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Amazon’s “second headquarters” may be no such thing
- chrisco255 8y agoYeah, we call those satellite offices.
- jazzyjackson 8y agoReally did say a lot about the state of government subsidizing big business that mayors and governors were falling over themselves to offer tax rebates to one of the richest companies on earth.
- bunderbunder 8y agoIt says something about the incentive structures affecting politicians. I'd be willing to pay crazy high money for a shiny bauble that I'd get to brag about to all my friends and coworkers, too, if I didn't have to use my own money to pay for it.
- fjsolwmv 8y agoIt's simply competition. When there are multiple sellers, the price drops. Unless state engage in collective bargaining and revenue sharing in some sort of federation, there's no avoiding it.
- StevePerkins 8y agoI honestly can't tell if this is sarcasm or irony.
- gedy 8y agoIt's ironic to me that the desire is to bring in "jobs", when Amazon has a huge negative impact on local retail jobs.
- deleted 8y ago[deleted]
- dorfsmay 8y agoRetail jobs lost to online shopping are gone regardless of a city hosting an ecommerce company or not. The economy is constantly shifting, it make sense to adapt to it.
- gedy 8y agoMaybe, but Amazon is uniquely large impact, and makes no sense to cut tax deals, etc for them either.
- dorfsmay 8y agoThese are orthogonal concerns. > Amazon is uniquely large impact Amazon's impact happens regardless of them offering jobs in your city. If you want to address their impact on local business then you the city should work out a local tax on good delivered to the city. Preventing Amazon to bring jobs in a city has zero impact on lost retail jobs! > makes no sense to cut tax deals A city should offer incentive for potential new employers, promise to augment public transport, accelerate the red tape to build their building (maybe the city hires more people temporarily to deal with that extra work?), possibly cut tax for the first few years in exchange of some written commitment. But I agree with you that it has to be financially sound long term, a tax break for ever that ends up being subsidized by the tax payer makes no sense except for somebody looking for re-election.
- kazagistar 8y agoThe competition of the free market leaves little room for morality or justice. The tragedy of the commons strikes again: "if we dont, the other city will get all the benefit and none of the loss" and we are apparently too averse to regulations in the US to actually cooperate in our best interest.
- assblaster 8y agoGovernment leaders doing whatever it takes to bring jobs and prosperity to their constituents is a good idea. Seeking favors and special treatment under false pretenses is bad. Amazon is in the wrong, clearly, since they actively misled others. If my city got a second headquarters for Amazon, I would have been ecstatic.
- ethbro 8y agoAnnouncing the list of finalists was in poor taste. Amazon could have at least let unchosen smaller cities believe they were seriously considered.
- esrauch 8y agoI assume the point was to get people (property owners, other constituents) in those cities put on pressure to the local government to land to deal even with more favorable terns for Amazon
- dorfsmay 8y agoWhy? Anoucing early who's out prevents those contenders to spend more money and waste further time with the bid.
- untog 8y agoThey could be notified privately. After all, all details of the negotiations had been private up until that point.
- ethbro 8y agoIndeed. The announcement and the mundanity of the finalist cities was pretty shitty to all the smaller towns Amazon insinuated could be in the running. I live in on the finalist cities, but I also have good friends in a nearby regional hub who made a good faith effort. It would have been one thing to tell them "We didn't select you." It's something different to say "We're still considering cities, but definitely not yours."
- eksemplar 8y agoCompanies are important to cities, and that means they get privileges. Maybe that’s not fair, but a company with a few thousand employees will pay for quite a few things through income taxes. All those employees will also bolster the community with purchases and what not.
- ashelmire 8y agoWhat about existing companies? What about the plethora of small businesses in them? Do they get incentives? After all, they are the majority of the workforce. It’s absurd that large businesses get to use our resources and pay less than small companies, as though our markets weren’t distorted enough.
- maxxxxx 8y agoTotally agree. Existing businesses get screwed over to get some shiny big company in. I think part of the problem is media coverage: You don't hear much about 1000 companies with 10 people each but there is a lot of news in a facility with 10000 people and a famous company name. Although I'd argue that the 1000 small companies are much better for for the area.
- prolikewh0a 8y agoSmall companies also aren't shipping 25,000 people in from all around the country or world to displace your family and friends by raising rent and living costs hundreds of percent. The incentives are given so that already rich individuals get even more rich; so already rich property owners get to drown in profits while the poor and lower middle classes struggle and are segregated out of their cities. Incentives for small local community buisnesses that care about your community should be a higher priority for all Americans.
- aswanson 8y agoIf there is one aspect of populism I agree with, it's this. Existing small businesses get nowhere near the level of policy protection and corporate welfare multinationals do.
- dazc 8y agoThe country of Ireland has done much the same on a grand scale, much to their own benefit. I agree it does seem crazy but if these businesses bring about a net benefit to where they are located it can't be all bad? I'm not familiar with the US tax system but in the UK, and much of Europe, the system is lagging behind the real world of business by a measure of decades.
- pekko 8y agoAnd, thankfully, EU has regulations against such schemes. We can have international treaties and organisations to prevent cases of tradegy of commons. For example, EU forces Ireland to collect taxes from Apple, because it deemed such rebates to be illegal state aid. See https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...
- asdfasgasdgasdg 8y agoThey did not force them to raise their tax rate though, so it is still highly beneficial to Apple to be in Ireland compared to, say, France. What member countries really should do is similar to the revenue tax that was recently proposed. But not exactly, because that's a pretty blunt tool. Instead, the calculation should go something like this. # Exclude payments to/from subsidiaries. global_revenue = all external revenue global_expenses = all external non-tax costs global_profit = global_revenue - global_expenses global_tax = this_country_tax_rate * global_profit country_tax = this_country_revenue / global_revenue * global_tax The goal being to remove the benefit of tax avoiding schemes like Ireland. It doesn't matter how you move the money around, you'll pay taxes to this country based on how much money you make here. Require the company to estimate and pay this tax quarterly, and provide reasonable fines for underpayment. Granted the first two lines might be difficult to compute, so you would only do this for companies big enough to be worth going through the trouble for. Disclaimer: not a tax policy expert. Would love to be corrected. Please poke holes.
- matt4077 8y ago
- cityzen 8y agoScott Galloway on the Recode podcast made a good point that the whole “search” was a scam to get tax breaks. Bezos knew where he wanted the second (and third) HQ as they are both within 7 miles of his different homes. I don’t know the truth in that but I don’t doubt it for a second. Here we are. All the little startups have grown up and are now the entitled little snowflakes we treated them like through their infancy on to corporate welfare adulthood.
- nautilus12 8y agoIve thought all along the second headquarters was just a bargaining chip. The fact that when the location was leaked that they came up with yet another “headquarters” proves it. They are just using it as leverage. These antics should be shut down!
- ausjke 8y agoMaybe it's just a scam and advertisement for Amazon? actually not all cities welcome Amazon, so Amazon if you have not totally lost your mind yet, don't push this kind of stuff too much. While Amazon made a lot of correct decisions and is now a giant, without the benefit of 'internet tax', it simply could not grow this fast, to some extent the taxpayers carried it over the past two decades. Maybe it's time for it to consider paying back something instead of being intrusive like this stupid 2nd HQ propaganda.
- asdfasgasdgasdg 8y ago> actually not all cities welcome Amazon Based on the hilariously large stack of cities willing to bid on their presence, I'm guessing it'll be a while before that effect (to the extent it even exist) is a constraint.
- toyg 8y agoNone of this is really new. Back when factories actually meant big money, entire countries competed to get this or that manufacturer’s plant - every time the plant would have been “the most advanced “, “key to the future of the company” etc etc. Then, a few years after the plant was built and subsidies were collected, they would close the plant and start the carousel again. RyanAir did it with regional airports for a bit. Every supermarket does it with their suppliers. It’s sad that politicians always think they are smarter than anybody else, that “this time it won’t happen” or simply that, even considering negatives, the opportunity is still too good to pass. Unfortunately, nobody ever got re-elected for saying no to this sort of opportunities.
- nkassis 8y agoI'm pretty sure politicians know what they are doing and know what it really means. They do it because of the huge publicity impact helps them get reelected. The incentives are misplaced for them to make decisions good for the people. It's our fault as voters for being swayed by these gimmicks.
- shaki-dora 8y agoPoliticians aren't quite as stupid as you (and, apparently, everyone else, believes). The dynamics in such a situation are simply a prisoner's dilemma. Meaning: without cooperation, bidding for and getting HQ2 is net positive for the city. Nobody really sees much of a problem here, and your (and the sibling comment's) tiresome invocation of the lazy stupid-corrupt-politician-cliché is, as always, superfluous. The actual issue is that, quite obviously, Amazon would expand and hire more employees anyway. This competition exploits the dynamic mentioned above to move money from the public to Amazon in a zero-sum game. And the total loss of this scheme is even larger than "just" billions in taxes: when Amazon makes this decision based on the subsidies they are promised, they (by definition) must put lesser weight on all the factors that would otherwise dominate the decision. So they will end up at a location with lower quality-of-life, higher prices, or some other trade-offs. Amazon is essentially asking cities to pay them for crippling itself, and for compromising their employees happiness. Which, come to think of it, really does not strike me as the set of priorities one would expect from a stable company with a long-term focus and healthy values. Anyway, that's why somewhat sane jurisdictions such as the EU put limits on subsidies and bespoke tax deals: it's cooperation that, when managed fairly, benefits everyone. There's still competition between locations, but it's about quality-of-life, infrastructure, or education, instead of a voluntary effort to impoverish. The fault, therefore, is the American fetishisation of market-based mechanisms[0], the seemingly endless willingness to starve public administrations of resources without any regard to their actual, absolute levels, and a somewhat pathological fear of showing weakness by treating any situation cooperatively, instead opting to turn everything into some sort of competition that at least guarantees the sweet payoff of others losing even worse. [0]: This is particularly interesting here: The dedication to a free market runs so deep, that voters and politicians are essentially turning down the possibility to form a cartel amongst themselves. I one were to believe they are doing this knowing- and willingly, one would have admire it as a rather rare display of altruism in the service of a larger principle.
- phakding 8y agoThis is just Amazon looking for welfare. This is not new. Cabela's was doing it for many years. Asking for tax breaks because they bring "jobs and prosperity" to the town. It turned out to be a plain lie. NFL teams are doing it to many cities. Making few hundred millions in profit while offloading stadium to tax payers. Sears, cboe and cme among other did it to Illinois for millions of dollars in tax breaks. Pure and simple corporate greed.
- eganist 8y agoSounds like bait and switch to me -- quite literally. "Hey, we have HQ2 for sale. Name your price." "...hey, highest-bidders, we actually only have two smaller satellite offices for sale; each of you gets one for the prices you named." Can't speak for NYC, but I hope Virginia refuses to honor any corporate welfare packages as a result of what's basically an entirely legal form of bait and switch.
- bilbo0s 8y agoGot bad news for you. There are a lot of states out there, (ie - all the other ones), that would give a whole lot more, for even a fraction of the jobs NoVA and NYC are getting. It's a testimony to the wealth and power of NoVA and NYC that they scoff at 25,000 high paying jobs. I'm from Wisconsin, for instance, and we will have handed over roughly 4 to 5 BILLION dollars when it's all said and done. And that was for only HALF the jobs that NoVA is getting. (Each job likely paying LESS than what most of the Amazon jobs will pay.) I'm not jealous or anything. You guys know your value. Good for you. Self-Awareness is sorely lacking in the US these days. But I'm just pointing out that as corporate welfare goes, you guys in the coastal elite cities are in the best positions in the country. You're able to give out the least because all the good knowledge economy corporations basically have to be there in any case.
- eganist 8y agoShare the wealth! There are other benefits to planting two QuarterHQs in places that aren't Virginia or NY: If anything, Amazon QuarterHQ3 can go in Wisconsin (though my primary pick for this purpose might instead be a more disaster-resistant part of Florida) and QuarterHQ4 can go in the heart of Texas. It might draw some of the groupthink apart a bit and into areas that actually need new blood, or at least need some blood drawn from NorCal.
- bilbo0s 8y agoBut none of what you just outlined has any effect on Amazon's bottom line, or on NoVA and NYC's tax base. The job of Amazon is to increase their bottom line. The job of the governments of the NoVA and NYC areas are to increase their tax bases. None of those entities have "draw some of the groupthink apart" or "bring new blood into areas that need new blood" as part of their job descriptions. I just think you're being a little idealistic and naive. You're attempting to advance what seem to be almost quasi-political objectives using the market. But market participants in NYC or NoVA don't really care if Wisconsin needs new blood, or if SF has too much groupthink. Those are not issues the market is meant to address. You only set yourself up for more frustration and failure trying to use what are at their root market based devices to achieve these sorts of quasi-political goals.
- analog31 8y agoFoxconn in Wisconsin. Football stadiums everywhere. Car plants. This has been going on forever. Why was anybody surprised?
- ballenf 8y agoI’d support a federal law basically outlawing these tax breaks for single companies. Game theory means almost no single state can resist the temptation. But it has the net effect of pushing the tax burden down onto smaller companies who are competing with the Amazons of the world.
- cultus 8y agoThese tax breaks really anger me, especially because the actual benefits typically fail to offset the lost tax revenue. And of course you have this race to the bottom as you said. In Washington, we gave an $8.7 billion tax break to the aerospace industry (read: Boeing) a few years ago. Look how that turned out for us.
- asdfasgasdgasdg 8y ago> Look how that turned out for us. It seems like y'all are doing pretty well. Can you elaborate?
- cultus 8y agoBecause of the tech industry. Boeing has move many, many thousands of high paying jobs elsewhere in recent years, despite the tax breaks. Thus, the tax breaks were colossal wastes of money.
- _asummers 8y agoAs long as sports stadiums also fall into that umbrella. They're just a variant of the same concept. I say this as someone who loves watching sports, so no bias from that end.
- celticninja 8y agoI dont really get this, are stadiums not paid for by the teams that play there? For example in the UK football teams own/build/run their own stadiums. Are NFL teams subsidised by the state or something?
- chiph 8y agoAmazon putting two towns competing against each other in the amount of incentives they'll offer? Reason pretty much nailed it already: https://www.youtube.com/watch?v=H_eG7leM6ew https://www.youtube.com/watch?v=H_eG7leM6ew
- pointillistic 8y agoWisconsin governor Walker lost a sure bet at Governorship because of his giveaway to Foxconn. (it's in the name...)
- village-idiot 8y agoI find the idea that localities are bidding on corporate offices with tax breaks extremely dystopic.
- kevmo 8y agoThis should be illegal.
- fashionrob 8y agowhy dont we just wait, and you know, see what amazon actually does.
- xapata 8y agoThe Economist quoted the Onion! "The Onion got it right"
- WhompingWindows 8y agoWhat a brilliantly capitalistic move. Amazon pretends to have a huge, one-locale supply of high-paying jobs and the promising ecosystem of economic activity around that center, and the demand is huge from cities. What if they grow into the next SV or Seattle from this? Once the cities agreed to the deals with such growth prospects in mind, and given the huge demand from other cities, Amazon bait and switched these saps. They get to have their cake and eat it too, NYC and DC, non-HQ2 premises, but just satellite offices. Well, that could have been done without the theater, though the buzz was tantamount to free advertising for them and ratcheted up all the incentives.
- ovi256 8y agoFWIW, you can bypass the Economist's paywall by reloading the page and then quickly stopping the reload. The HTML loads but not the js that implements the paywall. Hope I don't jinx it!
- jaytaylor 8y agoPaywall bypass: https://archive.is/osL0A https://archive.is/osL0A
- dependsontheq 8y agoAs a european the American view of "market" is always fascinating. Most tax breaks and subsidies amazon will get would be totally illegal under EU laws https://en.wikipedia.org/wiki/State_aid_(European_Union) https://en.wikipedia.org/wiki/State_aid_(European_Union) because they distort the market.
- graysonk 8y agoI’d agree with you if Ireland didn’t exist
- dependsontheq 8y agoYes, but we have to differentiate between general tax competition available to most companies and company specific offers, these are clearly illegal https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...