FacebookTwitterGoogle+RedditEmail

Jeff Bezos’ Quest to Find America’s Dumbest Mayor

Photo by DonkeyHotey | CC BY 2.0

With the Super Bowl now behind us, America eagerly awaits the next big event: the announcement of the winner in Jeff Bezos’ contest to determine which combination of state and local governments is prepared to give him the most money to be home to Amazon’s new headquarters.

Narrowed from a field of more than 200 applications, 20 finalists now wait with baited breath for the news, expected sometime later this year. But while the politicians who join Bezos for the photo op are going to be treated as big winners, it is likely that the taxpayers they represent will be big losers, dishing out more to Amazon than they will ever get back in benefits.

Bezos’ “HQ2” contest is simply an extension of a game that corporations have been playing with state and local governments for the last four decades. Rather than making location decisions based on standard economic factors, like the availability of a skilled labor force, quality infrastructure, land prices and tax rates, they have persuaded governments to bid against each other with company-specific benefit packages ― usually a basket of tax concessions and sometimes even including commitments to build company-specific infrastructure like port facilities or roads.

However, most research indicates that the cost to state and local governments for these subsidies typically outweighs the benefits in terms of employment and tax revenue, including in the cases of Amazon’s growing network of fulfillment centers.

new analysis by the Economic Policy Institute looking at employment in counties that managed to land a fulfillment center in the last 15 years found no evidence that overall employment increased, and in some instances employment even fell relative to comparison counties. The implication was that the commitments made to win Amazon’s facilities ― subsidies likely worth over $1 billion dollars in total ― usually were enough of a drag on the rest of the economy, either by imposing a higher tax burden or diverting resources, to more than offset any jobs and spending created by Amazon.

Nonetheless, politicians are unlikely to be deterred from such bidding wars, since the victory of landing a big investment is highly visible and immediate. A mayor or governor gets to take part in a big ceremony with the CEO of a major corporation touting the thousands of jobs that are being created. The costs in the form of lost tax revenue that may be needed to support schools, infrastructure and other essential services will only be seen years down the road.

Now, Jeff Bezos is taking the bidding war into the Internet Age with this highly publicized contest for Amazon’s next headquarters. He put out the promise of a new headquarters with “up to” 50,000 high-paying jobs, and then the country’s cities put in their offers. (Toronto is the one non-American city also in the running).

The structure of this bidding war is virtually guaranteed to ensure that the city that lands the new headquarters will end up paying out far more in subsidies than it gets back in benefits. Once a location is named as being in the top 20, political leaders have their appetite whetted. They want more than ever to be the winner and are prepared to raise their offers so that they don’t end up in second place. Bezos is using a standard tease as an inducement to keep people gambling, just like the $10 or $50 prizes in the state lotteries or the small jackpots at the slot machines. They give the players just enough incentive to want to keep playing.

In addition, to minimize the extent to which an informed public can scrutinize the commitments being made by their leaders, Amazon has encouraged city officials to keep the details of their offers secret. This means that there will be very little time between when city and state officials celebrate the big victory and when city or county councils have to vote on the package.

Of course, Amazon is not new to shorting taxpayers. In many ways, the company’s prosperity is based on it. For years, the company took advantage of a loophole in tax law so that it did not have to collect the same sales tax as its brick-and-mortar competitors. This created the absurd situation that as Amazon was growing into one of the largest retailers in the world, it was effectively getting a tax subsidy at the expense of many family-owned retail stores. Even now, while the company does collect sales taxes on its direct sales, many of its affiliates, who pay Amazon a portion of their revenue, still do not collect sales tax in many states.

This was not a small subsidy. The size of the sales tax in many cases is close to standard profit margins. The fact that Amazon did not collect the tax gave it an enormous advantage over stores that did. Recent research has found a very large effect from the imposition of sales tax on Amazon sales, especially in the case of large purchases like television sets. The findings implied that imposing a sales tax of 5 percent would lead to roughly a 20 percent decline in sales on large purchases.

Since Amazon has been only marginally profitable since its founding, a sales tax requirement that put it on a level playing field with its brick-and-mortar competitors would have seriously impeded its growth. It may still have survived and even prospered, but it almost certainly would be a much smaller company today.

The contest to find the stupidest mayor in America is best understood in this context, as yet another episode in Amazon’s efforts to shaft taxpayers. And judging by the quantity and enthusiasm of the bids, the taxpayers still haven’t caught on.

There is a reason that Jeff Bezos is considered a genius.

This column originally appeared on Huffington Post.

More articles by:

Dean Baker is the senior economist at the Center for Economic and Policy Research in Washington, DC. 

Weekend Edition
September 21, 2018
Friday - Sunday
Paul Street
Laquan McDonald is Being Tried for His Own Racist Murder
Brad Evans
What Does It Mean to Celebrate International Peace Day?
Alexandra Isfahani-Hammond
Hurricane Florence and 9.7 Million Pigs
Nick Pemberton
With or Without Kavanaugh, The United States Is Anti-Choice
Andrew Levine
Israel’s Anti-Semitism Smear Campaign
Jim Kavanagh
“Taxpayer Money” Threatens Medicare-for-All (And Every Other Social Program)
Jonathan Cook
Palestine: The Testbed for Trump’s Plan to Tear up the Rules-Based International Order
Jeffrey St. Clair
Roaming Charges: the Chickenhawks Have Finally Come Back Home to Roost!
David Rosen
As the Capitalist World Turns: From Empire to Imperialism to Globalization?
Jonah Raskin
Green Capitalism Rears Its Head at Global Climate Action Summit
James Munson
On Climate, the Centrists are the Deplorables
Robert Hunziker
Is Paris 2015 Already Underwater?
Arshad Khan
Will Their Ever be Justice for Rohingya Muslims?
Jill Richardson
Why Women Don’t Report Sexual Assault
Dave Clennon
A Victory for Historical Accuracy and the Peace Movement: Not One Emmy for Ken Burns and “The Vietnam War”
W. T. Whitney
US Harasses Cuba Amid Mysterious Circumstances
Nathan Kalman-Lamb
Things That Make Sports Fans Uncomfortable
George Capaccio
Iran: “Snapping Back” Sanctions and the Threat of War
Kenneth Surin
Brexit is Coming, But Which Will It Be?
Louis Proyect
Moore’s “Fahrenheit 11/9”: Entertaining Film, Crappy Politics
Ramzy Baroud
Why Israel Demolishes: Khan Al-Ahmar as Representation of Greater Genocide
Ben Dangl
The Zapatistas’ Dignified Rage: Revolutionary Theories and Anticapitalist Dreams of Subcommandante Marcos
Ron Jacobs
Faith, Madness, or Death
Bill Glahn
Crime Comes Knocking
Terry Heaton
Pat Robertson’s Hurricane “Miracle”
Dave Lindorff
In Montgomery County PA, It’s Often a Jury of White People
Louis Yako
From Citizens to Customers: the Corporate Customer Service Culture in America 
William Boardman
The Shame of Dianne Feinstein, the Courage of Christine Blasey Ford 
Ernie Niemi
Logging and Climate Change: Oregon is Appalachia and Timber is Our Coal
Jessicah Pierre
Nike Says “Believe in Something,” But Can It Sacrifice Something, Too?
Paul Fitzgerald - Elizabeth Gould
Weaponized Dreams? The Curious Case of Robert Moss
Olivia Alperstein
An Environmental 9/11: the EPA’s Gutting of Methane Regulations
Ted Rall
Why Christine Ford vs. Brett Kavanaugh is a Train Wreck You Can’t Look Away From
Lauren Regan
The Day the Valves Turned: Defending the Pipeline Protesters
Ralph Nader
Questions, Questions Where are the Answers?
Binoy Kampmark
Deplatforming Germaine Greer
Raouf Halaby
It Should Not Be A He Said She Said Verdict
Robert Koehler
The Accusation That Wouldn’t Go Away
Jim Hightower
Amazon is Making Workers Tweet About How Great It is to Work There
Robby Sherwin
Rabbi, Rabbi, Where For Art Thou Rabbi?
Vern Loomis
Has Something Evil This Way Come?
Steve Baggarly
Disarm Trident Walk Ends in Georgia
Graham Peebles
Priorities of the Time: Peace
Michael Doliner
The Department of Demonization
David Yearsley
Bollocks to Brexit: the Plumber Sings
FacebookTwitterGoogle+RedditEmail