OTOH when amazon wants to build a warehouse, they probably shop around for municipalities that are willing to waive collecting property taxes for X amount of years to get that development and income tax.
Plus it's a way for cities to start a bidding war, offering the lowest tax rates and property prices. Effectively Amazon will get their new HQ for free, if not have the cities actively pay for it. Because jobs. Free market, competition, etc, yay.
Honestly I think Amazon is as or more interested in the cities' overall plans than just tax incentives being offered. There's a lot of logistics to build a campus as large as they're planning with as many employees as they're planning. I think they're also very interested in zoning and regulatory hurdles. They're probably looking for a city that won't bog the project down in zoning permits, etc. Kinda like how Google Fiber was killed by regulation rather than capital or technical concerns.
The tax incentives play into the overall cost to Amazon for their location, but so does the rest of the plan.
On the flip side, there were municipal governments literally giving Amazon powers over taxation and spending[1] to get them to set up their headquarters in their city. I think this is quite a bit of political power myself.
Oh sure it's stupid to give Amazon incentives for warehouse locations. (If only there were a higher-level entity that could govern the short-sighted actions of municipalities so that they could coexist in a more prosperous state...) The point is that the warehouses they're getting aren't white elephants like old malls are. A warehouse doesn't need a huge utilities build-out, and it doesn't require a valuable location. Warehouses will always be needed, and as long as Amazon owns them they'll have up-to-date tech.
Greedy realtors would want this to happen in their city as it will inflate property values and fill their pockets deep. They certainly can influence city officials (via campaign funds etc.) to throw tax incentives at Amazon which will come from the pockets of tax payers. It would be interesting to have city wide referendum where constituents get to vote on such matters.
I could see why a city wouldn't want to pay real money and then have the company move, but what's the problem if they agreed not to tax Amazon and then Amazon relocates?
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.
I suspect a big part of the decision is the investment Amazon made in the real estate. It's also possible they have some favorable tax deals with the cities they operate in, given how much money their employees spend at local businesses near their offices.
Remember the craziness that ensued a few years ago when they announced that they are going to choose a city to build their second HQ based on tax and other incentives they would receive from the local governments? They would not be able to generate such a frenzy if their workforce was allowed to work remotely.
They are basically stuck with the office culture at this point.
Real estate is a finite resource. NYC isn't some dying rust belt town, someone will setup shop where Amazon planned to, and they will pay taxes that Amazon thought they shouldn't have to pay.
You wouldn't be able to gift them the land, but you would probably be able to waive property tax on said land. I know Detroit has a city income tax, so the mayor may be able to waive that for all Amazon employees if they committed to moving their headquarters within city limits.
Lots of jurisdictions have zones where they reduce taxes to encourage development. Small businesses can get the benefit simply by opening a location inside one.
This Amazon deal is likely to be neutral or beneficial for whichever government manages to pull them in. It's a race to the bottom but it likely isn't really deeply harmful.
(the employees will pay property taxes and spend money in the community...)
They also have the opportunity to collect payroll, income, property and sales taxes in respect of the employees; seed a technology district; and collect taxes down the road. It wouldn't make sense for San Francisco to do this. But it can make sense for a Tier 2 city to pay Amazon for densification over sinking a similar cost into the riskier proposition of renovating a downtown plaza or whatever.
I would guess, as I said, that towns simply compete for the business by making them an attractive offer. For example even when selling the ground for the warehouse towns could give Amazon a cheaper price while hoping for more future income in taxes. Presumably that would apply to other companies as well.
The bit about "paying to destroy mainstreet" is of course nonsense. Amazon's business would exist either way.
If a city waves taxes for Amazon, they'll still have increased costs - say, increased road maintenance around HQ2 as those roads get used much more. Those costs still need to be paid for, and the burden will then move to smaller companies with less clout to negotiate a special deal.
Trying to get an ever-increasing amount of money out of people and organizations with less ability to pay that amount of money seems bottomish for me.
I agree. I think Amazon cares a lot more about logistics and future growth than the specific tax incentives being offered.
The prevailing claim that Amazon has already chosen and is trying to extract better incentives seems wrong to me. If that was the case Amazon could have approached ~5 cities from the start with a plan for each and put a far stronger competitive pressure on them.
I think what this is really about is getting the cities to do the leg work of the research and initial planning process. Amazon wasn't going to put together 200 initial site proposals and 20 more detailed ones. By letting the cities make the proposals Amazon can look at far more potential sites than if they had done the research internally.
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