Cities Are Competing to Give Amazon the 'Mother of All Civic Giveaways' (vice.com)

Louise Matsakis, reporting for Motherboard: Amazon announced earlier this month that it was looking to build a second headquarters outside Seattle, where more than 40,000 of the company's more than 380,000 employees currently work. The tech giant is searching for a locale with at least a million people, a diverse population, and excellent schools, among other qualifications. It gave municipalities six weeks -- until October 19 -- to submit a proposal to be chosen. Local governments in more than 100 American and Canadian cities, including places like San Diego, Chicago, Dallas, and Detroit, quickly scrambled to outline why they should be home to Amazon's new corporate office, which is expected to employ up to 50,000 workers. The mayor of Washington D.C., Muriel Bowser, even made a scripted video for Amazon explaining why the capital should be picked. It featured an Echo, Amazon's smart speaker. But experts who have studied Amazon's business practices say having one of the most tax-allergic corporations in the world come to your hometown might not actually be a good thing.

Comments

New York Times wrote about this last week.

[Powys]

They figured Denver to be the best spot https://www.nytimes.com/intera...

Re:New York Times wrote about this last week.

[irrational_design]

Not mentioned in the article, but Denver is a lot more central to the rest of the country.

Re:New York Times wrote about this last week.

[bobbied]

They figured Denver to be the best spot https://www.nytimes.com/intera...

Maybe they are right but For the wrong reasons. Amazon isn't looking for a distribution center to ship from, but a place to house 50K employees that work behind the distribution centers, websites and such. They are looking for a place where they can attract and keep good technical and management talent, not people to pack boxes... So Denver is likely in the running, but will suffer from being an expensive place to live (and thus an expensive place to find and keep employees). I'm guessing they will end up someplace else...

Re:New York Times wrote about this last week.

[sirpwn4g3]

I believe KC would be a pretty good spot as well, and would be more central than Denver. I'm just not sure if KC is making any kind of real push.

Re:New York Times wrote about this last week.

[Anonymous Coward]

From that article:
"So Denver it is. The city’s lifestyle and affordability, coupled with the supply of tech talent from nearby universities, has already helped build a thriving start-up scene in Denver and Boulder, 40 minutes away. Big tech companies, including Google, Twitter, Oracle and I.B.M., have offices in the two cities. Denver has been attracting college graduates at an even faster rate than the largest cities. The region has the benefits of places like San Francisco and Seattle — outdoor recreation, microbreweries, diversity and a culture of inclusion (specifically cited by Amazon) — but the cost of living is still low enough to make it affordable, and lots of big-city refugees have been moving there for this reason. Amazon would be smart to follow them."

Re:New York Times wrote about this last week.

[Luthair]

They did ignore Canada and a few of the cities which rank near the top of global city lists have expressed interest. From the Stackoverflow story earlier developers are currently cheaper in Canada than the US though obviously adding another country & currency might be seen as more risky.

Re:New York Times wrote about this last week.

[swb]

The NYT analysis was more detailed than that and actually ran through a lot of the numbers of a lot of cities to reach the Denver conclusion.

That being said, they mention the attention Denver already has from a lot of other tech companies so it may be too late, and that by the time Amazon decides Denver may already be on its way to too expensive, if it isn't already.

I think Amazon might want to consider some kind of place that isn't obviously up and coming and may be initially dismissed as either too small-town or too rust belt.

I think Amazon will have to recruit a lot out outside talent no matter where they site, and it may look more attractive to go someplace with a cheaper standard of living where the salaries may go further.

They may also get more bargains on real estate and buildings -- buying into an already growing market makes for even more competition for real estate resources.

Tax bullshit

[bhcompy]

But experts who have studied Amazon's business practices say having one of the most tax-allergic corporations in the world come to your hometown might not actually be a good thing.

Sure, they'll ask for incentives, but 50000 employed people including a significant number of them being well paid makes a big difference in things like property tax, land value, etc.

Re:Tax bullshit

[Altus]

Yeah but you do have to figure that that helps some areas more than others. Places that already have high property values and high rates of tech employment might not see as much benefit as other locations. On the other hand, locations that stand a to gain the most from that bump in employment are more likely to give the best tax breaks.

Re:Tax bullshit

[vux984]

Sure, they'll ask for incentives, but 50000 employed people including a significant number of them being well paid makes a big difference in things like property tax, land value, etc.

Because big corporations don't already benefit from economies of scale, they should also get such large tax incentives that new laws have to be passed, while pitting cities and states against eachother to pay for them.

When people complain that corporations don't pay their fair share, this is precisely the sort of thing that needs to be stopped. Instead of passing legislation to grant amazon incentives, there should be federal law banning the practice outright.

Large corporations do not need, and should not receive 'incentives'. They already do not compete on an even footing, and it is ludicrous to further bend, and even rewrite, the rules in their favor.

Re:Tax bullshit

[RightwingNutjob]

Baloney. Income taxes and sales taxes (where they respectively exist) are paid to the state government (and sometimes city government) regardless of whether people pay their property taxes (if they exist) to a rich suburb or a less tony district. They also patronize businesses that can be located anywhere in the metro area to do things like eat, furnish their homes, etc etc etc.

Having an extra billion dollars or so of annual payroll is a positive, no matter how you spin it. Unless of course you choose to spin it as, "I'm not gettin' any therefore you can't have any either." In which case you're guilty of Envy and should be ashamed of yourself.

Re:Tax bullshit

[MightyYar]

I'd like the opposite direction - remove corporate taxes altogether and instead tax capital gains (and the special dividend) at normal income tax rates. Adjust rates and loopholes to fill any revenue holes. Sure, thousands of accountants and tax lawyers would suddenly be looking for work - but it would destroy this kind of thing. And it would make the US into a very attractive site for any multinational.

Re:Tax bullshit

[gurps_npc]

Not how it works. The high paid guys set up homes outside of the city. Then they put 50,000 minimum wage jobs that last a year.

People talk about how ineffective government is? This is EXACTLY the kind of thing government does poorly.

If your tax incentive idea is worthwhile it should be a permanent part of your tax structure and available to all.

The only reason to limit it's availability (either for a set time or for a certain company/kind of business) is because it is a crappy idea that would bankrupt the government if used too much.

Re:Tax bullshit

[ShanghaiBill]

Instead of passing legislation to grant amazon incentives, there should be federal law banning the practice outright.

This is the best solution. The incentives are a prisoner's dilemma. Each jurisdiction feels compelled to offer them because others offer them, but they would all be better off if no one offered them. Preventing this sort of self-destructive competition between the states is exactly why the commerce clause exists.

Instead, the states should focus on broad policies that help all businesses, such as streamlining permits, regulatory transparency, and reforming silly zoning laws that keep startups out of garages.

Re:Tax bullshit

[bluefoxlucid]

It's not just property tax. Amazon gets money from all over the world, pays wages, and those people have taxable income. They spend it locally, bringing your economy up with that spending. It's cash flow.

I make a similar argument for my universal Social Security: because it pays more to below-average-income households than it takes, below-average-income cities see a net cash flow. In Baltimore, MD, that would have been $2 billion in 2016. That's untaxable (it counts as income for means-tested welfare, but not for tax purposes, says my proposed policy), yet it gets spent and creates income to local businesses, wages, and so forth. Part of that flows out of the city up the corporate chain or to the suppliers; part of it stays in the city as wages. More comes twice a month, building it up continuously.

It's the end of poor inner cities.

An interesting effect, especially considering the after-tax income at every household income level and on corporate profits is higher under this system. I even slightly-lowered the payroll tax and the Federal deficit in the process.

Re:Tax bullshit

[cayenne8]

This is the best solution. The incentives are a prisoner's dilemma. Each jurisdiction feels compelled to offer them because others offer them, but they would all be better off if no one offered them. Preventing this sort of self-destructive competition between the states is exactly why the commerce clause [wikipedia.org] exists.

Except this is NOT interstate commerce....that concept has been bastardized badly over the years, allowing federal overreach....but this is a bit of a stretch to say this is.

This is purely between a state and a private business. This is not dealing with sale of goods between states which is interstate commerce.

What's next'? States (and even cities) can't compete for the Olympics? They can't compete to have the Super Bowl?

This is NOT the purview of the Federal Govt. And should not be.

Re:Tax bullshit

[Altus]

No I mean more like the amount of benefit that San Francisco would see in getting the HQ vs say, Denver. Property values can only go up so much, eventually the cost of living would drive out smaller employers, even in tech (I think you could already argue that this is happening in the valley which has lead to other cities becoming startup hubs). In Denver I think you would see a much higher upside to bringing in those 50K good paying jobs which might make it worth bending over backwards for Amazon where in another part of the country it might make less sense.

Re:Tax bullshit

[Geoffrey.landis]

This is the best solution. The incentives are a prisoner's dilemma. Each jurisdiction feels compelled to offer them because others offer them, but they would all be better off if no one offered them. Preventing this sort of self-destructive competition between the states is exactly why the commerce clause [wikipedia.org] exists.

Except this is NOT interstate commerce....

Yes it is. It is about one state bidding against another to win a business that operates across the entire U.S.. That's very clearly commerce.

Re:Tax bullshit

[MightyYar]

No - it would just be "income" and I wouldn't tax corporate income. Get it on the way out.

Re:Tax bullshit

[whoever57]

Having an extra billion dollars or so of annual payroll is a positive, no matter how you spin it.

Not if the state agrees to a tax credit/rebate that includes rebating the estimated sales and income taxes paid by the new employees. Such deals are not unheard of.

Re:Tax bullshit

[vux984]

Then it would never be "out".

The wealthy would just own corporations, and the corporations would own and pay for everything else.

If want to go on vacation? My corporation sends me to Paris, for business meetings, meeting potential vendors, or looking at possible expansion sites.

If want a cottage, my corporation buys it as an investment property, and I pay nominal rent to the corporation when i stay there. I also do that for my various homes, and cars.

I'd draw a nominal salary for food and clothing, maybe 30 or 40,000 per year, to cover that plus my nominal rents, and depreciating assets (so I realize some tax advantages from those). And the rest of my millions, in assets, property, stock holdings, ... all growing tax free.

I don't think this works.

Re:Tax bullshit

[vux984]

But..that is NOT something the federal government is empowered by the constitution to do.

Arguably, the commerce clause actually does apply here since the issue is state A luring a specific entity from state B.

But even if didn't, its in the states collective best interest not to play this game, but unless they all agree not to play it, the one who plays it wins at the expense of the rest. This is precisely the sort of issue the federal government should be involved in, and if that takes an amendment ... then it should be done.

That is PURELY on a state level. And it should be.

Why should large companies be allowed to pit states against each other for public handouts? How do we the public benefit from that?

Re:Tax bullshit

[gurps_npc]

1) I did not say or mean 50,000 permanent jobs for a churning workforce. I said 50,000 jobs that last a year. As in after that year automation replaces them with a 15 man team and 1000 robots.

2) Second, 50,000 minimum wage jobs end up COSTING the city and state money, not giving it. A minimum wage job is about $15k a year. Two parents, family of 2 at that wage will pay on average less than $3,000 to the state and local taxes and it cost more than that per year to pay for their kids schooling, police, fire, roads, etc. You end up attracting people to the area that cost the state more than they earn.

These kind of deals always promise more than they put out. There is no such thing as a free lunch, the guy promising the moon is always lying.

Re:Tax bullshit

[ShanghaiBill]

What's next'? States (and even cities) can't compete for the Olympics? They can't compete to have the Super Bowl?

Yes, that would be fantastic. I don't pay taxes so my local government can hand them over to a sport franchise.

Re:Tax bullshit

[networkBoy]

Not if the state agrees to a tax credit/rebate that includes rebating the estimated sales and income taxes paid by the new employees.

"rebating" it to who? The employees? I'm sure I'm missing something, but please explain how this rebate would work.

Rebating it to the company (Amazon in this case).
Thus We expect that you will hire these 100 people at $1/year and they will each pay $0.10/year in total taxes (sales, property) to the municipality (total: $10.00). The state/municipality then gives $10 in tax breaks (offset to property tax, zoning fees, what have you) to the company.

The direct net is zero, indirect there is still a (much smaller) gain as those employees each spend $0.01 at the donut shop per year and the shop owner now has an additional $1.00 to spend that will itself produce tax income, though much less than the first order taxes that were rebated.

Re:Tax bullshit

[MightyYar]

the corporations would own and pay for everything else.

Like what? A place to live? That is taxable compensation. A car? That is taxable compensation. Food? Taxable compensation. You don't just leave the current rules in place and reduce taxes - you tax money on the way out of the corporation.

If want to go on vacation? My corporation sends me to Paris, for business meetings, meeting potential vendors, or looking at possible expansion sites.

Who cares? They do that right now under the current system. Why does my system get held to a standard that the current system does not? Anything you do to fix this in the current system can be applied to my proposal.

Re:Tax bullshit

[PopeRatzo]

"rebating" it to who? The employees? I'm sure I'm missing something, but please explain how this rebate would work.

I think he's talking about rebating the state income tax withholding money back to the corporation, which is a common way you see states sweeten these corporate deals.

Here's how they work: You work for Company X and you have your 7% (or whatever) withheld from you paycheck by the company. Instead of having to then hand that money over to the state government, the government just tells the corporation, "Oh, you can keep that, and would you also like your dick sucked?"

So, the money is not only taken from the state tax coffers, but it's still being paid by the poor fucking employees. All these "incentive" deals are shitty, but this particular feature is particularly shitty, and they rarely work out to the benefit of anyone but the corporation and the politicians, who go on to claim a "big win". The numbers that the deal are based on never, ever add up. If the corporation promises 50,000 jobs, it turns out to be 5,000, or 500. The tax cuts, and rebates, and credits stay forever, but those jobs end up disappearing eventually because these deals happen most often in "right to work" states, where there can never be enough poor people to satisfy the needs of Capital.

Re:Tax bullshit

[rsilvergun]

When people complain that corporations don't pay their fair share, this is precisely the sort of thing that needs to be stopped. Instead of passing legislation to grant amazon incentives, there should be federal law banning the practice outright.

Bravo sir. If ever there was a legitimate use of the commerce clause that wasn't immediately obvious it is this. When States are pitted against each other it becomes interstate trade.

Re:Tax bullshit

[vux984]

No, I said, "Adjust rates and loopholes to fill any revenue holes."

I read that as simply adjusting the regular tax rates to make your proposal net revenue neutral to the government.

I didn't realize I was supposed to read it as 'fixxing all the hard problems my proposal creates, exacerbates, or perpetuates is left as an exercise to the reader'. :p

Re: Tax bullshit

[stealth_finger]

Sure, because no existing employees will move to this new tax free business from old taxed businesses....

Or spend their untaxed money in places that do pay tax.

Race to the bottom

[rsilvergun]

Marx talked about this in his books but all anyone ever seems to remember about him is Stalin & Mao put his name on their Pamphlets... Not saying he was right about everything, but I think this one's a given.

Re:Race to the bottom

[ShanghaiBill]

Marx talked about this in his books

Karl also (correctly) predicted that it would become more common as interest rates fell toward zero. As the return on capital fades away, capitalists turn to rent seeking at the expense of the taxpayers.

but all anyone ever seems to remember about him is Stalin & Mao put his name on their Pamphlets...

Clearly Stalin and Mao are not what Marx intended, but they were the inevitable result of his ideology. His belief that the dictatorship of the proletariat would remain uncorrupted and "fade away" was completely absurd. Human nature doesn't work that way.

Re:Race to the bottom

[Luthair]

Clearly Stalin and Mao are not what Marx intended, but they were the inevitable result of his ideology. His belief that the dictatorship of the proletariat would remain uncorrupted and "fade away" was completely absurd. Human nature doesn't work that way.

You could make the same argument about democracy, its only worked in a handful of countries.

I think there is a fair argument that dictators didn't come out of Marx.

Re:Race to the bottom

[ShanghaiBill]

You could make the same argument about democracy, its only worked in a handful of countries.

Many dozens of countries economically improved after becoming democratic. Far fewer regressed.

I think there is a fair argument that dictators didn't come out of Marx.

Dictatorships can arise under almost any economic system. Hitler, Mussolini, and Pinochet all got along with capitalists. But capitalism can also thrive in free societies. There is no examples of Marxism doing that. In every instance, it has led to dictatorship, usually reinforced with personality cults.

Amazon and Seattle

[Hylandr]

Pass Stupid Tax Laws, Win stupid Prizes.

With the new tax laws specifically targeting the wealthy this was not a surprise. It's more about clueless young people 'sticking it' to the men and women with the jobs and motivation to build much-needed infrastructure. I can't imagine a better example of cutting off your hand to spite your your fingers.

http://www.latimes.com/nation/...

Detroit, no way

[Bruinwar]

...a million people, a diverse population, and excellent schools, yes Detroit has all that & then some.

But "among other qualifications" includes a good mass transit system... not even close. A proposal to pay for it went down in flames just recently.

oops

[supernova87a]

Too bad Wisconsin already blew its load on attracting factory jobs that require manual labor and will never earn more than $50,000 per year. (minus the $7,000 they pay every year per job)

Mayor of Washington DC is "Bowser"?

[xxxJonBoyxxx]

>> mayor of Washington D.C., Muriel Bowser

The current mayor of Washington DC is "Bowser"? After Marion Barry, I don't think anyone is sure whether the leaders of the city or the voters are kidding anymore.

Just say no

[boudie2]

Given what we all know about amazon, who would want to work for them? And if you wouldn't want to work for them, why would you want to buy anything from them? They're too big already.

Just put it in Lebanon Kansas

[fustakrakich]

It's equally convenient to both coasts.

Re:Just put it in Lebanon Kansas

[nitehawk214]

One of the criteria was that it was near an airport with a non-stop flight to Seattle. Which really makes no sense, why move if you are going to be shuttling back and forth all the time.

My guess is this is a first step in moving the entire company to a cheaper location. A city that is so desperate that they will get to be entirely tax free for the company.

Where [Re:Tax bullshit]

[Geoffrey.landis]

[...] there should be federal law banning the practice outright.

Where in the Constitution is Congress granted the power to set state and local tax policy?

Since this is about interstate commerce, that would be Article I, Section 8, Clause 3.

Re:Where [Re:Tax bullshit]

[vux984]

Not really.

There is a big difference between tax incentives to a specific entity to lure it from state A to state B, and the overall tax regime universally applied within a state.

It would be easy to target one while not touching the other.

Re:hah, DC my ass.

[wired_parrot]

Given that Jeff Bezos owns the biggest house in Washington, as well as the biggest newspaper in DC, clearly the CEO of Amazon wants to be in Washington, DC. And his personal preference may well be the most important opinion in the relocation committee.

Just Wait

[jsrjsr]

Wisconsin GOP will find a way to spend even more money on corporate welfare -- and I think the Dems are mad they didn't get to do it.

ultimate tax dodge?

[rogoshen1]

What would stop a company the size and scope of amazon from building a platform in international waters, and use that as their headquarters?

Seems like it would be the next step in corporate evolution.

Re:ultimate tax dodge?

[notea42]

Yeah, that would be a terrible commute - >12 miles by ferry each way, every day. Admittedly, there's often less traffic to deal with, but you don't tend to get seasick on the Interstate on a regular basis. It's probably not worth doing until you can virtualize most of your workforce and make them telecommute. Even then, it leaves you reliant on a network and power bridge to the mainland, which is not cheap. It does fix your cooling problem somewhat - the ocean is a decent heat-sink.

First, they need a pool to draw top talent from

[bwanagary]

That means great colleges.   It will likely need to be on, or close to, the east coast.  It will have to be corporate tax friendly.  It will need to be easily accessible domestically and internationally - great airports.  They won't want to fish in the same pond as Google, Microsoft etc. for talent - drives up their labor costs.  It will need great communications infrastructure (networking, roads, power ...).

Corporate Giveaways...

[rnturn]

Like they need them.

Wisconsin gave a multi-Billion incentive to Foxconn to locate there. That doesn't include the pass they'll receive in environmental regulations so the vicinity can expect some local pollution. Sweet deal. For Foxconn.

What will Amazon be demanding once they select some sucker^Wcity to be their second headquarters?

It's not a positive if the cash insentives

[rsilvergun]

are more or even the same as the employees salaries. At that point all you've really done is have your city borrow a few billion dollars and give it to a corporation. Heck, it's worse than that, since they got labor on top of that. That's exactly what's going down with Wisconson's Foxconn deal. The question is will another city/state do the same (and stick the tax payer with the bill for their business expenses, which will eventually have to be paid when the bonds come due).

Re:It's not a positive if the cash insentives

[king neckbeard]

Private companies hire employees because they get more benefits from them than the cost of hiring them. Thus, there is no need to incentivize these companies, because they are engaging in theoretically mutually beneficial deals. Thus, anything that is given to them to entice them is an unnecessary wasting of a resource, and efficient allocation of resources is the bulk of the argument for capitalism.

Northern Virginia/College Park MD

[Isaac-Lew]

Northern VA meets most of the requirements: large & diverse population, public transportation, proximity to 2 major airports (3 if you include BWI), good schools, large talent pool to draw upon, lots of other big companies (Mars, Nestle USA) and organizations (Consumer Electronics Association,Grocery Manufacturers Association).

The downsides: the cost of living in general, and housing in particular. Also, you can forget building a sizable facility anywhere close to DC in that part of Virginia at a reasonable cost.

There are some articles saying that College Park, Maryland is putting forth a proposal. It's cheaper to live there, the demographic is younger & there's room to build & expand a headquarters, but the school system sucks (unless your child(ren) is/are in a private or magnet school).