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For the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone cooperates the payoff matrix is globally optimal. But for New York City it's a go

For the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone cooperates the payoff matrix is globally optimal. But for New York City it's a good deal, and those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel. $150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around 9.25% at that income level that's around 350MM in income tax alone. That doesn't include the taxes that Amazon itself will eventually pay, nor any of the knock on economic effects of injecting all that extra money into the local economy. For NYS and NYC this deal is a no brainer. The federal government is supposed to be the mechanism whereby coordination problems like this are solved. But the federal government (for a long time now, this isn't specifically about the current administration) if anything seems to want to encourage this kind of thing, not discourage them. So here we are. You can rant and rave about the perfidy of actors acting rationally or you can work to change the rules of the game so as to produce an outcome you think more desirable. I know which one I think is more productive.

onetimemanytime 8y ago
If NYC was a smaller city you'd have to price in the depression once Amazon went of business or lost market share /cut costs. But NYC is huge and 25,000 people will not skew it that much either way.
bilbo0s 8y ago
As someone facing the implications of a not so good deal in Wisconsin, I agree with Bradley here, NYC got a VERY good deal. It's just that my experience in Wisconsin has made me look at all of these sorts of deals in a different light. We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.
clairity 8y ago
you make it sound like those numbers are completely comprehensive and without agenda, and that these subsidies are an unmitigated good. but they completely ignore jobs lost, companies shuttered, environmental impacts, and opportunity costs. you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like. plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich. yes to more, savvy economic development; no to corporate giveaways. EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.
- matchagaucho 8y ago
  "you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies" Not a chance. Property tax incentives and subsidies are offered in all 50 U.S. states to encourage employer relocation. There is rampant competition.
  - clairity 8y ago
    but there is only one new york city.
    - bilbo0s 8y ago
      As arrogant as this comment may sound, when you're talking about a facility like Amazon's HQ2, HN user "clarity" is right. There really is only one place that combines a ridiculous amount of technology expertise, with an east coast location, and multi-modal transport links to both the US and the Europe-Africa side of the world. But that's all the more reason that NY state did not need to offer that much in subsidies. (Again, I know they got a good deal, but not giving Amazon anything would have been an even better deal.)
- Spooky23 8y ago
  Economic development numbers in NY are loaded with many of the things that you talk about. As the flow of jobs to the south from the north has demonstrated, incentives work and offset the increased costs of doing business in a place like New York. Those costs are often criticized but include things like worker protection, environmental protection and other things that companies generally flee.
- RandomInteger4 8y ago
  What jobs are being lost and companies being shuttered in New York? What environmental impact is being had in New York? This isn't a walmart that's going to displace local shops. This is a corporate headquarters; an office building. Last I checked, they don't have to build a stagnant pond next to the building either, so I don't know what you mean by environmental impact. Amazon is going to exist whether or not it has an HQ in NY, so your points seem tangential and irrelevant.
booleandilemma 8y ago
And yet I just heard that the MTA is raising prices again this year. How many Fortune 100 companies need to move here before we get a working subway system?
- bilbo0s 8y ago
  To be fair, you do have a working subway system. If you didn't, no one would care that they raised prices. You guys have the best subway system in the US if we're being honest here. That's part of the reason why you get things like Amazon's HQ2 instead of anyone else.
  - CharlesW 8y ago
    > You guys have the best subway system in the US if we're being honest here. The biggest (in the US), certainly. "Best" depends on your perspective. https://www.nytimes.com/2018/10/18/nyregion/chicago-l-train-mta-subway.html https://www.nytimes.com/2018/10/18/nyregion/chicago-l-train-...
  - anoncoward111 8y ago
    Having lived in both NYC and Boston for decades, I'm tempted to say the T is better than the subway, but I really just hate crowded trains in general and the T train I took was always empty because I reverse commuted. I am a happy suburb driver now :p
- bradleyjg 8y ago
  The MTA's problems have far more to do with inefficiency, mismanagement, and corruption than they do with a lack of money. A big part of the problem is that it doesn't have an accountable governance structure. The current MTA board is made up of appointees of: the governor, the mayor, and the county executives of Nassau, Suffolk, Westchester, Rockland, Putnam, and Orange counties. There needs to be one elected official, preferably one with the power to really negotiate with the contracting companies and the unions, that has ultimate responsibility for the system and it's problems.
  - 8y ago
oculusthrift 8y ago
>> those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel. its more than a little immature to accuse this of those who disagree with you. your model relies on the fact that this would all be additional tax revenue that wasn't collected earlier. While a lot of these jobs can be people who already work in NY and simply switch jobs. In addition, it neglects the cost to the govt of servicing this company and all its employees. It also neglects the negative externalities and consequences for current residents (only looking at it through a money lens which is a typical neoliberal fallacy).
- gammateam 8y ago
  thats true whether there are subsidies or not. these are higher paying jobs than current averages no matter how the average is done, using less space than average, and the subsidies pay for themselves. so............... thats why the model can exist in a vacuum
  - oculusthrift 8y ago
    right but how do you factor in longer commutes for existing residents? or current residents having to move or have their children go to different schools? What is your dollar value on that? and before you say that isn't relevant, thats the exact mindset that brought us trump. valuing the dollar value over quality of life of existing people. it also outsources alot of the quality of life to visa holders instead of residents.
    - gammateam 8y ago
      and you think ANY of that is a relevant argument for Long Island City's 3-year residents? LIC is the perfect place to build this. A lot less contrived than when Google bought a block of lower Manhattan for $1 billion back in 2011. > and before you say that isn't relevant, thats the exact mindset that brought us trump. is this post copypasta? I feel like you would recycle this post as a counterpoint for any form of upward mobility in an area. The model exists in a vacuum because the subsidies make a profit and create minimal overhead.
mattnewton 8y ago
Or you could think NYC could have negotiated more because it was a likely choice anyways, having already major offices for other tech offices, for example. I don’t have a horse in this race but I don’t think this math is the comprehensive picture.
gammateam 8y ago
I posted similar math on reddit several days ago too, and didn't receive a response when I asked to counterpoints to that specifically Most people's counterpoints are about what ifs related to corporate and human welfare, and will go on a tangent about that, emboldened by headlines about the dollar amount each new york tax payer would have contributed to the subsidy. Taxpayers got a good deal. Their corporate and human welfare argument will hold true whether there were subsidies or not, at any arbitrary salary figure, at any arbitrary number of jobs. So it is a total red herring to this deal, which is profitable whether 24,999 people get minimum wage and 1 person gets $100,000,000 annually, as long as they are taxed by New York in some capacity. (income, sales tax, property tax via direct ownership or rent paid to someone else that pays income and property tax)
rockarage 8y ago
Do you expect more automation in the workplace from Amazon or less? Cause the numbers only work if the jobs are created, however Amazon has about a decade as a cushion. A few years from now, Amazon could conclude that it may not be worthwhile to create all the 25,000 jobs and the better option is to return the government's money in year 10, this will be a loss for the city.
- TheCoelacanth 8y ago
  This is not an upfront payment. Amazon gets the money once they have actually created the jobs.
BonesJustice 8y ago
What is with all these posts that just assume that 25,000 new humans are going to be plopped down in NYC? Has Amazon come out and said that they’re going to be relocating 25,000 employees here? If not, then I suspect a solid majority of those hired will already be living and working in the greater NYC area. In those instances, any gain in income tax revenue will be meager.
- closeparen 8y ago
  Do you think 25,000 positions are going to disappear from the rest of the local economy? New York City's population growth from 2010-2017, without Amazon, averages out to 64k/year [0]. Adding 25,000 humans to New York is an entirely ordinary and expected occurrence that's been playing out every 4.5 months, not some sort of outrageous hypothetical. [0] https://www1.nyc.gov/site/planning https://www1.nyc.gov/site/planning
  - BonesJustice 8y ago
    No, I don’t think 25,000 positions will disappear. I think many previously filled positions will become unfilled as those employees get hired by Amazon. Obviously, many (most?) of those positions will in turn be filled by someone else (and so on). But because of a strong preference to hire locally, that imbalance tends to ripple through the local labor market for some time before enough new labor is brought in to cancel it out. Point is, dropping 25,000 “new jobs” into the local economy does not result in an automatic gain of 25,000 new taxpayers, so acting like it’s an automatic $3.75 billion in net new taxable income is just absurd. Eventually it may get close to that number, but there will be a significant lag before it gets there.
- dangwu 8y ago
  It’s 25k new jobs though. Not replacing existing. So the relocation aspect doesn’t really matter.
- cthalupa 8y ago
  Any time a new job is created somewhere, regardless of whether or not it is filled by someone who was already local or not, the total number of available jobs + filled jobs goes up, as long as positions are backfilled. Positions usually are backfilled. So even if every person that works at Amazon NYC already lived in NYC, they will have left 25,000 other jobs that are now available. There are a few ways in which these previous jobs get backfilled: 1) More people moving around locally. This will generally increase the pressure for local businesses to keep their employees happier, to prevent the attrition. This will generally increase the pressure for the businesses looking to hire to also compete. The easiest way both parties do this is increasing salary - which increase tax revenue. Other ways are other employee perks, which might not directly result in more tax revenue, but should result in increased QoL for the employees. 2) People moving into the city. People move to where the jobs are. People moving directly increases tax revenues, because they're increasing the tax base. If they're not moving in large enough quantities to fill all the open positions, then again, companies have to do something to increase their attractiveness. Since this is usually increasing pay, when it gets high enough to attract someone to move it then is an even larger effect. 3) People coming of age for work that already lived there/graduating college there/etc. They might already reside in the city, but weren't part of the workforce. They'll need jobs, and again, a market that is competing for employees is one where employers have to differentiate themselves. NYC doesn't need the Amazon jobs to be filled by people moving to the city for it to be an economic win. They just need to have properly balanced tax incentives/breaks vs. the benefit achieved from these factors. I'm not an expert so I don't know if they've successfully done that, but there's no reason to think that this being successful is dependent on Amazon directly bringing in people from out of city/out of state. As long as this is allowed nationally, cities and companies are being rational actors in trying to make these sort of deals. It doesn't mean that they always work out (See: Wisconsin, Foxconn, as mentioned repeatedly), but it is certainly possible for a deal to be created that is mutually beneficial to the company and the locale.

onetimemanytime 8y ago

If NYC was a smaller city you'd have to price in the depression once Amazon went of business or lost market share /cut costs. But NYC is huge and 25,000 people will not skew it that much either way.

bilbo0s 8y ago

As someone facing the implications of a not so good deal in Wisconsin, I agree with Bradley here, NYC got a VERY good deal. It's just that my experience in Wisconsin has made me look at all of these sorts of deals in a different light. We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.

clairity 8y ago

you make it sound like those numbers are completely comprehensive and without agenda, and that these subsidies are an unmitigated good. but they completely ignore jobs lost, companies shuttered, environmental impacts, and opportunity costs. you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like. plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich. yes to more, savvy economic development; no to corporate giveaways. EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.

matchagaucho 8y ago
"you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies" Not a chance. Property tax incentives and subsidies are offered in all 50 U.S. states to encourage employer relocation. There is rampant competition.
- clairity 8y ago
  but there is only one new york city.
  - bilbo0s 8y ago
    As arrogant as this comment may sound, when you're talking about a facility like Amazon's HQ2, HN user "clarity" is right. There really is only one place that combines a ridiculous amount of technology expertise, with an east coast location, and multi-modal transport links to both the US and the Europe-Africa side of the world. But that's all the more reason that NY state did not need to offer that much in subsidies. (Again, I know they got a good deal, but not giving Amazon anything would have been an even better deal.)
Spooky23 8y ago
Economic development numbers in NY are loaded with many of the things that you talk about. As the flow of jobs to the south from the north has demonstrated, incentives work and offset the increased costs of doing business in a place like New York. Those costs are often criticized but include things like worker protection, environmental protection and other things that companies generally flee.
RandomInteger4 8y ago
What jobs are being lost and companies being shuttered in New York? What environmental impact is being had in New York? This isn't a walmart that's going to displace local shops. This is a corporate headquarters; an office building. Last I checked, they don't have to build a stagnant pond next to the building either, so I don't know what you mean by environmental impact. Amazon is going to exist whether or not it has an HQ in NY, so your points seem tangential and irrelevant.

booleandilemma 8y ago

And yet I just heard that the MTA is raising prices again this year. How many Fortune 100 companies need to move here before we get a working subway system?

bilbo0s 8y ago
To be fair, you do have a working subway system. If you didn't, no one would care that they raised prices. You guys have the best subway system in the US if we're being honest here. That's part of the reason why you get things like Amazon's HQ2 instead of anyone else.
- CharlesW 8y ago
  > You guys have the best subway system in the US if we're being honest here. The biggest (in the US), certainly. "Best" depends on your perspective. https://www.nytimes.com/2018/10/18/nyregion/chicago-l-train-mta-subway.html https://www.nytimes.com/2018/10/18/nyregion/chicago-l-train-...
- anoncoward111 8y ago
  Having lived in both NYC and Boston for decades, I'm tempted to say the T is better than the subway, but I really just hate crowded trains in general and the T train I took was always empty because I reverse commuted. I am a happy suburb driver now :p
bradleyjg 8y ago
The MTA's problems have far more to do with inefficiency, mismanagement, and corruption than they do with a lack of money. A big part of the problem is that it doesn't have an accountable governance structure. The current MTA board is made up of appointees of: the governor, the mayor, and the county executives of Nassau, Suffolk, Westchester, Rockland, Putnam, and Orange counties. There needs to be one elected official, preferably one with the power to really negotiate with the contracting companies and the unions, that has ultimate responsibility for the system and it's problems.
- 8y ago

oculusthrift 8y ago

>> those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel. its more than a little immature to accuse this of those who disagree with you. your model relies on the fact that this would all be additional tax revenue that wasn't collected earlier. While a lot of these jobs can be people who already work in NY and simply switch jobs. In addition, it neglects the cost to the govt of servicing this company and all its employees. It also neglects the negative externalities and consequences for current residents (only looking at it through a money lens which is a typical neoliberal fallacy).

gammateam 8y ago
thats true whether there are subsidies or not. these are higher paying jobs than current averages no matter how the average is done, using less space than average, and the subsidies pay for themselves. so............... thats why the model can exist in a vacuum
- oculusthrift 8y ago
  right but how do you factor in longer commutes for existing residents? or current residents having to move or have their children go to different schools? What is your dollar value on that? and before you say that isn't relevant, thats the exact mindset that brought us trump. valuing the dollar value over quality of life of existing people. it also outsources alot of the quality of life to visa holders instead of residents.
  - gammateam 8y ago
    and you think ANY of that is a relevant argument for Long Island City's 3-year residents? LIC is the perfect place to build this. A lot less contrived than when Google bought a block of lower Manhattan for $1 billion back in 2011. > and before you say that isn't relevant, thats the exact mindset that brought us trump. is this post copypasta? I feel like you would recycle this post as a counterpoint for any form of upward mobility in an area. The model exists in a vacuum because the subsidies make a profit and create minimal overhead.

mattnewton 8y ago

Or you could think NYC could have negotiated more because it was a likely choice anyways, having already major offices for other tech offices, for example. I don’t have a horse in this race but I don’t think this math is the comprehensive picture.

gammateam 8y ago

I posted similar math on reddit several days ago too, and didn't receive a response when I asked to counterpoints to that specifically Most people's counterpoints are about what ifs related to corporate and human welfare, and will go on a tangent about that, emboldened by headlines about the dollar amount each new york tax payer would have contributed to the subsidy. Taxpayers got a good deal. Their corporate and human welfare argument will hold true whether there were subsidies or not, at any arbitrary salary figure, at any arbitrary number of jobs. So it is a total red herring to this deal, which is profitable whether 24,999 people get minimum wage and 1 person gets $100,000,000 annually, as long as they are taxed by New York in some capacity. (income, sales tax, property tax via direct ownership or rent paid to someone else that pays income and property tax)

rockarage 8y ago

Do you expect more automation in the workplace from Amazon or less? Cause the numbers only work if the jobs are created, however Amazon has about a decade as a cushion. A few years from now, Amazon could conclude that it may not be worthwhile to create all the 25,000 jobs and the better option is to return the government's money in year 10, this will be a loss for the city.

TheCoelacanth 8y ago
This is not an upfront payment. Amazon gets the money once they have actually created the jobs.

BonesJustice 8y ago

What is with all these posts that just assume that 25,000 new humans are going to be plopped down in NYC? Has Amazon come out and said that they’re going to be relocating 25,000 employees here? If not, then I suspect a solid majority of those hired will already be living and working in the greater NYC area. In those instances, any gain in income tax revenue will be meager.

closeparen 8y ago
Do you think 25,000 positions are going to disappear from the rest of the local economy? New York City's population growth from 2010-2017, without Amazon, averages out to 64k/year [0]. Adding 25,000 humans to New York is an entirely ordinary and expected occurrence that's been playing out every 4.5 months, not some sort of outrageous hypothetical. [0] https://www1.nyc.gov/site/planning https://www1.nyc.gov/site/planning
- BonesJustice 8y ago
  No, I don’t think 25,000 positions will disappear. I think many previously filled positions will become unfilled as those employees get hired by Amazon. Obviously, many (most?) of those positions will in turn be filled by someone else (and so on). But because of a strong preference to hire locally, that imbalance tends to ripple through the local labor market for some time before enough new labor is brought in to cancel it out. Point is, dropping 25,000 “new jobs” into the local economy does not result in an automatic gain of 25,000 new taxpayers, so acting like it’s an automatic $3.75 billion in net new taxable income is just absurd. Eventually it may get close to that number, but there will be a significant lag before it gets there.
dangwu 8y ago
It’s 25k new jobs though. Not replacing existing. So the relocation aspect doesn’t really matter.
cthalupa 8y ago
Any time a new job is created somewhere, regardless of whether or not it is filled by someone who was already local or not, the total number of available jobs + filled jobs goes up, as long as positions are backfilled. Positions usually are backfilled. So even if every person that works at Amazon NYC already lived in NYC, they will have left 25,000 other jobs that are now available. There are a few ways in which these previous jobs get backfilled: 1) More people moving around locally. This will generally increase the pressure for local businesses to keep their employees happier, to prevent the attrition. This will generally increase the pressure for the businesses looking to hire to also compete. The easiest way both parties do this is increasing salary - which increase tax revenue. Other ways are other employee perks, which might not directly result in more tax revenue, but should result in increased QoL for the employees. 2) People moving into the city. People move to where the jobs are. People moving directly increases tax revenues, because they're increasing the tax base. If they're not moving in large enough quantities to fill all the open positions, then again, companies have to do something to increase their attractiveness. Since this is usually increasing pay, when it gets high enough to attract someone to move it then is an even larger effect. 3) People coming of age for work that already lived there/graduating college there/etc. They might already reside in the city, but weren't part of the workforce. They'll need jobs, and again, a market that is competing for employees is one where employers have to differentiate themselves. NYC doesn't need the Amazon jobs to be filled by people moving to the city for it to be an economic win. They just need to have properly balanced tax incentives/breaks vs. the benefit achieved from these factors. I'm not an expert so I don't know if they've successfully done that, but there's no reason to think that this being successful is dependent on Amazon directly bringing in people from out of city/out of state. As long as this is allowed nationally, cities and companies are being rational actors in trying to make these sort of deals. It doesn't mean that they always work out (See: Wisconsin, Foxconn, as mentioned repeatedly), but it is certainly possible for a deal to be created that is mutually beneficial to the company and the locale.