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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
I saw a mention of AOC being against corporate welfare before the Amazon incident came up and wondered if she wasn’t just disingenuously yapping like most of her party elders have for so long. She now has more cred than Wisconsin Republican leading lights (Foxconn) . Maybe the Freedom Caucus should extend an invitation to join or at least to make common cause against the abuse. Her reasoning, or her views on anything else, be damned.
I would not dispute that. Hypocrites all.
I agree. Maybe there needs to be federal legislation criminalizing the actions of any local official who discriminates between business on taxes with the goal of ending this form crony profiteering. Put some locals in fear of prison. That would likely stop the practice of tax break bidding.
How about criminalizing a vote for the sugar subsidy? Why not make the Export/Import bank illegal? Why limit ourselves to local officials when trying to prevent corporate welfare?
I’d love it. All those are examples of crony profiteering.