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What's missing from most articles (this one included) is any kind of analysis of whether tax breaks make sense for the states in question. It bothers me how it'

What's missing from most articles (this one included) is any kind of analysis of whether tax breaks make sense for the states in question. It bothers me how it's presented as the state giving $5B of its own cash away to Amazon, as if that money could go to the homeless instead. Presumably there are ways to estimate the economic effects of 50,000 jobs + tax breaks. Is there a reason they're not mentioned?

at-fates-hands 9y ago
I had the same reaction. If the HQ is going to employ thousands of workers when its built, and will require a massive construction operation to build, you're looking at a fairly large windfall for the state. Is it $5B worth? The article doesn't delve into the details.
- kfriede 9y ago
  Not to mention, the $5B tax break isn't money lost, it's merely an opportunity cost. If HQ2 wasn't moving to this city/state, they'd still be out that money.
  - eropple 9y ago
    It isn't "merely an opportunity cost." Putting up with Amazon's HQ2 will significantly increase local infrastructural load and therefore costs. It is explicitly reducing their revenue while increasing expenses and there's no reason to assume--it's possible but the assumption is dangerous--that there will be sufficient compensatory side-effect revenues to be worth the transaction.
- toomuchtodo 9y ago
  I would caution against broad statements that the state will receive a windfall of tax revenue. This is the same argument used to locate sports stadiums, paid for by the public, with the gains going to private owners (and local taxpayers left holding the bag). Will tax revenues increase? Surely. Will infrastructure and housing be strained? Undoubtedly (Not everyone wants their local community turned into Seattle). Will there be a windfall? No one has proven that. Amazon hasn't made the case its presence is a net benefit to the city it selects, and cities are arguably pragmatic for turning them away.
ethagknight 9y ago
Correct, that piece is missing from the article. And the answer to that question is that a tax break is effectively a form of financing, so why not let Amazon (or other major corporations) be on the hook for the note? Even when that financing is paid by future tax revenues, every tax payer in the region will sign up involuntarily for a little piece of that debt. For smaller projects, this incentive mechanism makes sense. However, HQ2 will create an enormous "supply chain pull" on every aspect of government, and those costs are impossible to accurately assess. Ignore any economists projections, those are worth less than the paper they are printed on when it comes to guaranteeing billions in public debt. Here is a fun question:, are these grass roots anti-amazon campaigns being boosted/funded by the few remaining cities in the running as a means to sabotage the other cities bids, from the inside?? The campaign leaders may not even know the real answer to that. Thats what I would do if I were Chicago!
- pitaj 9y ago
  No, it's not financing. It's not a giveaway. It's a rebate.
  - ethagknight 9y ago
    many cities are offering all kinds of grants and tax credits, so there is even a bit of a giveaway component. It is a form of financing for the benefit of Amazon, and the forgone taxes will be paid by everyone else in the jurisdiction to cover costs incurred by the city on Amazon’s behalf.
- yourapostasy 9y ago
  > However, HQ2 will create an enormous "supply chain pull" on every aspect of government, and those costs are impossible to accurately assess. Rather than trying to account for the supply chain pull as you noted, I wish cities and states would standardize upon an open source formatting and presentation of the data in their accounting systems. Many competing analyses of costs to various jurisdictions can then arise from private citizens and organizations, and then we can pit them against each other historically to converge upon a small set of models that are consistently predictive. We can even then gather insightful analyses from weaving together accounting and GIS datasets, for example, that weren't possible before without creating entire new bureaucracies. With more accurate cost management accounting models, we can then more reliably challenge organizations petitioning for specific tax concessions: we can reasonably accurately model the influx of X thousand employees to have $Y impact upon the cost accounting structure over Z years. NPV of that cost is $N. If spread out over F forecasted years of the concession you are proposing, at equivalent long-term bond rate of your corporation of P% at your longest-projected credit quality, then that comes to $T total cost to the jurisdiction over the time period. Then the per-employee per-$10,000 wage-adjusted cost burden to the jurisdiction on a per-unit basis becomes a calculated, known amount. Tilt the unit measure towards favoring lots of employees at moderate wages instead of a few employees at extremely high wages to incentivize high monetary velocity in the local economy, lest the extremely high wages of a few employees get translated away into capital gains-structured instruments. Compare that to existing employment data, and you know if the jurisdiction is over-paying or not for the concessions. And now the jurisdictions have a metric against which to demand a surety bond: with any future adjustments to wage and/or employee count, if it falls below a certain threshhold, the jurisdiction can collect upon a proportional amount in the surety bond for non-performance. Benefits dollars don't count, because the jurisdiction is only interested in the localized monetary velocity impact upon the localized economy that comes from wages.
RobAley 9y ago
The protesters point (as stated in the article) is that Amazon is going to pick the city that best meets their (physical, if you will) needs regardless of tax breaks. So for the winning city : without tax breaks you'll still win, but will also keep the extra tax revenue Amazon will generate (which you'll need because of the oversized burden they create).
- RightMillennial 9y ago
  But surly Amazon won't decide the city based solely on just their physical needs. Say city A is technically the best, but offers no tax breaks. City B is just slightly behind city A, but offers attractive tax breaks. Wouldn't that cause Amazon to seriously consider city B?
  - simonsarris 9y ago
    Just how attractive? 5B? For a company that does 177.87B in sales each year? I think they would pick the structurally best city regardless. They just also want gravy from it first.
garrettdc 9y ago
Because it doesn't fit the narrative that amazon is evil / rich people are evil / gentrification / government kick backs. I would seriously doubt that any city would be offering this if they didn't believe that it would be net positive for their area. Between increases in property values (thereby increased taxes), number of high-income earners, and new spending from these people, they are likely to benefit from this arrangement in the longer term. Amazon asking for competition between the various cities isn't hunger games because pillage Atlanta to increase their odds of being picked. It isn't this zero-sum game that these people want to make it out to be.
- maxsilver 9y ago
  > I would seriously doubt that any city would be offering this if they didn't believe that it would be net positive for their area. I would. What's good for a "city" is not necessarily good for the residents of that city. These are two totally different entities with their own wants and needs, that are not guaranteed to act in the others best interest. In fact, occasionally the incentives are so misaligned as to be polar opposites. For example : > Between increases in property values (thereby increased taxes) Increased property value is never just a "good" thing. It's an explicit tradeoff. More expensive property is "good" for the municipality government (their incomes rise), but generally bad for most actual humans (their expenses directly increase as a result of this, doubly so if they aren't wealthy enough to already own property). > number of high-income earners, and new spending from these people, Again, this is not a good thing, it's an explicit tradeoff. This is good for high-income earners (who can use each other to push their own careers forward), but is explicitly bad for everyone other resident, who can't. If a bunch of "high earners" enter your market, and you yourself are not a high earner, your income remains mostly flat, but literally every cost you have has gone up significantly. (Housing, Transportation, Education, Medical, Daycare, etc). You are now competing against high-income people for almost everything, but with little-to-none of the money they have. You will loose, every time.
  - pitaj 9y ago
    If it's not beneficial for the residents of the city, then you can blame government once again. Good job government, working against your citizens' best interest.
Slansitartop 9y ago
> Presumably there are ways to estimate the economic effects of 50,000 jobs + tax breaks. Is there a reason they're not mentioned? That assumes the promised benefits will actually materialize. I don't have any cites handy, but my understanding is that they usually don't. The company gets money from unsophisticated local leaders based on big promises, and the state or city is left holding the bag if those don't materialize. Here's an example of another, similar deal that further along: https://www.realclearmarkets.com/articles/2017/12/26/wisconsin__foxconn_the_most_expensive_taxpayer-funded_jobs_program_in_history_103076.html https://www.realclearmarkets.com/articles/2017/12/26/wiscons... > The state legislative bureau estimated it would take 25 years – until 2043 – until the Wisconsin government received enough in additional tax revenues to match the initial $3 billion investment. At $4 billion-plus, the break-even point will recede even further into the future. > The Foxconn giveaway already adds up to a lot of money – close to $1800 per Wisconsin household, even in parts of the state that won’t benefit directly from the plant. > How many jobs will the deal actually create? The notion of 13,000 jobs is actually a goal, not a guarantee. The legislative bureau acknowledged that some estimates place the probable payroll as low as 3,000. The agency tasked with holding Foxconn accountable has a history of failing to verify job-creation claims and rewarding companies that fall short of quotas, according to state audits. How long will the jobs actually last? Foxconn has launched an extensive commitment to automation and robotics, eliminating tens of thousands of jobs in China with the introduction of specially-designed “Foxbots” – with the stated goal of eliminating almost their entire global workforce.
- ukulele 9y ago
  My original comment doesn't assume anything for or against -- I think your analysis of "it doesn't usually pan out" with associated data would be perfectly reasonable to include in an article like this. I'm fine with arguments for or against HQ2; I was commenting more on the sheer amount of hand waving in these articles.
roymurdock 9y ago
Point of the article/most news is to trigger NIMBYism or some provoke some fear/anger reaction, not provide an objective analysis. You need to pay for most objective and informed analysis
nic0lette 9y ago
How about this: Taxes, Incentives, and Economic Growth: Assessing the Impact of Pro-business Taxes on U.S. State Economies Soledad Artiz Prillaman and Kenneth J. Meier The Journal of Politics 2014 76:2, 364-379 > The empirical effect of business tax policy on economic development clearly diverges from economic theory. In a majority of cases, the impact of business taxation is negligible at best. Controlling for other factors, business-targeted tax cuts either have no effect or result in economic decline. The full paper is available via Sci-Hub's latest incarnation.
gottebp 9y ago
The primary injustice is that the rules don't apply equally to all businesses. Small businesses are more fragile, yet will never get special tax deals. Like any sport, the rules should apply equally to all players. Anything less is corruption, even if it has short term economic benefits.
jellicle 9y ago
> as if that money could go to the homeless instead. Why couldn't it?
tdb7893 9y ago
The article is more focused on the opposition to the plans instead of a whole cost benefit analysis of the project. It's a short article and it can't be everything. Also it's not like the opposition to it is unreasonable, it probably will benefit the community but it would've been a lot better if Amazon didn't get the tax bonuses and since they were going to build the second HQ somewhere anyway. You have municipalities paying 5b$ for Amazon to do something it was going to do anyway so while the individual location is better off the system as a whole just lost 5b$ in taxes. This really plays into the current trend where Americans feel like these corporations really have outsized power in the US politically and use it to get what they want (e.g. taxes, laws, favorible labor contracts) and as average citizens we have little recourse to do anything about it.

at-fates-hands 9y ago

I had the same reaction. If the HQ is going to employ thousands of workers when its built, and will require a massive construction operation to build, you're looking at a fairly large windfall for the state. Is it $5B worth? The article doesn't delve into the details.

kfriede 9y ago
Not to mention, the $5B tax break isn't money lost, it's merely an opportunity cost. If HQ2 wasn't moving to this city/state, they'd still be out that money.
- eropple 9y ago
  It isn't "merely an opportunity cost." Putting up with Amazon's HQ2 will significantly increase local infrastructural load and therefore costs. It is explicitly reducing their revenue while increasing expenses and there's no reason to assume--it's possible but the assumption is dangerous--that there will be sufficient compensatory side-effect revenues to be worth the transaction.
toomuchtodo 9y ago
I would caution against broad statements that the state will receive a windfall of tax revenue. This is the same argument used to locate sports stadiums, paid for by the public, with the gains going to private owners (and local taxpayers left holding the bag). Will tax revenues increase? Surely. Will infrastructure and housing be strained? Undoubtedly (Not everyone wants their local community turned into Seattle). Will there be a windfall? No one has proven that. Amazon hasn't made the case its presence is a net benefit to the city it selects, and cities are arguably pragmatic for turning them away.

ethagknight 9y ago

Correct, that piece is missing from the article. And the answer to that question is that a tax break is effectively a form of financing, so why not let Amazon (or other major corporations) be on the hook for the note? Even when that financing is paid by future tax revenues, every tax payer in the region will sign up involuntarily for a little piece of that debt. For smaller projects, this incentive mechanism makes sense. However, HQ2 will create an enormous "supply chain pull" on every aspect of government, and those costs are impossible to accurately assess. Ignore any economists projections, those are worth less than the paper they are printed on when it comes to guaranteeing billions in public debt. Here is a fun question:, are these grass roots anti-amazon campaigns being boosted/funded by the few remaining cities in the running as a means to sabotage the other cities bids, from the inside?? The campaign leaders may not even know the real answer to that. Thats what I would do if I were Chicago!

pitaj 9y ago
No, it's not financing. It's not a giveaway. It's a rebate.
- ethagknight 9y ago
  many cities are offering all kinds of grants and tax credits, so there is even a bit of a giveaway component. It is a form of financing for the benefit of Amazon, and the forgone taxes will be paid by everyone else in the jurisdiction to cover costs incurred by the city on Amazon’s behalf.
yourapostasy 9y ago
> However, HQ2 will create an enormous "supply chain pull" on every aspect of government, and those costs are impossible to accurately assess. Rather than trying to account for the supply chain pull as you noted, I wish cities and states would standardize upon an open source formatting and presentation of the data in their accounting systems. Many competing analyses of costs to various jurisdictions can then arise from private citizens and organizations, and then we can pit them against each other historically to converge upon a small set of models that are consistently predictive. We can even then gather insightful analyses from weaving together accounting and GIS datasets, for example, that weren't possible before without creating entire new bureaucracies. With more accurate cost management accounting models, we can then more reliably challenge organizations petitioning for specific tax concessions: we can reasonably accurately model the influx of X thousand employees to have $Y impact upon the cost accounting structure over Z years. NPV of that cost is $N. If spread out over F forecasted years of the concession you are proposing, at equivalent long-term bond rate of your corporation of P% at your longest-projected credit quality, then that comes to $T total cost to the jurisdiction over the time period. Then the per-employee per-$10,000 wage-adjusted cost burden to the jurisdiction on a per-unit basis becomes a calculated, known amount. Tilt the unit measure towards favoring lots of employees at moderate wages instead of a few employees at extremely high wages to incentivize high monetary velocity in the local economy, lest the extremely high wages of a few employees get translated away into capital gains-structured instruments. Compare that to existing employment data, and you know if the jurisdiction is over-paying or not for the concessions. And now the jurisdictions have a metric against which to demand a surety bond: with any future adjustments to wage and/or employee count, if it falls below a certain threshhold, the jurisdiction can collect upon a proportional amount in the surety bond for non-performance. Benefits dollars don't count, because the jurisdiction is only interested in the localized monetary velocity impact upon the localized economy that comes from wages.

RobAley 9y ago

The protesters point (as stated in the article) is that Amazon is going to pick the city that best meets their (physical, if you will) needs regardless of tax breaks. So for the winning city : without tax breaks you'll still win, but will also keep the extra tax revenue Amazon will generate (which you'll need because of the oversized burden they create).

RightMillennial 9y ago
But surly Amazon won't decide the city based solely on just their physical needs. Say city A is technically the best, but offers no tax breaks. City B is just slightly behind city A, but offers attractive tax breaks. Wouldn't that cause Amazon to seriously consider city B?
- simonsarris 9y ago
  Just how attractive? 5B? For a company that does 177.87B in sales each year? I think they would pick the structurally best city regardless. They just also want gravy from it first.

garrettdc 9y ago

Because it doesn't fit the narrative that amazon is evil / rich people are evil / gentrification / government kick backs. I would seriously doubt that any city would be offering this if they didn't believe that it would be net positive for their area. Between increases in property values (thereby increased taxes), number of high-income earners, and new spending from these people, they are likely to benefit from this arrangement in the longer term. Amazon asking for competition between the various cities isn't hunger games because pillage Atlanta to increase their odds of being picked. It isn't this zero-sum game that these people want to make it out to be.

maxsilver 9y ago
> I would seriously doubt that any city would be offering this if they didn't believe that it would be net positive for their area. I would. What's good for a "city" is not necessarily good for the residents of that city. These are two totally different entities with their own wants and needs, that are not guaranteed to act in the others best interest. In fact, occasionally the incentives are so misaligned as to be polar opposites. For example : > Between increases in property values (thereby increased taxes) Increased property value is never just a "good" thing. It's an explicit tradeoff. More expensive property is "good" for the municipality government (their incomes rise), but generally bad for most actual humans (their expenses directly increase as a result of this, doubly so if they aren't wealthy enough to already own property). > number of high-income earners, and new spending from these people, Again, this is not a good thing, it's an explicit tradeoff. This is good for high-income earners (who can use each other to push their own careers forward), but is explicitly bad for everyone other resident, who can't. If a bunch of "high earners" enter your market, and you yourself are not a high earner, your income remains mostly flat, but literally every cost you have has gone up significantly. (Housing, Transportation, Education, Medical, Daycare, etc). You are now competing against high-income people for almost everything, but with little-to-none of the money they have. You will loose, every time.
- pitaj 9y ago
  If it's not beneficial for the residents of the city, then you can blame government once again. Good job government, working against your citizens' best interest.

Slansitartop 9y ago

> Presumably there are ways to estimate the economic effects of 50,000 jobs + tax breaks. Is there a reason they're not mentioned? That assumes the promised benefits will actually materialize. I don't have any cites handy, but my understanding is that they usually don't. The company gets money from unsophisticated local leaders based on big promises, and the state or city is left holding the bag if those don't materialize. Here's an example of another, similar deal that further along: https://www.realclearmarkets.com/articles/2017/12/26/wisconsin__foxconn_the_most_expensive_taxpayer-funded_jobs_program_in_history_103076.html https://www.realclearmarkets.com/articles/2017/12/26/wiscons... > The state legislative bureau estimated it would take 25 years – until 2043 – until the Wisconsin government received enough in additional tax revenues to match the initial $3 billion investment. At $4 billion-plus, the break-even point will recede even further into the future. > The Foxconn giveaway already adds up to a lot of money – close to $1800 per Wisconsin household, even in parts of the state that won’t benefit directly from the plant. > How many jobs will the deal actually create? The notion of 13,000 jobs is actually a goal, not a guarantee. The legislative bureau acknowledged that some estimates place the probable payroll as low as 3,000. The agency tasked with holding Foxconn accountable has a history of failing to verify job-creation claims and rewarding companies that fall short of quotas, according to state audits. How long will the jobs actually last? Foxconn has launched an extensive commitment to automation and robotics, eliminating tens of thousands of jobs in China with the introduction of specially-designed “Foxbots” – with the stated goal of eliminating almost their entire global workforce.

ukulele 9y ago
My original comment doesn't assume anything for or against -- I think your analysis of "it doesn't usually pan out" with associated data would be perfectly reasonable to include in an article like this. I'm fine with arguments for or against HQ2; I was commenting more on the sheer amount of hand waving in these articles.

roymurdock 9y ago

Point of the article/most news is to trigger NIMBYism or some provoke some fear/anger reaction, not provide an objective analysis. You need to pay for most objective and informed analysis

nic0lette 9y ago

How about this: Taxes, Incentives, and Economic Growth: Assessing the Impact of Pro-business Taxes on U.S. State Economies Soledad Artiz Prillaman and Kenneth J. Meier The Journal of Politics 2014 76:2, 364-379 > The empirical effect of business tax policy on economic development clearly diverges from economic theory. In a majority of cases, the impact of business taxation is negligible at best. Controlling for other factors, business-targeted tax cuts either have no effect or result in economic decline. The full paper is available via Sci-Hub's latest incarnation.

gottebp 9y ago

The primary injustice is that the rules don't apply equally to all businesses. Small businesses are more fragile, yet will never get special tax deals. Like any sport, the rules should apply equally to all players. Anything less is corruption, even if it has short term economic benefits.

jellicle 9y ago

> as if that money could go to the homeless instead. Why couldn't it?

tdb7893 9y ago

The article is more focused on the opposition to the plans instead of a whole cost benefit analysis of the project. It's a short article and it can't be everything. Also it's not like the opposition to it is unreasonable, it probably will benefit the community but it would've been a lot better if Amazon didn't get the tax bonuses and since they were going to build the second HQ somewhere anyway. You have municipalities paying 5b$ for Amazon to do something it was going to do anyway so while the individual location is better off the system as a whole just lost 5b$ in taxes. This really plays into the current trend where Americans feel like these corporations really have outsized power in the US politically and use it to get what they want (e.g. taxes, laws, favorible labor contracts) and as average citizens we have little recourse to do anything about it.