Opinion & Blogs

Column | New York’s Amazon HQ deal is fundamentally flawed

Almost $3 billion. That’s what New York state and NYC will be giving in tax breaks to Amazon as it plants half of its second headquarters in the Big Apple.

Demonstrators protest against the coming of Amazon's second headquarters, at an Amazon store in Manhattan, Nov. 26, 2018. (Jeenah Moon/The New York Times)

Almost $3 billion. That’s what New York state and New York City will be giving in tax breaks to Amazon as it plants half of its second headquarters in the Big Apple. The state alone will be granting $1.53 billion in tax credits and grants. That will help fund, among other things, a new helipad for CEO Jeff Bezos.

After more than a year of fierce competition, Amazon recently announced it will split its second headquarters between Arlington, Virginia, and the neighborhood of Long Island City in Queens. The online retail giant promises to create 25,000 jobs in New York City, most of them new. 

Gov. Andrew Cuomo has been giddy about the prize, calling it “one of the largest, most competitive economic development investments in U.S. history.” Yet the same governor who has spent the last year railing against the new federal tax law — calling it a tax break for corporations and the rich — is now fine with giving tax breaks to a trillion-dollar corporation whose CEO is the richest man in the world.

The same governor who calls himself a champion of labor and livable wage is fine with giving tax breaks to a company that just weeks ago was pressured to raise its minimum wage to $15 an hour because thousands of people who work for one of the richest companies in history are living on food stamps.

Despite the image of an open competition that flooded Amazon with 238 proposals from cities across the United States with pitches on what makes them the best location for its second headquarters, we always knew that New York City was on the company’s shortlist.

Related: Column | ‘Up yours’ to Upstate NY in 2018 statewide elections

The city has all the things the company wants: a huge metropolitan area with direct access to major highways, international airports and a mass transit system, as well as close proximity to prestigious colleges and universities that can provide the career talent in the technology sector that Amazon requires.

Amazon played the nation for suckers. Many hoped that this would be the opportunity of a lifetime for a small city in the Midwest or the South that has been left behind by a changing economy fueled by companies like Amazon. Yet the king of online retail is instead taking billions of dollars to move into the corporate capital city of the world.

The economic irony is already being played in upstate New York. On the same day that Cuomo and downstate lawmakers were celebrating Amazon’s announcement, Major League Baseball cap manufacturer New Era Cap Co. announced it would be closing its Buffalo-area factory, putting 200 people out of work, and legal services firm Thomson Reuters announced the shuttering of its Rochester office, cutting 304 jobs. Where is their gigantic tax break?

Cuomo and city officials say that the income taxes Amazon will pay, along with its investments, will eventually result in billions of dollars in new state revenue that will dwarf the billions of dollars in incentives we are providing. We’ve heard this story before: New York is the king of using sweeteners to drive business development. The state spends approximately $8 billion a year on job-creation programs — more than any other state — and yet a lot of that money continuously goes to initiatives that in many cases fall far short of expectations.

The Empire Zones program gave big benefits to companies but many of them didn’t return the favor by providing new jobs or investments. The Start-Up NY program, which provides 10-year tax breaks for companies and their employees, cost $53 million just in advertising and has only created a handful of jobs. And the Las Vegas-style casinos that were supposed to revitalize upstate New York are seeking bailouts because they aren’t making the mountains of revenue that the government boasted they would.

Related: Column | New York should not be bailing out failing casinos

Cuomo predicted Amazon would generate $27.5 billion in new state revenue over the next 25 years, but that figure relies on Amazon creating 40,000 new jobs in New York City — far more than the initial 25,000 that it has promised. That calculation also factors in the number of employees that other businesses will have to hire to fill the needs of Amazon’s new second home, which also may be way overestimated.

That very well represents the fundamental flaw in this Amazon deal. We really have no idea what we’re getting, we only know how much we’re paying for it. Maybe that doesn’t mean too much to our state leaders or Jeff Bezos and his helipad, but when billions of dollars in taxpayer money is involved, we are right to be concerned. 

 

Luke Parsnow is a digital producer at CNY Central (WSTM NBC 3/ WTVH CBS 5/ WSTM CW6) and an award-winning columnist at The Syracuse New Times in Syracuse, New York. You can follow his blog “Things That Matter” online and follow his updates on Twitter.

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