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What Does Amazon Owe Its Second Headquarters City?

Taxes are only part of the story.

What Does Amazon Owe Its Second Headquarters City?
[Source Image: cherezoff/iStock]

Amazon recently announced its 20 finalists for the company’s huge second North American headquarters. My city, New Orleans, failed to make the cut (thank god: the retailer’s arrival would have decimated the local culture and led to a mass exodus of poor and working-class residents), but it wasn’t for lack of trying. The state of Louisiana offered a $6.56 billion package of tax breaks, spread out over 20 years. It’s almost certain the winning proposal will be even more generous. That’s precisely the purpose of this exercise: to leverage the best possible deal, using a very public competition, drawn out for months, creating maximum public relations impact. While undeniably intriguing, there is still something unseemly about the power imbalance. It’s a one-sided mating ritual, an arranged marriage, with Amazon playing the role of the rich and overbearing husband, extorting dowry offers from multiple suitors, all of whom he’s already richer than.

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Given the likely size of the incentive package, it’s worth asking whether this will be a good deal for the winning city. Obviously, the economic development teams for the competing cities have done the math. And while Amazon is clearly angling to pay as little local taxes as possible (is absolute zero possible? I wonder—it wouldn’t be the first time), it will be hiring an estimated 50,000 employees, for a range of positions, both skilled and unskilled. They will in turn pay taxes (little guys always pays taxes), rent apartments, buy houses, go out to eat, enroll their kids in school, use roads, ride public transportation, feed and feed-off the local economy. Danny Westneat at the Seattle Times describes the Amazon impact as a “prosperity bomb,” with all the good and bad that explosion implies. This expected boom for HQ2 will likely generate additional economic activity as well. All of this is collectively seen, by economists at least, as a huge net plus for whatever city is picked, and perhaps it will be. Fifty thousand is literally a city’s worth of jobs.

[Source Image: cherezoff/iStock]

It’s ironic or infuriating (take your pick) that Amazon’s Great Metro Area Bake Off (aka, the Round of 20) is playing out in the wake of the recently passed Trump tax cut, which will substantially slash taxes on large corporations. But as easily as it is to bash the economic cruelties of Donald Trump and Paul Ryan, the tax cut is just a continuation of a long trend. The percentage of tax revenue derived from corporations has been fairly steady in decline since the 1950s. Once upon a time, large corporations willingly (not happily, of course) paid their share of taxes, at rates actually higher than individuals. They weren’t thrilled with the arrangement—there’s a reason FDR was considered a traitor to his class—but they still felt connected enough to the rest of us, and didn’t set up shady offshore accounts, as a means of stashing profits and avoiding taxes (like Apple). They took advantage of whatever tax breaks were available then, but there were fewer, and in the end they did what the rest of us today are compelled to do, either by law or civic obligation: They paid their taxes.

Our broken code has turned all of us (regardless of political persuasion) into tax cynics, who assume (correctly, I think) that once a corporation or individual amasses enough capital, the opportunities for fast, loose, and legal tax maneuvers increase exponentially. “Marty,” my accountant once said to me, ruefully, “if you made a million dollars a year, then we could get really creative.” Indeed, in the context of profit-and-loss accounting tricks that can effectively slash even an alleged billionaire’s tax liability, the public and preening Amazon competition seems almost refreshingly honest. The company wasn’t that specific about what it wanted in a host city, but it was completely upfront about what it absolutely needed: a hefty package of financial incentives, and a large and talented workforce. All 20 finalists, presumably, are offering all of that, and maybe more.

Perhaps asking corporations like Apple and Amazon and Google to pay their “fair share” of taxes is unreasonable, in our current political climate. That’s for another election cycle and a different administration. So for now let’s ask a different set of question: Does Amazon owe its winning city anything besides minimal state and local taxes and steady paychecks for 50,000 workers?

Twenty-two large U.S. cities are comprised today of a majority of renters. Four of those cities made the Round of 20. If one of them were lucky enough to win, what would that do to the rental market? If Seattle is any indication, it would explode it, resulting in the mass displacement of poor and working-class residents. Does Amazon have a civic responsibility to address this issue? Can it insure that its “prosperity bomb” will lift all boats, not just property owners? Given the future of AI and robotics, can Amazon assure that its host city will continue to employ residents in the same numbers—or is it 50,000 now, 10,000 20 years from now? These are some questions the winning city might want to ask—perhaps in lieu of taxes. That will have already been settled.

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About the author

Martin C. Pedersen is a New Orleans-based design and architecture writer and editor.

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