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Orange Blooded [2692]
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Amazon & Tragedy of the Commons
Feb 18, 2019, 10:30 AM
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I can't really fault NY for looking at the big picture with Amazon. 25,000 new jobs have similar cost-benefit dynamics as tarrifs. The 25,000 jobs would have come at a TWO BILLION DOLLAR cost to taxpayers throughout the state, while the primary beneficiary obviously ends up being the Amazon shareholder. The states that competed for this relocation were in a race to the bottom, a short term gain with long term losses, AKA the Tragedy of the Commons.
Many states are figuring out that these kind of competitions for taxpayer-funded largesse are not a smart way to move forward.
Ruin is the destination toward which all men rush, each pursuing his own best interest in a society that believes in the freedom of the commons. Freedom in a commons brings ruin to all.
http://www.governing.com/topics/finance/gov-amazon-multistate-effort-ban-tax-breaks.html
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All-In [34577]
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wrong, the primary beneficiary would be the people with jobs
Feb 18, 2019, 10:52 AM
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and the state with a $25 billion tax haul.
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Orange Blooded [3389]
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I think it was $27 billion
Feb 18, 2019, 2:09 PM
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But that assumes 25,000 jobs. And only about $1 billion of the $3 billion in incentives actually required Amazon to hit those job creation goals.
You'd think that after the Foxconn/Wisconsin fiasco, cities would be a little careful about how big incentives are paid out. At the very least, these giant development deals should be more transparent to the public, not hidden in secret envelopes to private corporations.
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Heisman Winner [119681]
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They are not Pay-outs
Feb 18, 2019, 2:52 PM
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The incentives come in reduced taxes after jobs are in place....Jeez, when can you people get that straight?
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Orange Blooded [3389]
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There are tax credits in the mix,
Feb 18, 2019, 4:27 PM
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along with cash grants and other direct incentives & public investments (including ~$300m in infrastructure spending). That $3 billion figure also includes indirect incentives. I wouldn't call any of these "reduced taxes."
On the other hand, these jobs would provide a huge boost to income tax and sales tax revenues. Those should outweigh the spend, many times over. The question is whether the incentives were really needed to land the deal in the first place---I think Virginia offered around one-third of these direct incentives, and landed the other half of the project. That doesn't sound like a great negotiation, on the part of NY.
Regardless of whether you feel it was necessary to win the project, all of these large incentive packages (coordinated between local and state officials) should be done in the light of day. It's taxpayers, after all, who are on the financial hook.
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All-In [31887]
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typically only grants and outlays are tied to job creation..
Feb 19, 2019, 8:56 AM
[ in reply to I think it was $27 billion ] |
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totals.
Tax incentives normally are not tied to job creation numbers, but are typically based on owner capital investment and the like.
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Orange Blooded [2692]
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Rock Defender [53]
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Re: Actually, the primary beneficiary is Bezos
Feb 19, 2019, 8:44 AM
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Because Amazon would pay $9 in taxes to the state of New York for every $1 of tax benefits and taxpayer grants they receive.
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Hall of Famer [24730]
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Heisman Winner [119681]
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You are showing your own AOC ignorance of
Feb 18, 2019, 12:13 PM
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Economics...
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Orange Blooded [2692]
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Jeff Bezos loves your attitude
Feb 18, 2019, 7:53 PM
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you want to go ahead and line his pockets some more, eh?
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Legend [15746]
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I didn’t click the link but cant get passed the idea that
Feb 18, 2019, 1:48 PM
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a company employing 25,000 people in your community and occupying 4,000,000 sf of office space, while undoubtedly attractive tens of thousands of support jobs, is mostly a benefit to Amazon Shareholders.
While I hope my employment benefits my company’s shareholders, there’s no doubt that my company hiring me in my town is a bigger benefit to me than the company shareholders.
There’s just not enough lipstick in the world to make this pig look good. A complete failure by NYC’s elected officials for their citizens.
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Orange Blooded [2692]
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Re: I didn’t click the link but cant get passed the idea that
Feb 18, 2019, 7:46 PM
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Why does a company with billions in profit need billions of New York’s money to bring 25,000 jobs to a city where it already has a significant presence? The company admitted that such enticements were a secondary factor in its decision making?
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Legend [15746]
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I don’t understand the relevance of your question?
Feb 18, 2019, 7:58 PM
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What company cannot use an extra $3 billion? What company wouldn’t take that offer? The leadership of Amazon has a fiduciary duty to its shareholders to optimize their return. The HQ2 decision was both strategic and financial.
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Orange Blooded [2692]
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Self-interest is a key to The Tragedy of the Commons
Feb 18, 2019, 8:54 PM
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Amazon is acting in their own self-interest and is exploiting a competition between states over finite resources in the form of tax revenue. What if all the Fortune 500 companies played this game in order to lower their tax burden and take advantage of the limited tax revenues available to exploit? Where does it end?
If I lived in New York City, one of the most overcrowded places on the planet, I would totally question why I should pay the richest man in the world, Jeff Bezos, the largest shareholder of an insanely profitable company like Amazon, my hard-earned taxes just to exploit some corrupt local politicians rose-colored promise of job growth and a larger tax base. Then on top of this, deal with the challenge of paying even more locally as competition for resources, infrastructure, rise in housing costs, becomes even more exacerbated by growth.
Tragedy of the Commons was written in 1968 to address overpopulation. It has a decidedly Malthusian bent on resources, and to appreciate it you have to back up a bit and look into the long game.
http://science.sciencemag.org/content/162/3859/1243
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Legend [15746]
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Yes we see these things very differently.
Feb 18, 2019, 9:22 PM
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All these companies already do this. And why wouldn’t they? Amazon was offering an amazing opportunity to the communities that were bidding. Thousands of communities chose not to bid on Amazon’s HQ2 because it didn’t make sense. Others bid less than New York because that’s what they thought it was worth. Every community is welcome to bid or not bid as they see fit. New York’s leaders though the $27 billion in tax revenue and the good they could do with it was with $1.5 billion from the city and $1.5 billion from Albany.
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Orange Blooded [2692]
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imagine you own a small business in Queens
Feb 18, 2019, 9:58 PM
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You are not only competing with a beast of a company like Amazon over scarce resources in the form of labor, land and capital, but you have the deck stacked against you even further because your new competitor for land, labor and capital are receiving billions in subsidies while you are not, putting your existing investment risk in a much more dire place than before.
This curtails your ability to operate at a profit or expand and limits other potential new, yet unsubsidized investors as well. Tough luck, you might say. Well, a lot of companies don’t get the red carpet rolled out for them by the state, so now what are they? Chopped liver?
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Legend [15746]
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No, I get it. I’m just not very sympathetic.
Feb 18, 2019, 10:29 PM
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If a company is going to create at least 25,000 jobs of its own and thousands of other jobs, the city leaders looking out for the larger community is not exactly a shock. If you’re a small business owner, now would be (or would have been) the time to figure out how you’re going to compete with, or benefit from, Amazon in your backyard. But these things don’t happen in a bubble. Amazon would bring thousands of skilled people to the community and the training infrastructure would blossom to support them. Take advantage of that.
But again, I get what you’re saying.
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All-In [31887]
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except it doesn't really work like that....
Feb 19, 2019, 7:51 AM
[ in reply to imagine you own a small business in Queens ] |
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that's why you typically see small business owners as the main force behind economic development boards in cities and counties. That know that a growing local economy is what drives growth and sustainability in their businesses and they aren't concerned with the minor impacts on land prices, labor, etc... Heck, for most small businesses with a local focus, increasing labor costs and land prices normally are a good thing, if they're being driven by growth.
There is a difference between the real world and what one might learn in a textbook. It always amazes me how quickly I can tell if someone runs/owns a business by how they talk about things like this.
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Rock Defender [53]
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Re: except it doesn't really work like that....
Feb 19, 2019, 8:47 AM
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And yet, The stretch of I-85 through the Greenville-Spartanburg metro area is currently the fastest growing area in the country, and considered to be the top region in the country for business growth, with record setting economic growth and development, as well as community enrichment occurring, specifically because of all the interstate and international business investment that is occurring around Greenville.
The GSP area is a prime example of why you are wrong.
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Lot o points [155763]
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Rock Defender [53]
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Re: psssst
Feb 19, 2019, 2:06 PM
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2 of your links are broken and lead to "404" pages.
Your last link simply states the importance of creating a pro-business tax climate by cutting regulations that inhibit business growth.
Its almost like businesses want to set up shop in areas where its cheaper to run said business. It also seems like people want to live in areas with low cost of living with lots of high paying job opportunities.
Now who could've predicted that?
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All-In [31887]
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All-In [31887]
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Wanna know an easy way to prove your statement is wrong?...
Feb 18, 2019, 9:52 PM
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You stated that the deal bringing 25,000 direct jobs (and untold indirect jobs) would have come at a $2BB cost to the taxpayer. For that statement to be true, tax revenue would currently be $2BB higher now than it would be after the Amazon offices were built and 25,000 new jobs were there.
It's not.
Classifying a tax incentive as a cost is just plain incorrect. [Unless there is some perfect economic situation where another company is going to bring the same economic impact to the area without the tax incentives would instantly appear]
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Lot o points [155763]
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shhhhhhh
Feb 18, 2019, 10:03 PM
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You’re getting in the way of feelings-over-facts class warfare. It might not play in here, but they eat it up when he’s out community organizing.
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Orange Blooded [2692]
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Ha, usually don’t have
Feb 18, 2019, 11:19 PM
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very much time, let alone enough energy to rabble rouse down at the local watering hole a la Sam Adams. I don’t like crowds anyway.
But here is another perspective for you about the Amazon Stranglehold since you seem to be a curious, open mind.
https://ilsr.org/amazon-stranglehold/
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Lot o points [155763]
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So before we examine the article, you’re still tiptoeing
Feb 18, 2019, 11:47 PM
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Around your claim that Amazon’s incentives were a cost to the citizens. That’s simply not true, period.
For your claim to be remotely close to accurate, NYC would need to be able to have substitute employers introduce a similar number of new jobs to the community, at the same level of income, with the same investment in the community, in a similar time window as Amazon, with no incentIves whatsoever. We both know that won’t happen, so the “cost savings to the community” argument is purely emotional and specious.
Secondly, your article has some concerns that I have shared, but also contains a lot of the same claims of the retail sky falling that we have heard in years past with Wal-Mart, and then e-commerce in general before Amazon became the 500 pound gorilla du jour.
Amazon is giving the consumer what they want, when and how they want it. Good for them. Your article’s claims of them monopolizing the economy is laughable, since the article focuses on retail and a) retail is less than 6% of GDP and b) over half of Amazon’s sales come from third party sellers....if anything they are giving these sellers a new avenue to sell that they may not have had before.
Weakening communities? You’ve gotta be kidding me. Walmart killing Main Street was a more valid claim than this one...,,communities have been weakened since the rise of the Internet and Social Media and the rise of the individual as the most important entity. It also ignores the recent trend of brick and mortar stores coming back into favor, particularly among the younger generations.
Undermining jobs and wages? Not even going to acknowledge this one, due to all the emotional, inaccurate adjectives in this section......the permanent illegal underclass has done more to weaken wages than Amazon ever dreamt of, and this isn’t the 1800’s.....Amazon isn’t making anyone work there who doesn’t want to be there.
Bottom line, Amazon isn’t the first villain to be accused of killing retail when they’re ultimately just transforming it, and they won’t be the last. In our lifetime another entity will come along that makes Amazon a fond memory, and we will be having the same debate again if we are lucky enough to be around.
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Orange Blooded [2692]
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so you and your company, who
Feb 18, 2019, 10:06 PM
[ in reply to Wanna know an easy way to prove your statement is wrong?... ] |
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I presume doesn’t get a subsidy, would be ok with paying The Wealthiest Man in the World’s company a couple of billion out of your taxable profits?
All the while they are driving up your land, labor and capital expenses, diminishing your profit, with a competitive advantage thanks to subsidies that you indirectly have to pay.
Brilliant.
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All-In [31887]
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Actually, my company did get local and state tax....
Feb 19, 2019, 6:12 AM
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incentives when we built our factory in Hart County in the firm of 10yr tax abatement on the property, an off set for the grading of the land done by the county, access to a rotating pool of low interest financing (wasn't huge but it helped) and labor tax credits on the income tax. We got further incentives for the 4 expansions we've done and we're working with the county now on a fifth.
10 yrs later we've beat on head count estimates and are employing 140 ppl (about 180 by end of year) and using numerous local suppliers. We were the anchor to our phase of the industrial park and 2 other larger plants have sprung up on either side of us.
Also, Amazon is a public company and I think Bezos owns about 15% of the stock.
And no one is "paying them out of taxable profits"...that doesn't even make sense. Remember profits don't start as the government's and then dispersed back to the company....it's the other day around.
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Orange Blooded [2692]
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You are lost in semantics
Feb 19, 2019, 12:47 AM
[ in reply to Wanna know an easy way to prove your statement is wrong?... ] |
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In this case, a subsidy, a tax incentive, or a credit are lost opportunities to collect tax that normally would have been paid to the state treasurer.
You are then placing a heavier burden on existing tax revenues paid by other companies and individuals to fund shared resources such as roads, subways, education, etc. If you don’t charge Amazon the tax you normally would have charged, you are imposing a cost onto the rest of your tax base.
If that is what you want to do, then go blow it up and give everyone the same deal per capita. Except you can’t, because tax revenues are a finite resource and you would have a bit of red ink on your balance sheet.
I don’t understand why all these so-called “fiscal” conservatives are out here trying to protect Bezos’ backside on this issue? Incentives, subsidies, credits and other welfare programs for the mega-wealthy are bad policy, they create inefficient markets, and ultimately penalize small to mid-size businesses who don’t operate in such a large footprint and can’t compete for scarce resources.
Corporate mega-giveaways to monopolies like Amazon are shamefully excessive these days, and we all end up footing the bill.
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All-In [31887]
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no, in facts and economics....
Feb 19, 2019, 7:44 AM
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but to boil your claims down, for your points to be valid, the local and state economy would have to be better off without the Amazon center than with the Amazon Center with the tax breaks in place. I don't think anyone in their right might really believes that's the case.
Folks with views like yours tend to view these types of matters through the lens of "Incentives, subsidies, credits and other welfare programs for the mega-wealthy are bad policy". You are more worried about not "helping the mega-wealthy" (which this isn't since it's a publicly-traded corporation) than what such a deal would do for the 25,000 new employees and the countless indirect jobs it would create.
It's the same type of thinking that doesn't let one understand, or even be open to, the fact that supply-side economics might actually work.
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Lot o points [155763]
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I especially enjoy in recent P&R debate,
Feb 19, 2019, 8:08 AM
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Posters hoisting cancelled tax abatements with 10x ROI aloft as a victory for the little man, while defending the $500+M in defaulted Solyndra federal loans as a reasonable investment.
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Orange Blooded [2692]
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All-In [31887]
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I just went through the methodology section of the...
Feb 19, 2019, 9:53 AM
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report listed in the first link.
https://www.goodjobsfirst.org/sites/default/files/docs/pdfs/newmath3.pdf
After a quick glance, it looks like that study just put a value on tax abatements. There is no real study of the total impact of the employer. In other words, if a factory got a property tax abatement valued at $1MM in a given year, the study didn't consider the property taxes paid by all of the employees or local suppliers that might depend on that factory. Rather, it just said that schools lost out on their share of the $1MM property taxes.
Did you dive into the underlying "study" and, if so, do you really believe that such a study is really supporting your position here?
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Orange Blooded [2692]
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you make a good point
Feb 19, 2019, 12:11 PM
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about the study not showing the total impact of investment, and how it is pumping money into the local economy. I don't know that it is possible to accurately calculate.
The report does highlight how much we lose in potential contributions to things we use as a shared resource:
schools, roads, infrastructure, fire, police, etc. The game that is currently afoot is to push a growth agenda without much consideration for the consequences to at least sustaining the shared resources we have.
So if it is true that South Carolina school districts are not collecting $318 Million per year in possible revenue from corporate tax, as more and more people move with their kids to this state to take these jobs, I don't know how we would call that sustainable. Where would School districts find the money to keep up? It sounds like they aren't able to keep up, and that's the tragedy part.
Then we have to consider all the roads we need to build for things like Boeing, Mercedes, and the Volvo plant, etc. In Charleston, our roads are somewhere between sub-optimal to dismal. 526 bridge over the Wando is probably held together by duct tape. The there is the whole 526 extension boondoggle.
We obviously need to spend money on infrastructure to support the growth or we could just ignore the problems altogether. Hey, at least we know where the money is not coming from.
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All-In [31887]
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lost in this conversation seems to continue....
Feb 19, 2019, 1:50 PM
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to be the fact that a lot of these companies would not have located there and/or not have experience the same level of growth/success without the tax incentives.
Almost all tax incentives come in the form of property tax abatement that is phased out over time. Some companies get income tax credits, but those are normally linked directly to job credits and are done on a state level and typically (not always) apply to all companies for new hire incentives.
A good example is:
https://dol.georgia.gov/learn-about-tax-credits-and-incentives
What's curious to me is is the study data even correct? I thought SC public school funding shifted, in part, away from residential property tax funding to a 1% sales tax funding.
Back to the original point, one cannot judge the tax incentives in a vacuum and say that the state is losing $x because of these type incentives, while ignoring the fact that the companies may not be there at all without the incentives.
If I look at my company, we had a 10-year abatement phased-in 10% per year...so after 10 years, we're now paying the full property tax rate, which this year will be about $30,250 based on 2018 valuation. We have 140 employees now, soon to be 180. Is there any doubt that the 140 employees generate many many times more in property tax revenue than the abatements we've had over the last 10 years? And now the company is paying the full amount too.
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Orange Blooded [2692]
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Orange Blooded [2692]
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CU Guru [1405]
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Re: Amazon & Tragedy of the Commons
Feb 19, 2019, 9:19 AM
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One of the hardest parts of economic development is balancing the good with the bad. Despite what the geniuses here will tell you, it's not as easy as more jobs = good for everyone.
A huge problem the SC Dept of Commerce runs into is fly by night companies who suck every benefit they can out of the state and local governments and just don't pan out. Some companies (in ever-evolving forms) jump from state to state taking up resources that could have been used to land a real long term industry. Amazon isn't that kind of company, but the assumption that it's an automatic success is dangerous in economic development. In fact, I've heard more than one person in Columbia temper a conversation by pointing out that every project is by the next BMW.
The semantics here about the word cost is ridiculous. If my projected profits over a year are 100,000 and something knocks those down to 80,000, it functions the same as a cost to me. The meaning of the word doesn't matter, it's still money that's gone even if I never realized it. That must be taken into account. And it is.
For a state to offer massive incentives, the project must pass a "but for" test. That is, for the incentive to be offered, the state must establish that the project would not happen but for the incentive. That is meant to prevent unnecessary wasting of incentives, but it also establishes fierce competition between the states. "The other state offered x, so we need to offer x+1." It would make more sense for there to be a flat incentive package. But I'm not sure how you reform the current system to get to that point.
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All-In [31887]
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I don't agree on the "semantics" line....
Feb 19, 2019, 9:38 AM
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Giving a tax incentive to land a big business is not a cost. It's just not.
AEHC (all else held constant) the state and local gov is not going to collect $2BB less in tax revenue once Amazon builds there.
The tax revenue FROM AMAZON would be $2BB less than if they hadn't given the incentive...but that only works if Amazon would have built there anyway, which it's pretty clear now that they would not have. AND it ignore the impact from all of the additional direct and indirect jobs paying taxes.
Now, grants...they are costs.
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