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Who’s Right: AOC or de Blasio?
Amazon has announced that they are not going to locate one of the headquarters in NYC due to political blowback on the deal NY and NYC cut to attract Amazon there. The deal was priced at $3 Billion in Amazon’s favor. Congresswoman Alexandria Ocasio-Cortez (AOC) opposed the deal stating that that money should be distributed to the poor of NYC instead. Mayor de Blasio says “What money?!”
So what was the deal? It appears it was a fairly typical “redevelopment” project whereby a city (and/or state) offers a variety of things: spending money on infrastructure to make the place more useful to the expected developer, waiving certain regulations that add cost to the private developers, and exempting or reducing future taxes on the developer that would ordinarily be levied. Of these elements only infrastructure spending involves actual cash in the possession of government. And even then, the only cash that could alternatively be distributed to the poor would be any infrastructure expense that would be customizable for a particular developer as opposed to infrastructure needed to make the area usable for any economic activity.
But, you ask, couldn’t future tax collections that are being reduced or waived have been used for the poor? Yes, but only if there was economic activity stemming from a development. No development, no tax revenue.
Now let’s be clear: Amazon is taking advantage of competition between locales to reduce their tax burden as much as possible. If the locales did not compete with tax incentives, then exempting from or reducing tax burdens would not be a factor. But it’s like OPEC, cities have to act like a cartel to enforce higher taxes, or all cities are under pressure to offer reduced taxes to attract business.
If Amazon was going to do business on the cheap (from a tax perspective) in NYC, why did NY and NYC want them? Because employment creates individual taxpayers and consumers of other goods and services, to say nothing of votes for politicians who are seen as increasing employment and economic activity (unless they are named Trump).
Tucker Carlson knows all of this but has been on Amazon’s case because its actual employment practices nationally forces some locations to subsidize its workforce with welfare. So Tucker’s inner populist exerted itself to decry the national HQ sweepstakes that Amazon was running. But that did not make the NYC deal bad for NY/NYC. And, other than possibly the janitorial staff (which would likely be contracted out) at the NYC site, none of the employees would likely be on welfare. We are in a new Gilded Age with tech companies rather than smoke-belching factories, but the NY/NYC – Amazon deal was not a cash bribe, it was a “tax expenditure.”
“Tax expenditures” are where government declines to collect taxes on the condition that the money that otherwise would have been collected is spent in a governmentally-approved manner. Examples include charity, targeted employment, and training, solar, etc. So NY/NYC was making a bet: If Amazon located there and employed first construction crews then workers, the net tax collections from businesses and individuals with whom Amazon spent money would exceed the taxes not assessed directly on Amazon. If Amazon came without the tax incentives, NY/NYC stood to gain more, but if no business will operate in that location without the incentives, then NY/NYC just has unoccupied non-tax producing space.
The problem with the NY/NYC-Amazon deal wasn’t the deal, it was Amazon itself. But, of course, moving on is no problem for Amazon. And maybe NY/NYC will find someone else to develop and employ with fewer tax incentives and the citizens will be better off. But at the moment de Blasio seems to be the less crazy Marxist.
Published in General
Is that an endorsement for another presidential candidate? What a slogan to run on.
de Blasio the Less Crazy Marxist!
#dBLCM!
But, in his remarks lambasting Amazon for scuttling the deal, deBlasio dropped some hints that he was planning to impose some big obligations onto Amazon after Amazon was too far in to back out, obligations that were not in the initial deal. Perhaps Amazon began to suspect that deBlasio might not be acting in good faith, and that the final deal could prove much more expensive for Amazon than Amazon had anticipated.
So, yes, deBlasio has a better grasp of reality than do people who follow Ms. Cortez. But that doesn’t mean that deBlasio is necessarily sufficiently connected with reality that a future developer should trust a deal with him.
True, but that is a very low bar.
While AOC is consistent with her “capitalism is bad” mantra, de Blasio understands that more jobs means more people you can overtax. If de Blasio can see that lower taxes will help Amazon grow its business and create jobs, why doesn’t he understand that all businesses could benefit from lower taxes? Rather than cutting special deals, why not create a more pro-business city for everyone?
If businesses do not trust their crony capitalist partners in government, that’s the way it ought to be.
I share with AOC discomfort with major enterprises getting favorable government benefits that other business cannot get due to bargaining power. I recognize that governments get in bidding wars over the possibility of more jobs (which equal more revenue). I recognize the pragmatic aspects, but it is still wrong. It is a form of crony profiteering (more tamely referred to as “crony capitalism”).
The base problem is that government is too large. But that ship has sailed.
What we need is a law with a “most favored nation” clause. The law needs to provide that the benefits given to one company must be made available to all. That won’t end crony profiteering, but it would put a dent in it.
Interesting. Not smart to burnish your marxist credentials in public when you need to find the next sucker.
Good point.
No, I do not believe that is her concern. I think she would happily give special treatment to a company if the proposed jobs were union ones.
Wouldn’t it be accurate to say that the NYC government didn’t/doesn’t even necessarily have much cash on hand in these situations anyway? In other words, wouldn’t NYC have done a series of bond issues in conjunction with all the various development phases envisioned?
Which — it seems to me — then begs the question: Does this therefore imply that AOC, through whatever substantive role she may have played in the pullout, damaged NYC’s bond rating(s) for the near future?
This may be one of those “To ask is to answer” questions, but if anyone with expertise in this area can enlighten that would be appreciated.
To understand money requires a certain skill, “Distinguishing between fungible and distinguishable classes of stuff”*, which AOC lacks.
It is easy to detect statements and questions which mistake a quantity of money for an identifiable object. Just look for a the use of the definite article (“it”) or a pronoun in a reference to a quantity of money, such as “it”, “the money”, “that money”.
People who haven’t learned this critical thinking skill don’t recognize that funds once transferred are usually commingled–“that money” no longer exists as an identifiable object.
In this case, AOC used the phrase “that money“.
* This is skill #4 under the category “Process of Abstraction” in “Critical Thinking Skills”, a catalog I’ve been working on.
I must confess that if we’re going to destroy federalism further by having the feds overrule the states, this or something like it has long been one of the ways I’d be most tempted to go along with.
As I have commented elsewhere, in (sort-of) defense of AOC’s ignorance, Democrats for decades have been conflating handing out cash and not collecting taxes as “giving” people money. I think a very large number of Democrat voters, and even a number of Democrat politicians, would make the same mistake she did. (Though, as I enjoy pointing out, unlike AOC, most of them don’t have a degree in Economics from a prestigious university.)
Maybe mount a challenge using existing Constitutional equal protection principles? The law isn’t there now, but maybe it could be nudged?
I think this just points up how much learning is actually done in the process of earning a degree today.
Seems reasonable. Registering as a company (LLC) costs money, so to be fair, the law should provide that every citizen is registered as a “company” at birth, at no charge. Then all we’d need is a law providing that Congress may only pass a law arbitrarily transferring wealth from one citizen to another if it the same law transfers the same amount back at the same time.
I would like it the other way around. No state or city should be allowed to make a deal .
It would have been a good deal for New York City, but a questionable one for New York State as whole, because it would have further cemented the state’s overall tax and tax break policies into place that have been used to attract businesses to the city, but have repelled them from the Upstate areas. What you’d have is a tax policy that discourages major business investment other than in the downstate area, and even then makes it tough to do without the tax breaks Amazon received.
As long as Amazon was getting the tax breaks, Upstate residents would have to share the burden of making up those revenues. Theoretically, the payback would come from the additional tax revenues the 25,000 new jobs would have brought in, which could then allow for tax relief in order to make the Upstate area more competitive with other states with lower rates, but that’s not how it works in New York — the additional revenues would simply be seen as a way to provide more free stuff, with no tax breaks.
You’ve had an entire booming industry of oil and natural gas fracking that could have benefited the struggling Upstate economy, because geologically underground New York in the western part of the state is a lot like the western part of underground Texas. But instead of inviting in that growth, Gov. Cuomo has virtue signaled to his downstate voters and not only banned drilling, but also banned the pipelines to carry oil and gas from other places to New York State residents (or to anyone in New England, for that matter). So Cuomo and de Blasio can be irate at AOC for stifling New York City’s economic growth by leading the fight to kill the Amazon deal because she hates big business in general, but it’s not as though they haven’t been doing the same thing to voters with less clout in other parts of the state because they hate certain kinds of big business.
I’d like that to be a good approach. Don’t know if it really would. We need to get some good legal strategists on it.
Separation of corporations and state.
Did anyone calculate how many jobs would be lost to provide the tax breaks to create those 25,000 new jobs? I wouldn’t be surprised if it turned out to be more than 25,000. The main difference is that the lost jobs would be harder to detect, and wouldn’t motivate as much in the way of political campaign contributions.
There was an interesting opinion piece in the Wall Street Journal yesterday on this subject: “Amazon, New York and the End of Corporate Welfare,” by Mene Ukueberuwa. From the article:
I’ve witnessed this chain of events locally in a town near to mine, Hyannis, Massachusetts. I live in a conservative town that supports its small local businesses in terms of favorable taxation and infrastructure.
The Democrats in Hyannis have turned that town into something unrecognizable from what it was in the 1990s. It is much more urban today with very poor neighborhoods filled with new immigrants who work for the big-chain businesses the town has brought in.
Democrats have very little understanding of organic town growth–how it works or how to foster it. The Democrats are always going for the single big-money hit, and so they love big corporations. This flies in the face of what they purport to be and believe. But these corporations bring in their own people–people new to the area. They help very few of the people already there. The big corporations are good at getting good cheap labor en masse. However, they are the quintessential absentee landlords.
It’s a city’s or town’s local business owners who actually care about the town and develop the people who work for them. It’s the local business owners who support the local charities and Little League teams.
If the people in Long Island City get together and support their local businesses, in the long run, they will be better off.
AOC’s position is correct, but for the wrong reasons.
Both are wrong.
If I were to have a business in NYC (heaven forbid) then I would have to pay taxes. If the government concedes that their taxes are too onerous to attract a large business, what does that say about their governance?
Laws should be applied to all the same way. Giving exceptions is banana republic corruption.
I’ll be there this summer to hop on the ferry to Nantucket. I have a lot of relatives there that have to put up with so many stupid laws. The trash sorting and the requirement to have transparent trash bags is one of the stupidest things I’ve ever known.
It works. Considering where that party is today.
In order to shake them down for more money they have to be in the door. It’s not that deBlasio has a better grasp of anything, it’s that AOC discouraged the mark
The comments have raised some salient points about how complicated it can be to evaluate redevelopment deals. Whether a locale wins or loses — incrementally or bigly — depends on a lot of factors outside of the deal. Is there highly customized infrastructure expense? Are tax revenues fungible or in silos so that the shift in tax revenue sources (business/property versus individual income/individual property) mismatched? Do the taxing structures within the affected jurisdictions result in a net loss of tax revenue because of differential rates and tax avoidance opportunities? I think this is the source of the WSJ piece on the uncertainty of redevelopment deals.
Economic development is an uncertain business. I recall years ago when casinos were being developed in New Mexico on Native-American pueblos that a lot of discretionary income was withdrawn from locals in gambling that would have otherwise been spent with local small businesses. That, and the concentration of wealth in the casino operations far exceeded local capacity for investment. This meant that local money ended up largely being invested out of state with an adverse impact on the local economy in addition to feeding the gambling addiction of some. Whether that situation has normalized over the years with additional population and growth I do not know.
And that’s not even including all the crimes RFK’s drunken spawn are allowed to get away with . . .
Did anyone calculate how many comments in the heartland would lose an employee to Amazon in NY? These people don’t fall out of the sky.
“She wants to squander trillions of taxpayer dollars on ineffective government programs. By contrast, I only want to squander billions of taxpayer dollars on gifts for private corporations. Billions are less than trillions, so by definition I’m less crazy by three whole orders of magnitude !”