It's all about tax breaks. This is a blatant attempt by Amazon to get years of taxes abated in order to provide the increased regional economic benefit of... doing exactly what they'd do anyways if they didn't get the break. US city and state then competes against other US cities and states in a battle to provide the larger tax break.
It's an odious practice in my opinion, and I wish lawmakers would do something to curb it. But being able to tell your constituents "Hey, look at me, I got Amazon to come here!" makes for great campaigning.
Amazon was built upon the competitive edge of pricing devoid of state and local sales tax. Now it is soliciting tax breaks from state and local governments.
No. Not "new business". "A" new business. It's a sweetheart deal for one company in particular subsidized by the taxpayers. They're not reducing their citywide tax rate to attract Amazon, they're just giving a handout directly to Amazon.
What you're describing is nothing close to the reality. It's the prisoner's dilemma. Cities that participate in this scheme take turns screwing each other over in an attempt to get a minor benefit themselves, but compared to the scenario where nobody played the game to begin with, they all lose.
It's a business getting a payoff - worse, it's getting government assistance and Amazon is getting unfair treatment (if they give Amazon a x% tax break, they should give that same tax break to all other businesses currently in that jurisdiction + anyone wanting to start a business there - else they're unfairly giving Amazon an advantage, which is bad for competition)
Lets forget about the specifics about what it truly does to the state/town in the long term. Given the jobs it's fairly clear Amazon would have built this some place in US regardless of the tax break and would have created the jobs and tax revenue associated with that. By competing like this even if a particular city/state gains more benefit than before the country as a whole looses that tax break from it's total potential revenue right?
The cities that don't get chosen, yes. But the thinking is that Amazon has already secretly picked a city years ago (Let's say Washington, DC) who was not originally planning to offer any tax breaks.Then they make a this big show that's basically The Bachelor, causing every city to fall over themselves to offer tax breaks. Once 200+ cities offer tax breaks, then Washington, DC feels compelled to "bid" like everyone else, unknowingly sweetening a deal that has already been "made."
There's another problem here that isn't addressed by whether its a net plus revenue to the city. The tax break isn't applied across the board to all companies which means that Amazon is getting an unfair competitive advantage.
I don't really think of a company like Amazon needing a competitive advantage.
Because they only do it when it makes financial sense, political sense, or both. Getting Amazon to move to $CITY could very well bring in billions of dollars in [personal income] tax revenue, jobs, etc. It may or may not make $CITY more in the long run even if they're giving Amazon $5B in total breaks. But even if they make less than they give Amazon, there's still the obvious political implication of being responsible for the 50,000+ jobs that got created in your city.
It's not a net loss to the local government. It's a loss to Amazon's competitors that don't get those tax breaks. That local government is picking winners rather than provide a level playing field, and enriching themselves in the process. It's essentially bribery for favors but payed with tax revenue instead of under-the-table cash.
By all means, lower your taxes if you think it will attract jobs. But lower them for everyone.
The protesters point (as stated in the article) is that Amazon is going to pick the city that best meets their (physical, if you will) needs regardless of tax breaks. So for the winning city : without tax breaks you'll still win, but will also keep the extra tax revenue Amazon will generate (which you'll need because of the oversized burden they create).
I'm going to go against the consensus here and agree with you. Sure it would be great if Amazon moved to your city and added jobs, but that's not what they are doing. They are trying to start a bidding war between cities so that in the end the city gets as little value as possible and Amazon gets the most. This is especially true if you end up in a situation where Amazon gets some tax break for X years and the city expects a return in X+5 years, but Amazon just moved again after the tax break is gone.
Cities do better when they set themselves up to be attractive to companies naturally, not when they try to bribe an company to come to them
They're arguing that the states are giving away money.
What money are they giving away? If Amazon never comes, then there is no Amazon taxes and thus no tax breaks.
Right now those towns are starting out at zero. If they are smart, they structure the incentives to make sure they are net positive. If they screw that up, well that's on them.
Usually tax deals or tax holidays are offered to entice prospective companies but given Amazon's US tax burden is already nearly zero what else can these cities offer, free land, protection from unions?
Amazon seems unlikely to choose a city randomly, its likely to already have decided which city suits it best in terms of logistics, efficiency, cost and available labour pool so this seems to be an elaborate game to squeeze its preferred city.
Right, but if Amazon pre-selects from a menu of the former, then cause a competitive bidding war for tax breaks from compliant cities then that's even better from Amazon's perspective isn't it? I personally disagree with the approach, but I would guess that's why the search was publicized.
A "tax break" is just a reduction in taxes that otherwise wouldn't be paid at all. It still means a profit for the city.
It's not like NYC is paying Amazon to come to NYC. NYC would still make huge tax revenues from additional sales, real estate, income taxes, and corporate taxes.
Now they're turning that all away. It's such an irrational decision that if I were Amazon, it would raise a big red flag for me as well.
No need to open in a community that doesn't want your money.
This entire competition was an obvious sham to try to equivocate really desperate cities willing to give basically anything to have a major tech company headquarters, to the inevitable choice amazon was going to make of california or the coastal northeast, so they could extract maximum concessions.
Its disgusting this worked as well as it did, $48k/job in tax concessions from NYC and $22k/job from VA, expect to see a lot more of this in the future. Hopefully governments wake up and realize its a race to the bottom that advantages megacorps to such a point that having them is barely worth it, while at the same time hurting local businesses.
EDIT: the tax deductions are one time, not per year, i mixed that up.
It's an odious practice in my opinion, and I wish lawmakers would do something to curb it. But being able to tell your constituents "Hey, look at me, I got Amazon to come here!" makes for great campaigning.
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