[This essay originally appeared as a podcast at The Brand Populist]
When Amazon abruptly abandoned its plans to locate a headquarters facility in Long Island City, New York (which is a stone’s throw from Manhattan), reactions generally fell into two categories: Those who saw it as a foolish snub of the complex and necessary work of economic development…and those who saw it as a needed one.
I fall squarely in the latter camp…no surprise there. But let me take a minute to try and convince myself and you of the opposing argument, which goes something like this:
Cities and states attract corporate relocations with financial incentives that pay back many times over, over time. In this instance, New York State believed that Amazon would pay $27.5 billion in tax revenue over a 25-year period, or 9 times the $3 billion in incentives it was offered.
The new facility would create jobs — 25,000 of them, according to the estimates — and it would invest in local companies to partner on new technologies.
So the politicians and community leaders who opposed it were foolish and reckless, prompting one prominent local tech leader to call the move a “facepalm heard around the world.”
Now, the flip side.
The tax thing is utter nonsense…first because tax estimates are, well, estimates, so who knows what Amazon will pay a decade or two from now?
We do know that it paid no Federal tax last year (in fact, it got a credit) even though it had sales of $178 billion. How much did it pay to Washington State, where it’s currently headquartered? The Washington Times estimates it paid $250 million in state and local taxes in 2017.
Multiply that by 25 years and you get just over $6 billion, which is merely twice the cost of New York’s incentives, not 9x.
And speaking of 25 years, keep in mind that Amazon hasn’t even been in business that long (it was founded in 1994), and even Jeff Bezos himself has publicly admitted that the company will fail one day, and his team’s job is to delay it as long as possible.
So New York’s payback expectations weren’t just overly optimistic, they were stupid. They were certainly not reliable.
Looking beyond that, er, creative accounting, what about those promises of jobs and business partnerships?
Amazon is engaged in an escalating battle with employees trying to form unions, at both its warehouses and at recently acquired Whole Foods (it was going to be an issue in New York, for sure). I’m not suggesting that unions are necessarily good — though I think they are — but my point is that Amazon would never win any awards for enlightened employment, even after raising its minimum wage to an admirable $15 late last year.
Many of the folks who get that $15 per hour are “perma-temps,” who get no benefits, and some of whom live in their cars. Even full-timers are hired and fired as season or circumstantial whims dictate. It treats its delivery drivers like dogs.
Those 25,000 jobs don’t sound so great when you consider those details, if there were ever going to be that many (notice how the number “25” appears repeatedly in the rosy estimates?).
As for those local companies in New York that Amazon invest in, a quick perusal of the listof companies they’ve already invested in reveals that, well, they’re all over the place, which makes sense considering the Internet is everywhere and Amazon is a global company.
So again, I end up in the ‘good riddance’ camp.
And it’s nothing personal about Amazon, really. The entire premise that governments should spend taxpayer dollars so companies will turn around and distribute that money back to taxpayers is flawed, to say the least.
Just think of all those sports stadiums or Olympics villages that have succeeded only in making developers rich at citizens’ expense.
The only guarantee for future economic opportunity in a particular city or area, though it’s not wholly reliable either, is to invest in making it conducive to people working and living there. Good roads. Better schools. Great restaurants.
And it takes responsible governance that doesn’t ensure that the rewards of economic success are shared equally or always to everyone’s satisfaction, necessarily, but that people aren’t asked to pay for short-term promises that have no long-term certainty.
New Yorkers should invest in themselves, just as we all should, and let the Amazons move wherever they like. This match was not made in heaven.