If I had a dime for every time I’ve heard politicians or economic development directors explain how they must offer tax incentives to lure businesses because everyone else is doing it, I’d have … well … I’d have to pay taxes on all those dimes, which is more than those businesses have to do.
Utah is being secretive about what it has offered to lure Amazon’s second headquarters here. That’s a shame. A lot of other cities and states were upfront, and it has made for interesting reading.
New Jersey offered $7 billion in state and local
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credits — to attract what Amazon says will be a $5 billion investment.
I’m not a gambler, but I’m willing to bet not many people in Atlantic City would take that deal.
I’m all for giving credit where it’s due, and Jeff Bezos deserves some kind of genius award. He may be worth $67 billion, according to Wikipedia (some say it’s much more), but he didn’t get there without understanding how to give people what they really want.
And when it comes to his self-proclaimed sweepstakes for landing a new Amazon headquarters (to be announced sometime in 2018), with the promise of 50,000 new jobs, Bezos must know he has played politicians like Lindsey Stirling’s fiddle.
First is the aforementioned belief that every local government has to compete with tax incentives. Given that, cities and states simply can’t help themselves.
Second is the human nature of politicians. How could any elected official with an ego not want to proudly proclaim he or she brought Amazon to town?
This human nature is bolstered by the fact that people rarely do a cost-benefit analysis on these giveaways, and if they do, they have to wait so many years to accumulate data that few people care about the results, anyway.
Just in case the politicians didn’t get it, Amazon included this phrase in its request for proposals: “Incentives offered by the state/province and local communities … will be significant factors in the decision-making process."
Utah officials are quick to point out that the incentives we offer here are based on performance. That is, businesses don’t get them until they can demonstrate they have met agreed-upon benchmarks for things like job creation.
That’s great, as far as incentives go. The state doesn’t want to be taken by a venture that never delivers.
But this ignores a couple of big factors. One is that all those new jobs bring in people who require services that taxes provide, which means the rest of us have to make up for the incentives. The other is that those incentives often help a business thrive at the expense of local competitors, and few people take the time to calculate how many of those competitors subsequently end up shrinking or going away.
It’s hardly a secret Amazon is into selling everything these days from shoes and electronics to groceries. Tax-paying competitors abound. And even though Utah negotiated a deal this year requiring Amazon to collect taxes on all its sales to people in the state, it wouldn’t make much sense to send tax money back to the company through a different door.
If that’s what the state has proposed, that is. Who knows?
Amid the circus of cities and states trying to outdo each other, San Antonio had a different approach. The mayor and county judge sent a letter to Amazon saying, “No thanks.”
“We’ve long been impressed by Amazon and its bold view of the future,” the letter said. “Given this, it’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location. And, if that’s the case, then this public process is, intentionally or not, creating a bidding war amongst states and cities.”
It added, “… blindly giving away the farm isn’t our style.”
A cynic would argue San Antonio was a long shot, anyway.
Or maybe the mayor and county judge read a New York Times report five years ago that estimated states, counties and cities give away about $80 billion a year in tax breaks.
That’s a lot of dimes from a lot of governments, many of which like to complain they’re underfunded.