Local politicians run off Amazon - Economics

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IlliniDave
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Local politicians run off Amazon - Economics

Post by IlliniDave » Thu Feb 14, 2019 9:26 pm

News tonight is Amazon decided to back out of their plans to put a co-HQ in NYC due to pressure from local politicians.

I really don't have much expertise in economics beyond the personal/family level.Help me out here, please.

The sticking point was the $3B in future tax breaks in return for 25,000 jobs and revenue from corporate taxes above the $3B. The governor must have thought it was a good deal for the state because he's reportedly furious. The logic for the resistance was ~ "If we can afford to give $3B to the richest man in the world, then we should instead spend $3B on <a bunch of other stuff>. I'm guessing the payroll for the HQ would be at least $1-$2B/year, likely more so even without the incentives in 20-ish years the state would get get $3B from individual taxes. Even if the incentive is 0% corporate tax up to $3B, if the tax breaks are spread over the same time span, in 20 years it's a wash, then afterward it's a boon. In the meantime 25,000 people have jobs. Nix the deal and there's no jobs and no future revenue stream. There is no $3B to spend on other things. I see it as a bad move on the part of the local politicians.

People who know more economics than I do: am I incorrect, and if so why? I just don't get the logic.

My community/this part of my state is booming, in part from aggressively incentivizing businesses to come (and no, ringworm is not a problem here). Just broke ground (or are about to) on a new Toyota plant, Facebook is building a new facility, those two alone bringing something like 6,000 jobs (albeit probably lower paid than Amazon HQ gigs), and many lesser known names. Even putting the economics aside, I don't understand why politicians would throw local citizens (or future citizens) and longer term tax revenue under the bus because of a perception of missing out on a hypothetical short term tax revenue boon (that without the incentives would be $0).

Seppia
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Re: Local politicians run off Amazon - Economics

Post by Seppia » Thu Feb 14, 2019 10:11 pm

My point would be:
1- amazon is going to open a second HQ anyway, why should different places in America compete and bid against themselves?
2- what is the rationale for giving tax breaks to the largest company in the world, that hasn’t paid a dime in taxes in ages? How would that not be unfair to other businesses? It’s a susbsidy to amazon and it distorts competition.
3- I also have a philosophical issue with this, similarly to when billionaire NBA franchise owners making tons and tons of money extort communities into subsidizing their new stadium: you don’t need the fucking money. If nobody caved, they would build it themselves. It’s not a struggling business.
Pay your fair share like everybody does.

thegreatvoid

Re: Local politicians run off Amazon - Economics

Post by thegreatvoid » Thu Feb 14, 2019 10:31 pm

I am 20-something that has never bought/ will buy anything from AMZ . Despise this company so much.
Subsudies are the wost.
My country has a lot of subsudies, that are so complex that only the big companies, that can afford expensive lawyers , can benefit from them.

Mister Imperceptible
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Re: Local politicians run off Amazon - Economics

Post by Mister Imperceptible » Thu Feb 14, 2019 11:18 pm

But ultimately, politicians mostly will cave and give the tax incentives, because capital goes where it is treated best.

This is not just about the numbers here, this is big business sending a message.

And I do not like that Amazon exploits the system by paying its employees so little that the employees are forced to apply for government benefits.

NYC local real estate brokers are losing their shit and saying it will be the early end of a career for certain local politicians (hello, AOC).

It’s a race to the bottom whenever big business and socialist liberals scurry to the trough of presumably endless other people’s money.

Everyone thinks the world revolves around them. Jeff Bezos and AOC, either way it’s “me me me.”

I am just sitting here laughing.

Chris
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Re: Local politicians run off Amazon - Economics

Post by Chris » Thu Feb 14, 2019 11:48 pm

Mister Imperceptible wrote:
Thu Feb 14, 2019 11:18 pm
And I do not like that Amazon exploits the system by paying its employees so little that the employees are forced to apply for government benefits.
Are there current Amazon fulltimers who are on government benefits? $15 * 40 * 52 = $31200 , well above the US poverty level of $13k.

Tyler9000
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Re: Local politicians run off Amazon - Economics

Post by Tyler9000 » Thu Feb 14, 2019 11:59 pm

I'm no fan of massive tax breaks for things like sports stadiums and corporate campuses so I'm certainly not defending the perks Amazon demanded. But if you're gonna hold the line as a city you do it during the bidding process not after it starts to affect real lives. The way local politicians nixed this at the last minute for their own political purposes is likely going to come back to bite them and seriously harm their own constituents. Despite the noise from the vocal minority, Amazon had high public support in Queens. Now all of those jobs are gone and the real estate issue is going to legitimately ruin people. Note that this also comes after Citibank pulled 1100 jobs out of the same city to make room for Amazon and Citi has already said they're not coming back. And with neophyte fools like AOC on camera showing their ignorance by claiming that the $3 billion can now be spent elsewhere, there's no pretending that they actually know what they're doing. It's a complete mess.

Campitor
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Re: Local politicians run off Amazon - Economics

Post by Campitor » Fri Feb 15, 2019 12:02 am

Amazon probably wanted to defray the cost of building in New York City, a town that is notorious for costing $354 dollars per square foot to build. The cost of waste disposal, unions, trash removal, zoning, delivery, traffic planning, etc., would cut deeply into the money needed to erect a facility that would employ 25,000 people and house hundreds of thousands of line items. Amazon was planning to build a 4 million square foot building. 4 million x 354 = 1.416 billion.

Better to build somewhere cheaper if you're not going to get tax breaks. Either way Amazon wins and NYC residents lose out. Amazon was planning to expand the square footage and the number of people employed as the business grew. Amazon was projected to generated 27 billion to 137 billions dollars in tax revenue for NY over 25 years. Paying 3 billion to get 27 billion sounds like a sweet deal to me.

Mister Imperceptible
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Re: Local politicians run off Amazon - Economics

Post by Mister Imperceptible » Fri Feb 15, 2019 12:26 am

https://www.businessinsider.com/amazon- ... mps-2018-8

https://www.snopes.com/fact-check/amazo ... od-stamps/

Let’s not forget the huge amount of money that flows into Amazon as a result of monetary policy.

Bezos is smart but he has help too. It’s not a free market.

I do get a chuckle out of NYC getting its balls kicked.

IlliniDave
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Re: Local politicians run off Amazon - Economics

Post by IlliniDave » Fri Feb 15, 2019 4:07 am

Chris wrote:
Thu Feb 14, 2019 11:48 pm
Are there current Amazon fulltimers who are on government benefits? $15 * 40 * 52 = $31200 , well above the US poverty level of $13k.
This wasn't going to be just a fulfillment center. After I posted my OP I read Amazon had "promised" the average salary would be $150,000/yr and that the number of jobs would increase and could hit 40,000 ultimately.

IlliniDave
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Re: Local politicians run off Amazon - Economics

Post by IlliniDave » Fri Feb 15, 2019 4:41 am

Seppia wrote:
Thu Feb 14, 2019 10:11 pm
My point would be:
1- amazon is going to open a second HQ anyway, why should different places in America compete and bid against themselves?
2- what is the rationale for giving tax breaks to the largest company in the world, that hasn’t paid a dime in taxes in ages? How would that not be unfair to other businesses? It’s a susbsidy to amazon and it distorts competition.
3- I also have a philosophical issue with this, similarly to when billionaire NBA franchise owners making tons and tons of money extort communities into subsidizing their new stadium: you don’t need the fucking money. If nobody caved, they would build it themselves. It’s not a struggling business.
Pay your fair share like everybody does.
In the US all places aren't the same, and Americans compete against each other all the time. In my state taxes are much lower than in NY, especially in NYC. Is my state subsidizing business (and me and its other residents for that matter), or is my state "fair" and therefore is NY stealing from both business and residents? What is fair? What does it benefit NYC and NY state when Amazon puts the campus and hires tens of thousands in another state? It's not like business are lined up around the block to spend > $2.5B to build and add 25,000-40,000 jobs with a very high average salary in Queens.

The politicians' arguments seem rooted in disdain of the wealthy.

There are issues that go along with influxes of high paying jobs into urban areas, to be sure, and there would be losers. NY state is already projecting something like a $1.5B state revenue shortfall this year. Whose fault is that?

I'm no fan of Bezos, and I notice that he switched from NYC to the Washinton DC area (home of the bulk of the wealthiest counties in the nation)--either choice being an obvious move to gain favor with powerful Democrat political hubs on the East Coast. Having grown up in the rust belt I tend to look at it from the economic perspective of the little people that actually live in the communities rather than focusing on corporations as villians.

tonyedgecombe
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Re: Local politicians run off Amazon - Economics

Post by tonyedgecombe » Fri Feb 15, 2019 4:46 am

Mister Imperceptible wrote:
Thu Feb 14, 2019 11:18 pm

It’s a race to the bottom whenever big business and socialist liberals scurry to the trough of presumably endless other people’s money.
Isn't the governor who is "furious" about this a Democrat?

Your constant political jabs end up marring what would otherwise be an interesting discussion.

IlliniDave
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Re: Local politicians run off Amazon - Economics

Post by IlliniDave » Fri Feb 15, 2019 5:01 am

tonyedgecombe wrote:
Fri Feb 15, 2019 4:46 am
Isn't the governor who is "furious" about this a Democrat?

Your constant political jabs end up marring what would otherwise be an interesting discussion.
He is, and one who generally leans substantially far left within that group. Bezos also seems to, on balance, align with Democrats. I don't know exactly where MI was going but this is really starting to move beyond Democrat vs Republican politics into the realm of the core philosophies/principals that define the stage on which politics historically function here. But all that is beside the point. I was really trying to focus on the economics in the OP to determine if my simple-minded view of economics (future tax revenues > incentives = economic win for gov't; more higher paying jobs = economic win for community) is fundamentally flawed. The problems where economics and social philosophies clash is a different one, and how politicians exploit that landscape is a third. I was hoping to stay away from the latter two since it is too likely to get contentious. I probably erred and maybe should not come around here at the end of the day when I'm tired.
Last edited by IlliniDave on Fri Feb 15, 2019 5:12 am, edited 1 time in total.

Seppia
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Re: Local politicians run off Amazon - Economics

Post by Seppia » Fri Feb 15, 2019 5:08 am

IlliniDave wrote:
Fri Feb 15, 2019 4:41 am
In the US all places aren't the same, and Americans compete against each other all the time. In my state taxes are much lower than in NY, especially in NYC. Is my state subsidizing business (and me and its other residents for that matter), or is my state "fair" and therefore is NY stealing from both business and residents?
I think a point that gets often missed is that businesses also receive a great deal from the public.
They benefit from a functioning infrastructure system in terms of easy transportation and movement of goods, they benefit from the school system in the form of good and productive employees, etc.
All this is paid for with taxes.

Do you really think amazon could set up HQ2 in Nowhere, Alabama and get access to the same pool of talent?
They also have an interest in being in a major, thriving metro area.

I don’t know exactly what “fair” is, but I can tell you that a system in which a gigantic and thriving business gets tax breaks and Tony’s Pizza in Queens doesn’t certainly isn’t my definition of “fair”.

I’m extremely old school and I prefer to think that people and businesses shouldn’t always and under any circumstance try exert as mush leverage as possible to squeeze as much as possible from others.

Amazon wants a tax break? All major metro areas should think about their collective benefit and tell them to fuck off and go set up shop in the Nevada desert, or pay taxes like everybody else.
I’m far from being “anti corporations” but I want them to be tretated like everybody else.

Seppia
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Re: Local politicians run off Amazon - Economics

Post by Seppia » Fri Feb 15, 2019 5:16 am

IlliniDave wrote:
Fri Feb 15, 2019 5:01 am
I was really trying to focus on the economics in the OP to determine if my simple-minded view of economics (future tax revenues > incentives = economic win for gov't; more higher paying jobs = economic win for community) is fundamentally flawed.
If you look at it from a strictly local perspective (ie: NY) it may be worth it to give tax breaks and get the big fish, but looking at it from a broader perspective (ie: all USA), I think it’s a losing proposition: the obvious long term effect is a race towards zero where different local communities will undercut each other and the only winners will be big businesses

IlliniDave
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Re: Local politicians run off Amazon - Economics

Post by IlliniDave » Fri Feb 15, 2019 5:33 am

Seppia, fair points, which if locales are going to be rigid then NY would have likely been eliminated from the start. As it happens, one could argue that Amazon tried to find a compromise but could not and moved their plans south like so many others. Meanwhile the state of NY complains about increasing revenue shortfalls and maybe some residents pack up and head to Virginia to take a higher paying job along with the resulting revenue, and lowering the flow of customers into Tony's Pizza on the corner. The best solution for NY arguably would be to lower taxes for everyone if attracting new business and residents is a priority (various parties in NY apparently don't share that as a priority), certainly would be more fair if fairness is defined by tax rates.

IlliniDave
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Re: Local politicians run off Amazon - Economics

Post by IlliniDave » Fri Feb 15, 2019 5:41 am

Seppia wrote:
Fri Feb 15, 2019 5:16 am
If you look at it from a strictly local perspective (ie: NY) it may be worth it to give tax breaks and get the big fish, but looking at it from a broader perspective (ie: all USA), I think it’s a losing proposition: the obvious long term effect is a race towards zero where different local communities will undercut each other and the only winners will be big businesses
Is that true though? That argument is essentially that economic competition is a bad thing. And nowadays, the competition is not limited to intra-US competitors.

niemand
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Re: Local politicians run off Amazon - Economics

Post by niemand » Fri Feb 15, 2019 5:51 am

Long Island City, Queens, NY is a neighbourhood of 70,000 people that would have 25,000 additional HQ2 tech-workers descend on them each day if Amazon had gotten it’s will.

HQ2 staff is being recruited from around the world, not many will be current Queens residents. Many of the new staff will look to live near the HQ2.

Since the average local Queensylvanian doesn’t have tech worker skill set and doesn’t make $120k pa on average as the HQ2 Amazonians do, some 40% (not the majority!) are/were concerned about an even faster gentrification, property and rent becoming more unaffordable, public services getting more stretched, the subway getting clogged, restaurants getting too pricey/fancy for them, etc.

In short they were worried about the change the HQ2 would bring to their neighbourhood and if this change would still leave space for them to live their old lives.

While it may make sense economically to have HQ2 in Queens, the opportunity cost as perceived by 40% of local residents is quite high. Better no change than a potential negative change. Also 80% of Queens residents didn’t really feel they were consulted/heard during the tender process, so here’s the (populist) political backlash. Maybe Amazon isn’t tough enough for NY, eh?
Last edited by niemand on Fri Feb 15, 2019 6:36 am, edited 1 time in total.

cimorene12
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Re: Local politicians run off Amazon - Economics

Post by cimorene12 » Fri Feb 15, 2019 6:34 am

https://www.nytimes.com/2019/02/04/nyre ... veto.html

Yeah, I agree with niemand's take.
The ability of a local legislator to block the deal to bring a major new Amazon campus to Long Island City was exactly what Mr. Cuomo and Mayor Bill de Blasio had tried to avoid when they decided to use a state development process and to bypass more onerous city rules. Opposition, while vocal, seemed futile.
And then State Senator Michael Gianaris came in.

Cuomo's statement:
However, a small group politicians put their own narrow political interests above their community — which poll after poll showed overwhelmingly supported bringing Amazon to Long Island City — the state’s economic future and the best interests of the people of this state. The New York State Senate has done tremendous damage. They should be held accountable for this lost economic opportunity.
https://www.governor.ny.gov/news/statem ... cuomo-196

slsdly
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Re: Local politicians run off Amazon - Economics

Post by slsdly » Fri Feb 15, 2019 6:57 am

Toronto's bid contained no tax breaks or financial incentives and it was not eliminated right out of the gate. Mind you, I am suspect of the entire process. This is not a formal tendering process, and as such, Amazon has no obligations to those who make bids. They could just be using this to extract concessions from places they were going to build up anyways. I don't see the huge Amazon office here going anywhere because we didn't offer up the public treasury to them.

Jason
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Re: Local politicians run off Amazon - Economics

Post by Jason » Fri Feb 15, 2019 7:57 am

Hopefully Queens will have a chance to learn from this mistake at the beginning of the 22nd century.

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