roads. This is more or less an accounting-trick of course, but imho it's a lot less zero-sum and actually forces the company to consider how their incentives (or requirements) will actually benefit them. If you prohibit all tax-incentives, cities are effectively forced to pre-build or promise services to make themselves attractive to companies. This can lead to huge amounts of waste (4-lane roads that could have been 2 for example) and cities defaulting on bonds to build such things when the company ends up choosing another city etc. I don't know if this is much better than requiring clever accounting.
geofft 9y ago
Can a US city legally apply economic sanctions to another US city in another state, or would that be considered as affecting "interstate commerce" and preempted or something?
- pm90 9y ago
  I don't think US cities have that kind of power. Sanctions are considered a diplomatic tool when dealing b/w Sovereign Powers; City Governments can argue their dispute in US courts and get a binding resolution that both need to follow.
- buttcoinslol 9y ago
  Do you really think a city council/mayor has the power to enforce sanctions on another city? Generally, it's nation-states with armies that enforce sanctions, otherwise the target of the sanctions just says "Uh, no."
- danielvf 9y ago
  It's already going on! PROHIBITION ON STATE-FUNDED AND STATE-SPONSORED TRAVEL TO STATES WITH DISCRIMINATORY LAWS (https://oag.ca.gov/ab1887 https://oag.ca.gov/ab1887) In effect, this law means that if any member of California government picks a contractor / supplier / conference in North Carolina, then that person has to pay for any related travel out of their own pocket. The idea is that this will hugely disincentize any one in the California government from doing business with companies located in North Carolina. I guess we'll have to see if there's ever a legal challenge to it.
  - tptacek 9y ago
    The law you posted prohibits the state of California from requiring that any of its own employees travel to a discriminating state, excepting a very broad list of essential purposes. I don't see the contractor thing you're referring to. You also seem to be describing a case where California is a direct market participant (they're paying the contractors). States are allowed to discriminate in favor of their own citizens (or, I guess, anyone else) when they themselves participate in the market.
pm90 9y ago
I (and many of my programmer friends) believe this to be correct; and moreover that city is Austin, Texas. There was basically no need for Austin to be a finalist; I don't think the city was particularly interested in getting them (we're already booming and most folks are already grumbling about increasing property taxes and congestion etc.). They already have a pretty big presence in Austin and are expanding rapidly. I'm 99% sure this was a cheap stunt to get some kind of incentive/subsidy from the City. I'm actually very glad there is little popular support for their proposal. See http://www.statesman.com/news/breaking-news/austin-shortlist-for-amazon-second-headquarters/n1XY7VrIrzdhbihoZRtMIL/ http://www.statesman.com/news/breaking-news/austin-shortlist.... Quote: > Austin officials said in October that no local financial incentives were included in the city's proposal for the Amazon project.
- ericabiz 9y ago
  Agreed; Austin already has the Whole Foods HQ and a huge Apple and Facebook presence. Amazon also has a huge presence just outside Austin in San Marcos. As an Austinite, I was really proud to see the city offered no financial incentives. Seems they've learned from the Domain issues (locals will understand this reference.) I would be happy to have Austin selected as the city for HQ2. On local FB groups I have said I didn't think it would happen due to other cities offering better incentives, and I think that's why Amazon ran this contest. Instead of just saying "Austin", they said "Well, Austin...unless somewhere else gives us an unbeatable deal." :-/
  - simplyluke 9y ago
    Also UT providing a pipeline of top CS talent and a healthy tech scene locally compared to a lot of the other final cities.
  - txsh 9y ago
    In the early days of Whole Foods they built stores with cash and bought land to build shopping centers instead of renting. I believe HQ2 may be the real reason Amazon acquired Whole Foods, because it owned a lot of real estate in Austin.
paulmd 9y ago
> 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. It's not - the Constitution was specifically designed to forbid this kind of inter-state warfare (eg things like taxing out-of-state goods differently) and SCOTUS has consistently upheld this (eg Granholm v. Heald).
- crdoconnor 9y ago
  Except this kind of interstate warfare is exactly what is happening now, with Amazon pitting city against city in an attempt to extract tax breaks.
  - paulmd 9y ago
    Yup, the Constitution does not have a good mechanism for dealing with states racing-to-the-bottom, either in taxes or regulatory climate. This isn't really the kind of thing that you can regulate Federally, either, under the Constitution. The Constitution gets some things right, but it also gets a lot of things wrong. That's why the whole "living document" part is so important.
    - 18pfsmt 9y ago
      The whole idea that the Constitution is a living document is a myth. There is a process by which we can alter the Constitution, but it isn't by reinterpretation. The federal government is meant to be constrained in its powers in order to assure the liberties of the citizens.
      - dragonwriter 9y ago
        > The whole idea that the Constitution is a living document is a myth No, it's not; it's a fundamental inescapable truth of all documents, because meaning is dialogue between the author and the audience, change the audience and the meaning changes.
fjsolwmv 9y ago
>They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue. This is quite how the Constitution of the United States was created by the 13 independent former-colonies of America. The #1 show on Broadway right now covers this.
jnordwick 9y ago
Even if this were 110% true, I'd still rather have money in Amazon's hands. This isn't a football stadium, it is one of the best growth and tech companies in the world. Employees best interest is in a better Amazon with a runway growth and stock price. Many employees might not even live in the same city, and the parents and children will be better off with more a stronger 401k, raise, better firm.
kinkrtyavimoodh 9y ago
Wow. So it's okay for cities to band together and create a so-called oligopoly but everyone is baying for blood if a bunch of companies decide to do the same.
notyourday 9y ago
> 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." Here, in the same real life Amazon responds: "Oh, we decided you are no longer the finalists. That place in Idaho gets it."
- jawns 9y ago
  My entire point is that Amazon has likely already chosen its HQ2 location for unrelated business reasons. But if the finalist cities think that it has not made up its mind yet, and that tax incentives are the primary criterion it is using to make up its mind, then Amazon benefits from them thinking that. It still gets the HQ2 in the city it wants, but on top of that it gets highly competitive tax incentives. It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them.
  - notyourday 9y ago
    > It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them. Oh that's 100% incorrect. Absolutely everything has a price. The only question is how much would Amazon need to get in tax breaks to offset tiny state issue
snarf21 9y ago
I've been beating the same drum from the moment I heard the announcement. I also think the city is Boston and always was (don't live there) and not Austin and definitely not Atlanta.
eanzenberg 9y ago
I agree, as an AMZN shareholder, it's quite ridiculous for this kind of "woo'ing" to occur related to states' economies and income.
CapitalistCartr 9y ago
This seems like Mary-Sue got in a fight with Bubba, so she goes down the their favorite pub, starts dancing with any handy guy, knowing Bubba will be along chasing her shortly. It looks like Amazon is flirting with a few other cities to make her beau a bit jealous. And its about as seemly.
simonebrunozzi 9y ago
> 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. Wrong! Amazon paying or not paying taxes would have a small impact on the rest of the city. They are better off saving these billions. Of course, I consider Amazon's approach borderline illegal. It should be banned, period. For Amazon, and for any other company in the US.
astro_robot 9y ago
A pact like that would only benefit the city with most incentives that are not tax related. Giving businesses tax incentives is a great way for smaller cities to get their foot in the door. Also, tax incentives is a common tactic by cities and countries to get businesses to move locations.

by jawns 9y ago

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.
- ryanianian 9y ago
  > Does it really matter to "St. Louisans" which side of this silly, arbitrary border they build their HQ? For those that pay taxes and use things paid for by taxes, it matters. The services on the other side of that silly, arbitrary border is paid for with different funds and gets to make its own decisions about how money is spent or saved. > This system is ridiculous. Yes, but an alternative would be...what? Federally-mandated local-tax rates and policies or something? I like that my city (not on the HQ2 list) can control what it spends its money on and can decide if giving tax breaks to X would lead to suitable growth in Y and make the trade-offs with its tax-base in mind.
  - crdoconnor 9y ago
    >Yes, but an alternative would be A federally mandated blanket prohibition on city tax incentives that companies can use to play cities off against one another. >I like that my city Can participate in this race to the bottom? I don't see the value in making cities compete with one another for jobs with tax breaks. It's simply a mechanism to create subsidies to big business because they are big that drains city budgets.
    - ryanianian 9y ago
      My point: If the city decides the breaks are worth it, then the city has ended up ahead. Your point (I think): It's competing with other cities and taking less tax in doing so. So it may end up _less_ ahead than if there were no competition. Since every city is doing this, it makes sense to keep under-cutting other cities until the net-gain is effectively just larger than zero. Nobody forces the city to participate or offer incentives. This article advocates that they shouldn't. A city should be clever about its incentives and make them align with what the company wants so the outcome isn't so zero-sum. Many cities do this with zoning - only allowing waterfront building permits if the developer also builds parks or whatever. These increase the property-values for the developers while paying for a public-good that everyone can use. Something similar here may be to offer tax credits toward infrastructure near the campus. E.g. don't demand the taxes directly but instead force the company to build new roads. This is more or less an accounting-trick of course, but imho it's a lot less zero-sum and actually forces the company to consider how their incentives (or requirements) will actually benefit them. If you prohibit all tax-incentives, cities are effectively forced to pre-build or promise services to make themselves attractive to companies. This can lead to huge amounts of waste (4-lane roads that could have been 2 for example) and cities defaulting on bonds to build such things when the company ends up choosing another city etc. I don't know if this is much better than requiring clever accounting.

geofft 9y ago

Can a US city legally apply economic sanctions to another US city in another state, or would that be considered as affecting "interstate commerce" and preempted or something?

pm90 9y ago
I don't think US cities have that kind of power. Sanctions are considered a diplomatic tool when dealing b/w Sovereign Powers; City Governments can argue their dispute in US courts and get a binding resolution that both need to follow.
buttcoinslol 9y ago
Do you really think a city council/mayor has the power to enforce sanctions on another city? Generally, it's nation-states with armies that enforce sanctions, otherwise the target of the sanctions just says "Uh, no."
danielvf 9y ago
It's already going on! PROHIBITION ON STATE-FUNDED AND STATE-SPONSORED TRAVEL TO STATES WITH DISCRIMINATORY LAWS (https://oag.ca.gov/ab1887 https://oag.ca.gov/ab1887) In effect, this law means that if any member of California government picks a contractor / supplier / conference in North Carolina, then that person has to pay for any related travel out of their own pocket. The idea is that this will hugely disincentize any one in the California government from doing business with companies located in North Carolina. I guess we'll have to see if there's ever a legal challenge to it.
- tptacek 9y ago
  The law you posted prohibits the state of California from requiring that any of its own employees travel to a discriminating state, excepting a very broad list of essential purposes. I don't see the contractor thing you're referring to. You also seem to be describing a case where California is a direct market participant (they're paying the contractors). States are allowed to discriminate in favor of their own citizens (or, I guess, anyone else) when they themselves participate in the market.

pm90 9y ago

I (and many of my programmer friends) believe this to be correct; and moreover that city is Austin, Texas. There was basically no need for Austin to be a finalist; I don't think the city was particularly interested in getting them (we're already booming and most folks are already grumbling about increasing property taxes and congestion etc.). They already have a pretty big presence in Austin and are expanding rapidly. I'm 99% sure this was a cheap stunt to get some kind of incentive/subsidy from the City. I'm actually very glad there is little popular support for their proposal. See http://www.statesman.com/news/breaking-news/austin-shortlist-for-amazon-second-headquarters/n1XY7VrIrzdhbihoZRtMIL/ http://www.statesman.com/news/breaking-news/austin-shortlist.... Quote: > Austin officials said in October that no local financial incentives were included in the city's proposal for the Amazon project.

ericabiz 9y ago
Agreed; Austin already has the Whole Foods HQ and a huge Apple and Facebook presence. Amazon also has a huge presence just outside Austin in San Marcos. As an Austinite, I was really proud to see the city offered no financial incentives. Seems they've learned from the Domain issues (locals will understand this reference.) I would be happy to have Austin selected as the city for HQ2. On local FB groups I have said I didn't think it would happen due to other cities offering better incentives, and I think that's why Amazon ran this contest. Instead of just saying "Austin", they said "Well, Austin...unless somewhere else gives us an unbeatable deal." :-/
- simplyluke 9y ago
  Also UT providing a pipeline of top CS talent and a healthy tech scene locally compared to a lot of the other final cities.
- txsh 9y ago
  In the early days of Whole Foods they built stores with cash and bought land to build shopping centers instead of renting. I believe HQ2 may be the real reason Amazon acquired Whole Foods, because it owned a lot of real estate in Austin.

paulmd 9y ago

> 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. It's not - the Constitution was specifically designed to forbid this kind of inter-state warfare (eg things like taxing out-of-state goods differently) and SCOTUS has consistently upheld this (eg Granholm v. Heald).

crdoconnor 9y ago
Except this kind of interstate warfare is exactly what is happening now, with Amazon pitting city against city in an attempt to extract tax breaks.
- paulmd 9y ago
  Yup, the Constitution does not have a good mechanism for dealing with states racing-to-the-bottom, either in taxes or regulatory climate. This isn't really the kind of thing that you can regulate Federally, either, under the Constitution. The Constitution gets some things right, but it also gets a lot of things wrong. That's why the whole "living document" part is so important.
  - 18pfsmt 9y ago
    The whole idea that the Constitution is a living document is a myth. There is a process by which we can alter the Constitution, but it isn't by reinterpretation. The federal government is meant to be constrained in its powers in order to assure the liberties of the citizens.
    - dragonwriter 9y ago
      > The whole idea that the Constitution is a living document is a myth No, it's not; it's a fundamental inescapable truth of all documents, because meaning is dialogue between the author and the audience, change the audience and the meaning changes.

fjsolwmv 9y ago

>They would then team up to teach Amazon a lesson, and hilarious hijinks would ensue. This is quite how the Constitution of the United States was created by the 13 independent former-colonies of America. The #1 show on Broadway right now covers this.

jnordwick 9y ago

Even if this were 110% true, I'd still rather have money in Amazon's hands. This isn't a football stadium, it is one of the best growth and tech companies in the world. Employees best interest is in a better Amazon with a runway growth and stock price. Many employees might not even live in the same city, and the parents and children will be better off with more a stronger 401k, raise, better firm.

kinkrtyavimoodh 9y ago

Wow. So it's okay for cities to band together and create a so-called oligopoly but everyone is baying for blood if a bunch of companies decide to do the same.

notyourday 9y ago

> 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." Here, in the same real life Amazon responds: "Oh, we decided you are no longer the finalists. That place in Idaho gets it."

jawns 9y ago
My entire point is that Amazon has likely already chosen its HQ2 location for unrelated business reasons. But if the finalist cities think that it has not made up its mind yet, and that tax incentives are the primary criterion it is using to make up its mind, then Amazon benefits from them thinking that. It still gets the HQ2 in the city it wants, but on top of that it gets highly competitive tax incentives. It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them.
- notyourday 9y ago
  > It's not going to chose that place in Idaho (or in my tiny state of Delaware, which also made a proposal) just to spite them. Oh that's 100% incorrect. Absolutely everything has a price. The only question is how much would Amazon need to get in tax breaks to offset tiny state issue

snarf21 9y ago

I've been beating the same drum from the moment I heard the announcement. I also think the city is Boston and always was (don't live there) and not Austin and definitely not Atlanta.

eanzenberg 9y ago

I agree, as an AMZN shareholder, it's quite ridiculous for this kind of "woo'ing" to occur related to states' economies and income.

CapitalistCartr 9y ago

This seems like Mary-Sue got in a fight with Bubba, so she goes down the their favorite pub, starts dancing with any handy guy, knowing Bubba will be along chasing her shortly. It looks like Amazon is flirting with a few other cities to make her beau a bit jealous. And its about as seemly.

simonebrunozzi 9y ago

> 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. Wrong! Amazon paying or not paying taxes would have a small impact on the rest of the city. They are better off saving these billions. Of course, I consider Amazon's approach borderline illegal. It should be banned, period. For Amazon, and for any other company in the US.

astro_robot 9y ago

A pact like that would only benefit the city with most incentives that are not tax related. Giving businesses tax incentives is a great way for smaller cities to get their foot in the door. Also, tax incentives is a common tactic by cities and countries to get businesses to move locations.