Amazon.com Inc., the well-known, mostly online retailer that dominates the industry, recently decided against building a second partial headquarter in New York City that would have provided more than 25,000 high paying jobs.
New York was able to offer enough incentives to win the Amazon (AMZN) deal, beating out more than 20 other serious bidders.
To win, both the city and the state had to come up with incentives that were greater than the other bidding cities. The final package included more than $3 billion in incentives. A small portion of that total was for improvements to the infrastructure at the chosen site in Queens, but most of the $3 billion was tax reductions.
The city and the state both reasoned that they would be far better off with Amazon than without. In reality, the true cost was only a few hundred million dollars and the true benefits will be tens of billions of dollars over time. Many of the 25,000 workers could come from the surrounding area and the rest will be attracted from other areas, which will increase the population and help add growth.
Based on Amazon’s projections, they would likely have paid almost $6 billion in taxes to the city and the state over the next ten years. The deal said they could get half off. That meant Amazon would save nearly $3 billion.
Socialists led by Alexandria Ocasio-Cortez (AOC) cried foul. They view this whole situation as another example of crony capitalism where a large corporation gets favorable treatment while the average person loses.
AOC tweeted: “Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”
Socialists further note that many prominent economists have strongly criticized tax breaks to corporations, even saying that they are counter-productive.
Some New York businesspeople also raised concerns. Many noted that they had been in business for a number of years and would likely be in business for many more. Where are their tax breaks? They have been paying their fair share for years. They funded their own expansions without the incentives that Amazon is getting. Why does Amazon get the tax breaks and we don’t?
Socialist leaning politicians also noted that Amazon’s employees are not unionized. This, the socialists reasoned, is obviously because greedy Amazon is powerful enough to keep the union out and must, therefore, be exploiting workers.
Perhaps surprisingly, a recent Sienna College poll showed that the majority of New Yorkers support the Amazon headquarters project. Yet with the support of socialist leaning state and federal government officials, enough roadblocks were put in front of Amazon to have them reconsider the New York site.
In the end, Amazon was forced to abandon its plans because New York politicians wanted to follow socialist principles. Among other things, the Socialists want to limit the profits of the most successful corporations, increase taxes on those who contribute the most to the economy and share every high-income individual’s earnings with the entire population.
Is New York better or worse off without Amazon?
While it is true that Amazon would have saved almost $3 billion in taxes over the next ten years, it is also true they would have paid almost $3 billion in taxes. Unless other businesses suddenly rush into New York, no Amazon means no $3 in tax revenue.
No Amazon also means no additional 25,000 jobs. Those jobs would have generated even more tax revenue annually for New York. Since many employees would likely want to live close to where they work, home values would increase as new houses are built and older ones renovated. That means higher property values for current residents.
Local businesses will also prosper and grow, with most of them expanding to meet the new demand from Amazon workers. New businesses will pop up around the new headquarters. That means more shopping choices and more services offered for local residents. There will also be more dining and entertainment establishments to improve the quality of life.
The economic impact of 25,000 workers in any area is huge, especially since these jobs pay six-figure salaries. Without Amazon, there is no growth impact. High growth would have benefited local businesses even if they don’t get any tax breaks.
Except for the argument about existing businesses not seeing any tax breaks, the socialists’ arguments don’t seem to make sense. What socialists call corporate greed is simply stockholders seeking to maximize the return on their investment. What Socialists call worker exploitation is really workers who freely choose to work at Amazon at a salary that reflects the value of their output. And the workers would rather bargain individually than collectively with a union.
And finally, this deal does not reflect “the power of the richest man in the world.” Rather it reflects New York acting in their best self-interest and Amazon doing exactly the same thing. That’s the way our system is supposed to work.
Socialist principles killed this deal. New York is the big loser.
Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University in Galloway, New Jersey, where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.