Amazon HQ2 and Government Incentive

Obviously Amazon pulling out of NY HQ2 is big business news and I have been trying to hear from both sides about the situation...I honestly cannot decide whether one side is "right" or "wrong"

I get the straight economics of it...25K jobs and potentially $25 billion in economic infusion into the area...but question is whether that is good for the local area or people.  A lot of these place are so insular that local business would see very little gain. 

On the flipside, you are going to be displacing a lot of local people whether it be directly or indirectly.  Bay Area and California as a whole are prime examples...you have a group of people who are very well paid and drive up costs/RE prices but middle/lower classes people are being squeezed and pushed out. 

We have not even gotten to whether government should be offering private companies financial incentives to come to a particular area in a quasi-blackmail/corruption type set up. 

I am curious to hear the views of TI members.  I would appreciate an economic/social discussion and to leave out the politics as much as possible.  Thanks.

this would have been a clear net benefit for the community.

the downsides, as you mention, are local renters who get priced out and may need to move or their way of life is upside down.  but please explain why you think local businesses would see little gain?  everyone from the dry cleaners to the mom and pop sandwich shop down the street are going to see huge gains in business from 25,000 highly paid white collar workers that have extra cash to spend.  okay, maybe the payday loan office will have to move on.... :

the government incentives are a benefit with no negatives to speak of.  let's be straight, amazon is not going anywhere that is not offering incentives, so whether amazon goes somewhere or not, taxes from amazon as a company to the local government are pretty much nil in both scenarios. what indirect taxes to the local government increase? tot taxes, property taxes, state income tax revenue, sales taxes from increased purchasing power by highly paid workers, and on and on. new york lost out big time on this one.

There are a lot of cities vying for HQ2.  If NY can't come up with a better offer, someone else will, and did.
However, I don't think NY lost anything.  They are poorer for it, but that doesn't mean they lost. 


Prob a better thought is renters won, landlords lost.

Imagine if Disney pulled up stakes in Anaheim and moved where they could build a larger park. What if Panasonic or Broadcom completely bailed on OC? What would the economic consequences be?

Yes, it was a taxpayer subsidy, but the long term benefits outweighed all of the short term giveaways. Once a company puts down deep roots, the odds of them leaving after the subsidies are gone is highly unlikely.

This was a boneheaded move by all parties. Amazon thought they could muscle their way into NY - and for a while it seemed like they could. NY decided to push back, demanding all sorts of really dumb programs and benefits. They got a reply from Bezos they deserved: " You want something? I'll give you Zero. How does Zero sound?"

Our tax laws need to change so big companies will pay taxes, or at least be banned from receiving tax credits beyond what society deems reasonable. That's a discussion though for another thread.

My .02c

Kings said:

this would have been a clear net benefit for the community.

the downsides, as you mention, are local renters who get priced out and may need to move or their way of life is upside down.  but please explain why you think local businesses would see little gain?  everyone from the dry cleaners to the mom and pop sandwich shop down the street are going to see huge gains in business from 25,000 highly paid white collar workers that have extra cash to spend.  okay, maybe the payday loan office will have to move on.... :

the government incentives are a benefit with no negatives to speak of.  let's be straight, amazon is not going anywhere that is not offering incentives, so whether amazon goes somewhere or not, taxes from amazon as a company to the local government are pretty much nil in both scenarios. what indirect taxes to the local government increase? tot taxes, property taxes, state income tax revenue, sales taxes from increased purchasing power by highly paid workers, and on and on. new york lost out big time on this one.

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Most of these campuses are self-contained.  A lot of the stores near these megabusiness hubs are actually doing poorly because workers stay inside the campus to eat and the area basically shuts down at night.  New business will move in to cater to the new workers but that would displace the existing businesses.  It is a real thing.
https://www.sfchronicle.com/busines...w-s-unusual-rule-for-Facebook-No-13096100.php

Yes, the community as a whole may get better but the people that are already there have a legitimate gripe.

There is a lot of downside for local governments too...they need to ramp up infrastructure and support (i.e. schools) while rents and other things are likely to increase.  There are studies about these things.
https://www.citylab.com/life/2017/03/business-tax-incentives-waste/518754/
https://slate.com/business/2017/03/...work-and-cost-the-u-s-45-billion-in-2015.html
http://www.governing.com/columns/tr...e/col-why-states-play-tax-incentive-game.html
https://newrepublic.com/article/151133/enduring-scam-corporate-tax-breaks

For a local example...look at Broadcom.  They made this huge investment to move people and then decided to not move in at all.  I don't know if Irvine/California gave them anything for it but Irvine certain had to redo some infrastructure in the area.

GE did the same in Boston:
http://fortune.com/2019/02/15/general-electric-boston-tax-incentives/

Soylent Green Is People said:

Imagine if Disney pulled up stakes in Anaheim and moved where they could build a larger park. What if Panasonic or Broadcom completely bailed on OC? What would the economic consequences be?

Yes, it was a taxpayer subsidy, but the long term benefits outweighed all of the short term giveaways. Once a company puts down deep roots, the odds of them leaving after the subsidies are gone is highly unlikely.

This was a boneheaded move by all parties. Amazon thought they could muscle their way into NY - and for a while it seemed like they could. NY decided to push back, demanding all sorts of really dumb programs and benefits. They got a reply from Bezos they deserved: " You want something? I'll give you Zero. How does Zero sound?"

Our tax laws need to change so big companies will pay taxes, or at least be banned from receiving tax credits beyond what society deems reasonable. That's a discussion though for another thread.

My .02c

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Taking an existing economic base/source of jobs away is very different than potential investment into an area.  There are a lot examples where the investment never materialize or materialize in a way that significant less rosy than originally projected.

This whole thing also sets up a perverse system where cities try to outbid each other...at what point is it too much?  I mean cities/municipalities went through this with sports stadiums where teams constantly threaten to leave unless they got a newer/fancier place. 

IC makes many good points . I think cities should not be in the business of being blackmailed by large companies . Today?s it?s amazon , tomorrow what if chase wants 10bn from nyc in tax breaks or else ...

Ultimately this would have benefited real estate hustlers more than anything else even if a few locals manage do to snag some jobs

Amazon is paying zero taxes to the feds despite having the largest market cap in the world . I know the accountants will jump all over this and say if there are loopholes why not use them but in the larger picture this does not work for the economy as a whole .

fortune11 said:

Amazon is paying zero taxes to the feds despite having the largest market cap in the world . I know the accountants will jump all over this and say if there are loopholes why not use them but in the larger picture this does not work for the economy as a whole .

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You should dig into the details on why Amazon's federal tax liability is 0.  I think what they do to minimize their liability is much better than what other companies are doing - ie. funneling profits to offshore subsidiaries and declaring itself as a foreign company.  I have no issue of how they are lowering their tax liability as other public companies do the exact same thing.  Amazon is an easy target due to it's massive market cap and richest man in the world CEO.

Irvinecommuter said:

Most of these campuses are self-contained.  A lot of the stores near these megabusiness hubs are actually doing poorly because workers stay inside the campus to eat and the area basically shuts down at night.  New business will move in to cater to the new workers but that would displace the existing businesses.  It is a real thing.

Click to expand...

I believe Amazon is different. Their approach to building HQs is to encourage their workers to be part of the area they work in, to eat and do business with locals:
https://qz.com/306558/why-theres-no-such-thing-as-a-free-lunch-for-amazon-workers/

It's an older article but some people who work at Amazon told me the same story but more from an angle that Amazon is cheap and doesn't actually pay well or have great office benefits (like a cafeteria, gym, etc).

And was the NY location also a warehouse? Those workers are not highly compensated (also mentioned in the article) so not sure if rents can go up that much.

woodburyowner said:

fortune11 said:

Amazon is paying zero taxes to the feds despite having the largest market cap in the world . I know the accountants will jump all over this and say if there are loopholes why not use them but in the larger picture this does not work for the economy as a whole .

Click to expand...

You should dig into the details on why Amazon's federal tax liability is 0.  I think what they do to minimize their liability is much better than what other companies are doing - ie. funneling profits to offshore subsidiaries and declaring itself as a foreign company.  I have no issue of how they are lowering their tax liability as other public companies do the exact same thing.  Amazon is an easy target due to it's massive market cap and richest man in the world CEO.

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Wasn?t the new tax code supposed to put an end to all these shenanigans ? Didn?t do jack . And just because ?you have no issue ? doesn?t mean this is not an issue with the vast majority of Americans .

The system we have in this country is corporate welfare and socialism for the ultra wealthy but brute capitalism for the middle class . And I say this having consulted for large corporations for 15 plus years

fortune11 said:

Wasn?t the new tax code supposed to put an end to all these shenanigans ? Didn?t do jack . And just because ?you have no issue ? doesn?t mean this is not an issue with the vast majority of Americans .

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The tax law went into effect after Amazon engaged in this offshoring activity.  I mean this is an obvious strawman troll on your part, but I thought I'd just point out how silly your argument is.

irvinehomeowner said:

Irvinecommuter said:

Most of these campuses are self-contained.  A lot of the stores near these megabusiness hubs are actually doing poorly because workers stay inside the campus to eat and the area basically shuts down at night.  New business will move in to cater to the new workers but that would displace the existing businesses.  It is a real thing.

Click to expand...

I believe Amazon is different. Their approach to building HQs is to encourage their workers to be part of the area they work in, to eat and do business with locals:
https://qz.com/306558/why-theres-no-such-thing-as-a-free-lunch-for-amazon-workers/

It's an older article but some people who work at Amazon told me the same story but more from an angle that Amazon is cheap and doesn't actually pay well or have great office benefits (like a cafeteria, gym, etc).

And was the NY location also a warehouse? Those workers are not highly compensated (also mentioned in the article) so not sure if rents can go up that much.

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Amazon is known for having poor working conditions, and not just for the factory workers but also for the white collar workers.  There was a NY Times write up about it some time ago and Amazon got a lot of flak for it at the time. 

I have been contacted by recruiters for jobs in their Irvine office before and I just said no thanks.  It's not worth the mental anguish that comes with working in that type of environment no matter how good the pay is.  Plus I like spending time with my family and I don't think an Amazon career is conducive to that.

Irvinecommuter said:

We have not even gotten to whether government should be offering private companies financial incentives to come to a particular area in a quasi-blackmail/corruption type set up. 

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This is the part of the whole search for a HQ2 that I thought was obscene.  When Alexandria Ocasio-Cortez brought up the corporate welfare New Yorkers would be paying to Amazon, that was the moment I fell in love with her as a politician. 

Even though most of her ideas are wacky, she does a lot of things that I admire.  She gives establishment Democrats (and Republicans) heartburn and is a master at using the media to her advantage.  I mean she really is the Democrats answer to Trump that they've been looking/hoping/praying for.  Notice how all of the presidential candidates are lining up to adopt her ideas because it resonates so well with the grassroots.

"AOC has what I call 'gameness' or competitive heart - the combination of grit, determination, fighting spirit that you can't coach," Stephen Bannon, President Trump's former chief strategist, told Politico in an interview released early Wednesday.

"You either have it or you don't, and she has it big league," he continued.

"I think her policies and everything are a disaster but I just look at her effectiveness," conservative activist Mike Cernovich told the news outlet. "No one's more effective than her right now."

https://thehill.com/homenews/house/427592-top-conservatives-offer-praise-for-ocasio-cortez

Hate the game. But she?s well respected by the other side.

I have been pointing to AOC since last year before the midterms as the one to watch ?- a real game changer . And the conservative media is really flailing this time as nothing they slap at her , sticks.  There was some lame ass story by one of the right wing cesspool sites on how she was paying her boyfriend under the table even that turned out to be a dud - as she quickly exposed the whole slander attempt through Twitter.

This is what she is teaching the democrats ? be quick on your feet and over expose so the other side has nothing to hold you on .

This is the one thing the Old fogey dems need to learn - be in the attack mode, not on defense all the time . I remember when Hilary Clinton tried to hide her temporary sickness- was so foolish and gave rise to all sorts of wacky right wing conspiracy theories on Facebook .

AOC is giving Trumpsters the same medicine that Trumpsters/Trump has been feeding to GOP and the rest of the country.  Say a bunch of things and one of them will stick. 

I have no problems with AOC in the Dem party.  She is voicing the concerns of a particular group of individuals that do not feel represented.  The Amazon HQ2 issue is a perfect example of that.  She is voicing the concerns of those who are living there now and will be displaced/pushed out if Amazon takes over.  One may think that they are shortsighted or economically silly but their grievances are real and directly impact them.

Listening more discussion about this issue, Amazon clearly wanted to do what it did in Seattle in NYC...which doesn't work for a place like NYC.  You should be interested to working with local government and population.