Yesterday (Jan. 18), Amazon announced the 20 finalists for its “HQ2” project, that will supposedly create a second headquarters (why?) for the company somewhere in North America, most likely in the United States. With an alleged 50,000 jobs and $5 billion in investment, this development attracted 238 bids from cities and counties in the United States, Canada, and Mexico.
The finalists: Atlanta, Austin, Boston, Chicago, Columbus, Dallas, Denver, Indianapolis, Los Angeles, Miami, Montgomery County (MD), Nashville, New York, Newark, northern Virginia, Philadelphia, Pittsburgh, Raleigh, Toronto, and Washington.
The finalists will now be subject to months of unremitting pressure to give up as much as possible. It will not be pretty. Information asymmetry, capital mobility, and rent-seekingare the hallmarks of the site selection process. In the European Union a set of rules on subsidies limits this competition, whereas in the United States, it’s the Wild West. This leads to much higher investment incentives being given in the United States than are given by EU Member States for similar projects even by the same company (AMD/Global Foundries, for example).
Interestingly enough, both the highest-known bid ($7 billion in Newark) and the lowest (0 in Toronto) are still under consideration. (Unfortunately, the other known 0 bid, by San Jose, was rejected.) I can think of scenarios where either might be chosen, but I can’t get inside the mind of Jeff Bezos and other Amazon decision-makers. This is the heart of information asymmetry. So again, we have to wait and see what Amazon does. Will the company subject a smaller group of cities to still more torture? Stay tuned!
This is why all the talk of full employment doesn’t mean anything to me. Newark, desperate for subsistence-level jobs, offers tax breaks it shouldn’t have to offer.
(NYT article): It asked candidates to include in their bids a variety of detailed information, including potential building sites, crime and traffic stats and nearby recreational opportunities. Amazon also asked cities and states to describe the tax incentives available to offset its costs for building and operating its second headquarters
Please don’t choose Chicago, please don’t choose Chicago, please don’t choose Chicago- I’m a taxpayer and can’t afford another tax increase to cover another corporate free tax-ride glad handed by Rahm the Terrible dipping big time into the Tax Incremental Fund (TIF). A fund meant to improve and cleanup neighborhoods and communities instead of stuffing another corporation’s pockets.
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rps, yes, TIF is a very widely abused subsidy. In St. Louis, the 100+ municipalities have chased their tails trying to obtain sales tax revenue. A study showed they gave away $2 billion in subsidies and created a net 5400 jobs between 1990 and 2007. The entire increase was proportional to the area’s income growth, so the TIFs were not the cause. Then of course all those jobs went away with the Great Recession.
Amazon has probably killed some of those retail jobs, too.
Sanders has proposed in the past a law stating that any state that is willing to underwrite such corporate adventures should have to pay back federal funding.
After all, if you have that kind of money to give to the few, you seem not to need the Fed’s help.