For the nation as a whole it's a bad deal, in a prisoner's dilemma if everyone cooperates the payoff matrix is globally optimal. But for New York City it's a good deal, and those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel.
$150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around 9.25% at that income level that's around 350MM in income tax alone. That doesn't include the taxes that Amazon itself will eventually pay, nor any of the knock on economic effects of injecting all that extra money into the local economy. For NYS and NYC this deal is a no brainer.
The federal government is supposed to be the mechanism whereby coordination problems like this are solved. But the federal government (for a long time now, this isn't specifically about the current administration) if anything seems to want to encourage this kind of thing, not discourage them.
So here we are. You can rant and rave about the perfidy of actors acting rationally or you can work to change the rules of the game so as to produce an outcome you think more desirable. I know which one I think is more productive.
you make it sound like those numbers are completely comprehensive and without agenda, and that these subsidies are an unmitigated good. but they completely ignore jobs lost, companies shuttered, environmental impacts, and opportunity costs.
you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like.
plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich.
yes to more, savvy economic development; no to corporate giveaways.
EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.
>> those claiming otherwise refuse to look at the math and instead want to go with how the deal makes them feel.
its more than a little immature to accuse this of those who disagree with you.
your model relies on the fact that this would all be additional tax revenue that wasn't collected earlier. While a lot of these jobs can be people who already work in NY and simply switch jobs. In addition, it neglects the cost to the govt of servicing this company and all its employees. It also neglects the negative externalities and consequences for current residents (only looking at it through a money lens which is a typical neoliberal fallacy).
What is with all these posts that just assume that 25,000 new humans are going to be plopped down in NYC?
Has Amazon come out and said that they’re going to be relocating 25,000 employees here? If not, then I suspect a solid majority of those hired will already be living and working in the greater NYC area. In those instances, any gain in income tax revenue will be meager.
As someone facing the implications of a not so good deal in Wisconsin, I agree with Bradley here, NYC got a VERY good deal. It's just that my experience in Wisconsin has made me look at all of these sorts of deals in a different light.
We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.
Do you expect more automation in the workplace from Amazon or less? Cause the numbers only work if the jobs are created, however Amazon has about a decade as a cushion. A few years from now, Amazon could conclude that it may not be worthwhile to create all the 25,000 jobs and the better option is to return the government's money in year 10, this will be a loss for the city.
Or you could think NYC could have negotiated more because it was a likely choice anyways, having already major offices for other tech offices, for example. I don’t have a horse in this race but I don’t think this math is the comprehensive picture.
If NYC was a smaller city you'd have to price in the depression once Amazon went of business or lost market share /cut costs. But NYC is huge and 25,000 people will not skew it that much either way.
I posted similar math on reddit several days ago too, and didn't receive a response when I asked to counterpoints to that specifically
Most people's counterpoints are about what ifs related to corporate and human welfare, and will go on a tangent about that, emboldened by headlines about the dollar amount each new york tax payer would have contributed to the subsidy.
Taxpayers got a good deal.
Their corporate and human welfare argument will hold true whether there were subsidies or not, at any arbitrary salary figure, at any arbitrary number of jobs. So it is a total red herring to this deal, which is profitable whether 24,999 people get minimum wage and 1 person gets $100,000,000 annually, as long as they are taxed by New York in some capacity. (income, sales tax, property tax via direct ownership or rent paid to someone else that pays income and property tax)
The thing that seems the most interesting to me is the control over the financial narrative.
Here's a bunch of numbers, and if they add up to more than zero, we should do the deal.
There seems to be very little questioning of wether the accounting given is appropriate. What's the chance that Amazon would put staff in NYC even with no money? I'd say reasonable. Is anyone concerned about rising prices when 25k new high income people show up? Will they show up, or are they already there?
Plenty of things in the details can be challenged, I'm not saying I know the answer to any of these things.
But the narrative seems to be that there's these numbers, and they point to "we should do it".
Normally the only tax/subsidy I'm in favour of is externality related, eg Pigouvian. And I'm not seeing a lot of that argumentation here, though admittedly I'm not the keenest observer on this one.
Has anyone seen specifics on how they'll be held accountable? They've made promises for x jobs with $y average salaries, but if they don't meet that, then what?
The NYC REAP is per employee[0]. Zero employees, zero dollars. ICAP is property tax abatement and requires spending 30-40% of the assessed value of the property[1]. Long Island City might be cheap in terms of NYC real estate, but it’s not particularly cheap overall. I can’t imagine they won’t spend more than the ICAP portion.
That article is an example of people not understanding what this deal is. Amazon is not receiving $3B in public dollars, they are receiving $3B in tax breaks. They are shifting a small % of that via PILOT and some other funding Amazon has agreed to.
I don't understand how people think this is in any way a bad deal for NY.
There is no agency, governmental or private, in existence that subsequently measures or keeps tracks of these "job creation" promises. And in the very unlikely event that their broken promises do come to light, it will be explained away in the usual manner as to deflect (e.g. circumstances change, etc.).
Just remember one thing: At the end of the day Amazon is a private enterprise and it can and will do whatever they want and are accountable to no one.
Eh. Everyone is acting like $3B is some massive some of money. The State of New York recently sealed a budget for ~$168B and and the economy of the state itself is somewhere around $1.2T. Hell, Amazon itself has a market cap of nearly 800B.
As of 2017, "[m]ore people are leaving the New York region than any other major metropolitan area in the country":
>> Throughout a bidding process that saw dozens of cities vie to be the next location of a proposed hydra-headquarters, there were murmurs that Amazon might really just be looking for a regular office, and rebranding it a “headquarters” to corner those tax breaks.
Amazon was just looking to expand satellite offices, and used the HQ contest as a way to get free business info as to where to expand next. They were also looking for generous tax breaks to allow them to operate leaner in high COL high talent areas.
My guess is NY and NOVA areas were already being seriously considered and someone had the bright idea to turn it into a race to the bottom. Remember, as way back as 2016, Bezos was buying property in the DC area.
We should ban these kinds of deals at the national level. They're rational for companies, and rational for regions, but overall they allow extremely large companies to avoid paying their share of taxes.
They do seem to open up a much more complex calculus in the tax system.
I think you can make an argument that these deals can improve efficient allocation of capital. But like credit default swaps and other complex financial instruments, I think you run into the issue of, is there a level of complexity that's just too much for the rest of the system to be rational around.
One of the purposes of tax structures is to allow people to make predictions about what the exact financial consequences of various choices they might make. If you add this kind of one-off negotiation into that, you undermine our collective ability to be rational about our financial choices.
However, if you allow this kind of negotiation, and you allow governments to try to compensate organizations for the systemic benefits they bring to an economy, that also has some utility. You can create an incentive to these organizations to create value outside of just their bottom line. And if we allow these kinds of deals, then over time we'll be able to systematize them and then eventually make them broadly available under standard terms.
So, I don't know. I'm not sure rushing to an outright ban is the way to go. But I do think there's some merit to the idea that in financial transactions there's a limit to how far the contracts can be recursive. Allowing it to be infinite makes for a chaotic fuzzy edge to the markets.
Being from New York and having followed this situation closely, I can say that this entire fiasco serves as a good example on how the politicians we elect _ought to_ protect their constituents from predatory corporate power.
However, this is not the case. Its mere political theatre as De Blasio and Cuomo pose for the cameras, as what matters is not the actual success they have achieved for the city in terms of job creation, but the _perceived_ success. That's how politics works. Otherwise some kind of protocol would exist to enforce, track and hold to account the job creation promises alleged by corporations or federal economic policies (NAFTA anyone?). How convenient that it does not exist. How convenient that we forget that as a private enterprise, Amazon has no obligations to the public.
The old tired adage "socialism for the rich, capitalism for the poor" sounds about right. Supporters of Amazon can work out all the math they want to try to convince others (and mainly themselves) of any public benefit. When taxpayer dollars are diverted to corporate welfare, that's when we, the public, get those austerity policies that we love so much. All in exchange for the 25k high-paying jobs not applicable to the working and middle class folks who in addition, will no longer be able to afford living there and will be forced out.
I agree with your sentiment that corporate welfare sucks and would have been much happier with the tax breaks being distributed to startups somehow, however, you're talking about LIC, where home prices already average above one million dollars.
Gentrification in LIC started a long time ago. These 25,000 people, many of whom will be hired from within the already vast tech talent pool, probably aren't going to drive prices up very much.
I think it really underestimates just how big NYC is to think such a thing.
I live in flyover country in Wisconsin. We still got hosed on our Foxconn "deal". Living in flyover country does not make us immune, we can fall victim to these deals as well.
There are benchmarks baked into the deal, so no jobs = no tax breaks. The cities should have known better than to play this game, but at least there's that.
Amazon negotiated in bad faith and as such any deals should be voided. I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded.
What the cities have submitted were nothing more than proposals, they are not contracts and are not binding. Considering the new information that has come to light mayor de Blasio.
More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.
>I'd like to NYC mayor call out Amazon instead of allowing the good people of NYC to be railroaded...
To be honest this is part of the problem. The Mayor IS deadset against giving any subsidies, but it doesn't matter. The state politicians can still do whatever they want.
So you're talking about "the good people of NYC", but that's not the level at which the decisions are being made. Same thing happened to us in Wisconsin. Maybe you had some mayors around the state dead set against giving Foxconn anything, but Walker is the governor, (or WAS the governor rather), so it didn't matter.
In short, de Blasio can call out whatever he wants, but he'll get nowhere. (In fact he has been calling it out, and got nowhere with it anyway.)
The answer really is to put these deals to a vote. We need a law that makes it so that politicians can still make these deals, but they are null and void until approved by a popular referendum.
> More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.
Don't they already have this essentially locked in?
It looks like the only public official who could change the terms now is Cuomo since he used unique powers of the NY governor's office to make the deal to override municipal laws. It might be possible for the state legislature to try to amend it but it's totally out of NYC officials' hands.
https://www.thedailybeast.com/jeff-bezos-is-right-at-home-in...
I'm so confused by this. The people that negotiated these deals are perfectly content with what they got. You think Amazon said "jk, going to build two" and got the same deal?
Withdrawl would require politicians admitting they were duped. In NY, Democrats have a monopoly on power so they have no need to be responsive to voters.
[+] [-] bradleyjg|7 years ago|reply
$150,000 x 25,000 = $3.75B/year. At NYS + NYC effective tax rate of around 9.25% at that income level that's around 350MM in income tax alone. That doesn't include the taxes that Amazon itself will eventually pay, nor any of the knock on economic effects of injecting all that extra money into the local economy. For NYS and NYC this deal is a no brainer.
The federal government is supposed to be the mechanism whereby coordination problems like this are solved. But the federal government (for a long time now, this isn't specifically about the current administration) if anything seems to want to encourage this kind of thing, not discourage them.
So here we are. You can rant and rave about the perfidy of actors acting rationally or you can work to change the rules of the game so as to produce an outcome you think more desirable. I know which one I think is more productive.
[+] [-] clairity|7 years ago|reply
you're looking only at inflows and ignoring outflows. no systems dynamicist would take such an analysis seriously. systems have boundaries (by definition), and you must look at all traversals across the boundaries, not just the ones you like.
plus, you ignore the fact that amazon probably would have set up shop in nyc for far fewer, and probably even zero, dollars in subsidies. i.e., the same benefits without redirecting tax dollars to the already rich.
yes to more, savvy economic development; no to corporate giveaways.
EDIT: to your point about actors acting rationally, i would hope a group of business owners who don't get such subsidies put a bill before the people to either hold amazon accountable to promised performance or rescind/restrict the subsidies (or failing that, vote the bums out). the economic development program dollars they used should be directed toward entrepreneurs and small businesses, not mega-corps.
[+] [-] oculusthrift|7 years ago|reply
its more than a little immature to accuse this of those who disagree with you.
your model relies on the fact that this would all be additional tax revenue that wasn't collected earlier. While a lot of these jobs can be people who already work in NY and simply switch jobs. In addition, it neglects the cost to the govt of servicing this company and all its employees. It also neglects the negative externalities and consequences for current residents (only looking at it through a money lens which is a typical neoliberal fallacy).
[+] [-] BonesJustice|7 years ago|reply
Has Amazon come out and said that they’re going to be relocating 25,000 employees here? If not, then I suspect a solid majority of those hired will already be living and working in the greater NYC area. In those instances, any gain in income tax revenue will be meager.
[+] [-] bilbo0s|7 years ago|reply
We need to have something like "checks and balances" on these things. Sometimes they just get way out of hand.
[+] [-] rockarage|7 years ago|reply
[+] [-] mattnewton|7 years ago|reply
[+] [-] booleandilemma|7 years ago|reply
How many Fortune 100 companies need to move here before we get a working subway system?
[+] [-] onetimemanytime|7 years ago|reply
[+] [-] gammateam|7 years ago|reply
Most people's counterpoints are about what ifs related to corporate and human welfare, and will go on a tangent about that, emboldened by headlines about the dollar amount each new york tax payer would have contributed to the subsidy.
Taxpayers got a good deal.
Their corporate and human welfare argument will hold true whether there were subsidies or not, at any arbitrary salary figure, at any arbitrary number of jobs. So it is a total red herring to this deal, which is profitable whether 24,999 people get minimum wage and 1 person gets $100,000,000 annually, as long as they are taxed by New York in some capacity. (income, sales tax, property tax via direct ownership or rent paid to someone else that pays income and property tax)
[+] [-] lordnacho|7 years ago|reply
Here's a bunch of numbers, and if they add up to more than zero, we should do the deal.
There seems to be very little questioning of wether the accounting given is appropriate. What's the chance that Amazon would put staff in NYC even with no money? I'd say reasonable. Is anyone concerned about rising prices when 25k new high income people show up? Will they show up, or are they already there?
Plenty of things in the details can be challenged, I'm not saying I know the answer to any of these things.
But the narrative seems to be that there's these numbers, and they point to "we should do it".
Normally the only tax/subsidy I'm in favour of is externality related, eg Pigouvian. And I'm not seeing a lot of that argumentation here, though admittedly I'm not the keenest observer on this one.
[+] [-] __float|7 years ago|reply
https://ny.curbed.com/2018/11/16/18098589/amazon-hq2-nyc-que... suggests that nearly $1.3 billion is not tied to any amount of job creation at all.
[+] [-] coredog64|7 years ago|reply
[0]https://www1.nyc.gov/site/finance/benefits/business-reap.pag... [1]https://www1.nyc.gov/site/finance/benefits/benefits-industri...
[+] [-] jhall1468|7 years ago|reply
I don't understand how people think this is in any way a bad deal for NY.
[+] [-] maria_|7 years ago|reply
[+] [-] intopieces|7 years ago|reply
As of 2017, "[m]ore people are leaving the New York region than any other major metropolitan area in the country":
https://nypost.com/2017/04/01/people-are-fleeing-new-york-at...
So, 25k additional people is closer to stemming the tide of people leaving rather than overcrowding an already hot market.
[+] [-] throwaway2048|7 years ago|reply
[+] [-] unknown|7 years ago|reply
[deleted]
[+] [-] l8again|7 years ago|reply
That is exactly what happened.
[+] [-] jorblumesea|7 years ago|reply
My guess is NY and NOVA areas were already being seriously considered and someone had the bright idea to turn it into a race to the bottom. Remember, as way back as 2016, Bezos was buying property in the DC area.
[+] [-] jefftk|7 years ago|reply
[+] [-] erikpukinskis|7 years ago|reply
I think you can make an argument that these deals can improve efficient allocation of capital. But like credit default swaps and other complex financial instruments, I think you run into the issue of, is there a level of complexity that's just too much for the rest of the system to be rational around.
One of the purposes of tax structures is to allow people to make predictions about what the exact financial consequences of various choices they might make. If you add this kind of one-off negotiation into that, you undermine our collective ability to be rational about our financial choices.
However, if you allow this kind of negotiation, and you allow governments to try to compensate organizations for the systemic benefits they bring to an economy, that also has some utility. You can create an incentive to these organizations to create value outside of just their bottom line. And if we allow these kinds of deals, then over time we'll be able to systematize them and then eventually make them broadly available under standard terms.
So, I don't know. I'm not sure rushing to an outright ban is the way to go. But I do think there's some merit to the idea that in financial transactions there's a limit to how far the contracts can be recursive. Allowing it to be infinite makes for a chaotic fuzzy edge to the markets.
[+] [-] maria_|7 years ago|reply
However, this is not the case. Its mere political theatre as De Blasio and Cuomo pose for the cameras, as what matters is not the actual success they have achieved for the city in terms of job creation, but the _perceived_ success. That's how politics works. Otherwise some kind of protocol would exist to enforce, track and hold to account the job creation promises alleged by corporations or federal economic policies (NAFTA anyone?). How convenient that it does not exist. How convenient that we forget that as a private enterprise, Amazon has no obligations to the public.
The old tired adage "socialism for the rich, capitalism for the poor" sounds about right. Supporters of Amazon can work out all the math they want to try to convince others (and mainly themselves) of any public benefit. When taxpayer dollars are diverted to corporate welfare, that's when we, the public, get those austerity policies that we love so much. All in exchange for the 25k high-paying jobs not applicable to the working and middle class folks who in addition, will no longer be able to afford living there and will be forced out.
[+] [-] codyb|7 years ago|reply
I agree with your sentiment that corporate welfare sucks and would have been much happier with the tax breaks being distributed to startups somehow, however, you're talking about LIC, where home prices already average above one million dollars.
Gentrification in LIC started a long time ago. These 25,000 people, many of whom will be hired from within the already vast tech talent pool, probably aren't going to drive prices up very much.
I think it really underestimates just how big NYC is to think such a thing.
[+] [-] karpodiem|7 years ago|reply
[+] [-] bilbo0s|7 years ago|reply
[+] [-] jetcata|7 years ago|reply
[+] [-] claydavisss|7 years ago|reply
Like sports teams, the impact on the local economies will be negligible. Lets see how many of the 25k jobs even show up...
[+] [-] thenanyu|7 years ago|reply
[+] [-] watertom|7 years ago|reply
What the cities have submitted were nothing more than proposals, they are not contracts and are not binding. Considering the new information that has come to light mayor de Blasio.
More than anything Northern Virginia should withdraw their proposal, Amazon wants the Government cloud business so bad that Virginia has Amazon over a barrel.
[+] [-] bilbo0s|7 years ago|reply
To be honest this is part of the problem. The Mayor IS deadset against giving any subsidies, but it doesn't matter. The state politicians can still do whatever they want.
So you're talking about "the good people of NYC", but that's not the level at which the decisions are being made. Same thing happened to us in Wisconsin. Maybe you had some mayors around the state dead set against giving Foxconn anything, but Walker is the governor, (or WAS the governor rather), so it didn't matter.
In short, de Blasio can call out whatever he wants, but he'll get nowhere. (In fact he has been calling it out, and got nowhere with it anyway.)
The answer really is to put these deals to a vote. We need a law that makes it so that politicians can still make these deals, but they are null and void until approved by a popular referendum.
[+] [-] jerglingu|7 years ago|reply
Don't they already have this essentially locked in?
https://aws.amazon.com/govcloud-us/
https://www.youtube.com/watch?v=DEc6kVAXSs8&feature=youtu.be...
Second link has the CIO of the CIA talking about it
[+] [-] stevenwoo|7 years ago|reply
[+] [-] howard941|7 years ago|reply
The announcement goosed property values in Brooklyn and Queens. I wouldn't be on a call out anytime soon.
[+] [-] jhall1468|7 years ago|reply
[+] [-] claydavisss|7 years ago|reply