When New Jersey just announced a $7 billion package of tax incentives to try to lure Amazon’s 2nd headquarters to Newark, local officials saw a chance to jump-start a city that has long struggled with poverty and joblessness. But from an national perspective, this may be a failed development strategy, writes The New York Times (Jan.27, 2018). Tax incentives are little more than corporate giveaways that divert money from education, infrastructure and other priorities that ultimately do more for a region’s economy.
Several locations, like Chicago and DC area’s Montgomery County, have offered Amazon their own 9- and 10-figure incentive packages. Columbus, Ohio would waive all property taxes for Amazon for 15 years, and give back a share of the income taxes paid by Amazon’s employees to the company in cash. More than 200 North American cities submitted bids for HQ2, and the enthusiasm is hardly surprising. Amazon said it plans to invest as much as $5 billion in the project and to hire up to 50,000 workers, most earning high salaries.
But accommodating Amazon’s thousands of workers will require hiring more teachers, widening roads and building more housing. The costs for those upgrades will fall on residents. “The stakes are getting higher and the deals are getting worse for the taxpayer,” says a Brookings exec. Plus, incentives rarely work. Companies will play cities and states off one another to save money, but ultimately base location decisions on other factors: A talented work force, which requires good schools and colleges, and amenities like affordable housing, parks and public transit that make a place desirable.
Local officials say that refusing to offer incentives, though, is the equivalent of unilateral disarmament. “We’re not going to be outbid on Amazon doing business here,” states the mayor of Dallas.
Classroom discussion questions:
- So which location criterion is more important? Incentives–or a quality city?
- Use factor-rating to evaluate the 20 finalists on the 1/2 dozen most important factors Amazon has named. A good team exercise.