Local politicians run off Amazon - Economics

[Campitor]

We’ll just agree to disagree

Sounds good to me.

[Mister Imperceptible]

I’d rather you two keep lobbing grenades at each other.

[Campitor]

I’d rather you two keep lobbing grenades at each other.

Hahaha! I wasn't debating for the sake of being right. I wanted to sincerely know what I was missing because the benefits would have been substantial. Denying someone a "loan" with a high guarantee of a 10 to 1 return just didn't seem wise to me.

This reminds me of a research paper I read but I can't remember the source. They had 3 individuals do a very easy task but one got paid 10 dollars, the 2nd one was paid 5 dollars, and the last person was paid 3 dollars. I recall they had to sort a stack of papers - each stack sorted netted them money. When the other 2 found out they were getting paid less, they refused to sort any more papers despite the ease and speed in which it could be accomplished. The sum of money at the end of the day, even at the lowest pay rate, was modestly substantial. The scientists were perplexed that people would turn down easy money because of a pay imbalance. Desiring zero money over some money is a logical fallacy. Somewhere someone is making more money for doing the same job - but somehow finding out about it turns people angry despite their previous satisfaction with the job and its pay.

I can't help but feel that NY acted like the guys in that experiment.

[Seppia]

Yup, I wasn’t trying to be angry/confrontational at all and I’m sorry if it sounded so.

The difference in opinion generates by what we consider more important.
Campitor claims amazon deal with NYC is a good deal for NYC and hence they should have taken in. I can’t counter this statement - it makes full economic sense for Nyc

But I’m more of the opinion that I don’t care if the deal was good or not. Amazon is not struggling so they can afford the full tax payment, and accepting such a deal will only incentivize extortive behavior from other similarly not-at-all-in-need-of-subsidies companies.
In the long run, the USA in the aggregate would just have given up tax revenue (similar to the shitshow that the Trump tax cut is turning out to be: lost revenues, an exploding deficit, and no tangible, proportionate benefits for the economy)

[Seppia]

Relevant for my point, this tweet by Anand Giridharas

“You know what would have been even tougher to refuse than Amazon’s future hiring?

Companies saying they would move 25,000 current jobs out of state if they didn’t get some discount.

Everyone claiming this is about those 25,000 jobs alone doesn’t understand the power of example.”

[Mister Imperceptible]

Hehe, just my sense of humor, guys.

Things should get uglier and I’m just trying to maintain my sense of humor.

Still 21 months to go before the next presidential election, Dr. Fisker must be thrilled about moderating these boards.

I’m personally hoping for 21 months of this:

tell them to fuck off and go set up shop in the Nevada desert

It is bad because
THEY
DON’T
NEED
THE
GODDAMN
MONEY

[IlliniDave]

Some interesting ideas got thrown out here. The two that stick out to me (please, no one feel offended, none of this is personal) that I'll distill to their logical extreme as I see it:

-New York should not "do business" with Amazon because the insanely wealthy Bezos doesn't "need" the money.
-New York, with projected revenue shortfalls of close to $2B for the current fiscal year, and leading the nation in people leaving the state (high taxes and tepid business climate among the leading reasons attributed) is foolish to let this opportunity get away given the expected ROI.

I took a devil's advocate position (to a degree) for the latter.

In reality it's a really gray area sort of thing in my mind. For a state with government that prizes high tax revenue the way New York does, it's no surprise the high-level executive politicians (Cuomo and de Blasio) were in on the deal. I'm very sympathetic to the concerns of gentrification. One need only look to SF Bay area to see what a "Tech Industry" can do to a metro area, especially to those who are not part of that industry. Obviously Amazon was not going to employ the entire population of Queens. Jacob pointed out another potential pitfall--things change and businesses can't always meet all their projections (and some businesses may actually enter deals in bad faith). So there was no guarantee things would have worked out the way some of the projections went. At the same time, reward often requires the taking of risk. On the other side there's the "evolve or die" philosophy often applied when discussing flyover country, especially my native rust belt. The short-term pain is often glossed over when people dismiss calls or even efforts to revitalize those areas with minimal disruption. Not a clear black/white situation depending on the perspective from which you view it.

[Jason]

Relevant for my point, this tweet by Anand Giridharas

“You know what would have been even tougher to refuse than Amazon’s future hiring?

Companies saying they would move 25,000 current jobs out of state if they didn’t get some discount.

Everyone claiming this is about those 25,000 jobs alone doesn’t understand the power of example.”

And this doesn't go on every single day?

A major component of the real estate game is the threat to move jobs based upon the benefits another municipality is offering. It's Game of Thrones shit in this region. New York vs. New Jersey. New Jersey vs. Pennsylvania. Grow areas, opportunity zones, tax abatements all centered on the creation of jobs. Family owned entrepreneurial companies leverage it every day. It's part of the landscape. They don't "need" it to survive. They are a business looking to maximize profits. Any business that is not tethered to a specific locale looks into these things. Amazon is merely optimizing its leverage.

Seppia, I like you. You are my favorite Italian outside my wife and maybe DeNiro. But it's like you are rummaging through Alexandria Ocasio-Cortez's underwear drawer here.

[Seppia]

@Dave: thanks for being an adult in the room. I'm clearly getting too emotional on this.
@Jason: I don't blame amazon for trying*, but I'm happy their use of leverage failed in the end. See Tyler's link a few posts above for the reason why

*thats a lie: I do blame them for trying because I'm a relentless romantic (I'm Italian, I'm compelled to be romantic) and I wish multi billion dollar companies that dominate the world would sometimes try think bigger picture instead of being super selfish.

[7Wannabe5]

"autonomous pricing algorithms increasingly used by online vendors may learn to collude. . . Most worrying is that they learn to collude by trial and error, with no prior knowledge of the environment in which they operate, without communicating with one another, and without being specifically designed or instructed to collude. . . Already in 2015, more than a third of the vendors on Amazon.com had automated pricing"

This was happening long before 2015. It's not really any more ominous than checking Zillow pricing before putting up your own home for sale by owner. On readily available goods (most stuff), the price race is usually fairly quick to the bottom. On rare, slow-moving items, such as out-of-print books, the race is usually slow to the bottom, with the occasional upward bump. It is only with high demand, time sensitive items, such as this year's hot Xmas toy, that there will be a rapid rise upward which might smack of the sort of collusion which might be of concern.

Anyways, the reason why I think it is stupid for any municipality to give these sort of concessions is that in order for economic growth to continue at current size of economy, benefits for the community will not be derived before business goes belly-up in the face of creative destruction OR the global economy collapses. IOW, 30 years is WAAAAAAY to long for specific planning in the current environment.

[Mister Imperceptible]

Charlie Munger chimes in. Maybe its not so bad living into your 90's.

https://www.marketwatch.com/story/charl ... op_stories

I watched the interview.

Lots of nuggets:
-Rome and Britain fell, so will the US.
-We cannot print money forever
-Stay cheerful! Stay cheerful!

I'm a relentless romantic

This just means you are alive. I hope we do not become perfectly logical and humorless flesh robots.

[Jason]

@Jason: I don't blame amazon for trying*, but I'm happy their use of leverage failed in the end. See Tyler's link a few posts above for the reason why

But that's the very point. Amazon didn't fail in the end. Queens did. There will be plenty of other opportunities.

[Seppia]

This latest from Scott Galloway pretty much sums up how I think.
I believe it’s an interesting read from a guy who’s been studying tech for a while.
https://www.profgalloway.com/hq-451

[thegreatvoid]

Seppia, I like you. You are my favorite Italian outside my wife and maybe DeNiro.

Isn't Robert De Niro american ? Or is Zuckerberg German ...

[Campitor]

This latest from Scott Galloway pretty much sums up how I think.
I believe it’s an interesting read from a guy who’s been studying tech for a while.
https://www.profgalloway.com/hq-451

I believe every major decision has to be weighed dispassionately and logically. It is logical to argue that giving tax breaks to Amazon is unfair or could incentivize current businesses to blackmail NY with an exodus if they don’t get one. This is a legitimate concern.

So first off lets get NY's official stance on Corporate/Business tax incentives (source: https://esd.ny.gov/doing-business-ny/ta ... incentives):

”Tax credits and incentives give New York State businesses a competitive edge. You’ll find all forms of tax incentives, business incentives and tax credits in New York State, all designed to benefit small or expanding businesses as well as film and TV production companies...We use tax credits and financial incentives to help businesses invest in their workforce, locate in strategic areas and improve their facilities.”

Looks like this quid-pro-quo of tax incentives for doing business in NY has been around for a while. Especially in light of the perks to the TV/FILM industry.

(https://esd.ny.gov/industries/tv-and-film):

The success and stability of New York State’s Film Tax Credit Program over the past seven years has contributed to tremendous growth in industry confidence and in the production of films, television series and pilots in New York. The rise in television series has been particularly dramatic; the number of series applications has grown every year since Governor Cuomo took office in 2011, extended the tax credit program through 2019, and then again through 2022.  Series applications have more than quadrupled, from 14 applications in 2010 to 72 in 2017. Those 72 television series spent a total of almost $3 billion in 2017, with each series averaging over $41 million in spending and 2,232 hires per season.
New York’s film industry infrastructure also has seen growth at every level...In addition to up to 40% in tax credits (45% for post), the New York State Governor’s Office of Motion Picture & Television Development offers productions location scouting assistance and hands-on problem solving and logistics support, with a statewide network of more than a dozen regional film offices helping to find  film-friendly and camera-ready locations.”

It looks like tax breaks (40%) spur development and jobs. I guess NBC Universal (hardly a pauper) has it good with all these tax breaks but it’s been a success according to NY. And if you dig around you’ll see that NY has approximately 437 million dollars budgeted just on this perk alone.

And if your developing property or improving an existing property, NY will give you a 25 year tax abatement (source:https://www1.nyc.gov/site/finance/benef ... ction.page): ”This program provides abatements for property taxes for periods of up to 25 years. To be eligible, industrial and commercial buildings must be built, modernized, expanded, or otherwise physically improved. ICAP replaced the Industrial Commercial Exemption Program (ICIP) which ended in 2008. Previously approved ICIP benefits were not affected.”

Wandering around this NYC.gov site reveals there is a multitude credits for businesses - small and large. NY is tripping over itself on providing business tax credits. So Amazon was selecting to do what other businesses are already doing.

And this threat of leaving NY if tax breaks aren’t provided, was a tactic used by JP Morgan (#1 employer in NY) in 2014 and unlike the Amazon deal, that required fulfillment of commitments before tax credits would be given, JP Morgan was given tax credits with no strings attached. JP Morgan welched on the deal and got NJ to give them a tax break to relocate employees. Source: https://www.nytimes.com/2014/10/17/nyre ... -news&_r=0 and https://www.goodjobsfirst.org/jpmorgan- ... idy-effort). So the cat was out of the bag on the “give me tax breaks or I leave” conundrum. And JP Morgan is worth 2.1 Trillion and was NY’s #1 employer and #2 in revenue - Amazon is worth 1 Trillion.

NY is too expensive - it's these breaks that keep businesses from leaving and new businesses coming. I imagine that companies would seek to create or relocate to a new commerce hub if those NY tax breaks stopped.

[7Wannabe5]

“...most girls don’t want to tell their friends that they bought a dress from Amazon.”- Richard Saghian CEO Fashion Nova

[Jason]

Isn't Robert De Niro american ? Or is Zuckerberg German ...

https://mitpress.mit.edu/books/beyond-m ... nd-edition

[CS]

https://www.zerohedge.com/news/2019-02- ... game-loses

I found the city income tax an excellent point. It is nearly 4%. No matter how far out you live, NYC will still get its money.

Working in Columbus, Ohio was my first experience with a city income tax. It was only one something percent (1.4? I can't remember). But it was a shock!

Frankly, considering the fact that city is going to be underwater in 25 years (literally), I really think it was mistake on the resident's part. But that hardwired 'fairness' thing is hard to shake. And unlike Seattle, New Yorkers will get in your face and yell at you about it. Culture shock for Amazon perhaps. They certainly don't allow anyone else to have a say - be it their vendors or authors.

I spent a month (and a considerable amount of money) in 2007 for a film program in Manhattan. We were able to shoot on the streets, get free permits from the city and all sorts of understanding from the cops for filming. And there were people from all over the country at that school. That never would have worked without the strong film incentives in the city. Somehow the residents are okay with that. I think the Amazon thing was too sudden, and not pitched right, etc. It is not incentives so much as how things are framed, i.e. 'this is different'. Amazon has little to no people skills in some ways.

[7Wannabe5]

Will New York be underwater before Amazon goes the way of KMart and Sears? Based on my research involving Korean pop loving 12 year olds, and concerned scientist regional forecasts, I think not.

[CS]

It took Sears 80 years to die.