Amazon’s process of picking two cities for its two new 25,000-worker headquarters—in Long Island City, New York, and Crystal City, Virginia—illustrates all of the factors causing inequality in America. The company’s successful extortion of bidders accelerates the state vs. state and city vs. city competition for jobs, and redirects public dollars from public needs to corporate profits.
Even before the high-tech retailer collects any of the $2 billion-plus in taxpayer subsidies (the real final price tag to taxpayers is likely to exceed $4.6 billion), U.S. cities and states had already shelled out about $110 billion annually in “incentives” to the largest corporations. Now Amazon’s coup will encourage other corporations to demand more from the public treasuries.
The big incentive packages offered to woo Amazon are stirring citizen outrage, especially in New York. “How did the city suddenly come up with a plan to give such significant tax breaks and incentives to a corporation led by the richest man in the world?” asked the community group Queens Neighborhoods United in a statement.
How indeed?
Amazon, worth nearly $1 trillion, is owned by Jeff Bezos, already the world’s richest man with a fortune of $162 billion and growing.
Under the guiding hand of Bezos, Amazon has avoided U.S. federal taxes while raking in public subsidies. A new report from Seattle Business says Amazon paid zero dollars despite making $5.6 billion in profits last year, and will be getting a $789 million tax cut in 2018 thanks to the Trump Administration’s new tax law. The company has already received subsidies of $1.6 billion and counting for its warehouses and data centers as of mid-2018.
Amazon paid zero dollars despite making $5.6 billion in profits last year, and will be getting a $789 million tax cut in 2018 thanks to the Trump Administration’s new tax law.
Adding salt to the wound, the latest Amazon subsidies will reap serve no productive purpose. As Greg LeRoy documents in The Great American Job Scam, corporate location decisions are driven almost entirely by such factors as whether there are enough workers with the right education and skills. A New York Times editorial noted the strong education system and large concentration of skilled technicians already generated by the two states and demanded, “If New York has what Amazon wants, why is it paying the company so much to make the move?”
In fact, the big-dollar incentives are downright counterproductive. The enormous diversion of tax funds to Amazon undercut the ability of New York and Virginia to support the strong educational systems that produce the workers Amazon finds so attractive. Long-term economic development flows from investing in high-quality public education, rather than tossing unneeded subsidies to mega-corporations like Amazon.
The handouts to Amazon come “at time when New York desperately needs money for housing, transportation, infrastructure, and education,” said City Council Chairman Corey Johnson. Rampant gentrification and over-crowded transportation systems and roads will become more urgent with new Amazon tech workers drawn to the New York area. Spikes in housing prices and transportation pressures will only intensify in the D.C. metro area.
Locally owned enterprises will also suffer as the gargantuan Amazon receives public money to more effectively grind them down, intensifying the firm’s power to drive small local firms and operations out of business. “If you’re a local retailer or small manufacturer or artist or writer or publisher, you’re watching as your city and state hands your tax dollars to your most ferocious antagonist,” observed Stacy Mitchell of the Institute for local Self-Reliance.
Right now, three prominent Democratic leaders—New York Governor Andrew Cuomo, New York City Mayor Bill de Blasio, and Virginia Governor Ralph Northam—are pounding their chests over landing the new Amazon headquarters. But they should be mindful of the recent defeat of Wisconsin Governor Scott Walker, who employed a similar “development” strategy to woo the Taiwanese firm Foxconn.
Wisconsin state and local governments pledged to dole out $4.5 billion to Foxconn in exchange for its promise to create up to 13,000 jobs. Citizen furor over the unprecedented size of these subsidies and uncertainty over the long-term benefits was a key factor in his loss on November 6.
Middle America remains neglected and economic inequality soars.
Amazon’s decision also highlights the increasing concentration of new investment and wealth on the two coasts, while Middle America remains neglected and economic inequality soars. As Robert Reich wrote about the Amazon deal, “Between 2010 and 2017, according to Brookings, nearly half of America’s employment growth centered in just twenty large metro areas that are now home to about a third of the U.S. population.”
The Amazon subsidies are helping to steer private investment away from the Midwest and South, where the fates of millions of families are tied to fading manufacturing, farming, and resource extraction industries. The vast spending on state and local “incentives” to America’s mega-corporations should be redirected to public programs like infrastructure rebuilding and clean-energy manufacturing.
And then maybe someone should write a book about it—available everywhere except from Amazon.