DON’T OVERBID FOR AMAZON OR OLYMPICS.

New York State Governor Andrew Cuomo and New York City Mayor Bill de Blasio obviously didn’t get the wardrobe memo for their joint announcement of Amazon’s HQ2 x 0.5 on Tuesday. (“Zero point five” because New York is getting only half of Amazon’s new HQ. Washington’s Virginia suburbs are getting the other half, which means the company will now have three headquarters, a logistics challenge even for Amazon.)

In their dark suits, white shirts, shiny ties and cuff links, the politicians looked like rubes beside Amazon VP John Schuettler, who was tieless in a windbreaker. Don’t they understand 21st-century rules? The more money you’ve got, the less you dress up. In this threesome, Amazon has the money — and thanks to the politicians is getting even more: US$2 billion in total, US$1.5 billion of it from New York.

Governor Cuomo is getting grief from his Democratic Party’s rising socialist wing about giveaways to Amazon at a time when New York’s subway system is “crumbling” and communities need “more investment, not less,” as newly elected superstar Congresswoman Alexandria Ocasio-Cortez tweeted. In response, Cuomo was unusually candid: “It’s not a level playing field to begin with. All things being equal, if we do nothing, they’re going to Texas.”

Huh. “If we do nothing, they’re going to Texas.” Words for public executives everywhere to live by.

One reason it’s not a level playing field is New York’s 6.5 per cent corporate income tax. Texas doesn’t have a corporate income tax (though it does have a gross business receipts tax, averaging less than one per cent). Another lump in the playing field is New York City Council’s love of microregulation. Thus Amazon has exacted guarantees that for certain future business clearances it can go directly to the mayor and governor — who, incidentally, have pledged to end their famous feuding for Amazon asks.

Governor Cuomo’s admission that taxes and regulation can discourage investment is remarkably refreshing and maybe an indication he’s running for president in 2020. The usual Democratic response to proposals to reduce corporate taxes is that businesses need to pay their “fair share” for public services, along with a blanket denial that taxes affect business decisions.

Governor Cuomo didn’t elaborate on his common-sense economics, but his tax strategy presumably is to impose the full corporate rate on companies that aren’t credible threats either to leave or not come to New York in the first place, and then to negotiate lower taxes, as he has just done with Amazon, for business that do have credible alternatives. Small businesses stuck in New York for family or commercial reasons won’t agree, but in principle “tax discrimination” of this sort is a semiplausible way of dealing with the reality of corporate mobility.

In practice, however, the problem is figuring out which of the 544,000 firms operating in New York — and the millions that could be — are mobile and by exactly how much. Amazon’s easy. It’s a super-mobile whale that announced it was open to persuasion. But what about all the other actual and potential operators? So the governor and mayor are going to identify them all and evaluate the credibility of their threats to leave or not to come in the first place? As New Yorkers would put it: Gimme a break!

And don’t forget the power asymmetry of the resulting negotiations. More than 200 cities and towns registered with Amazon for its HQ2 auction and fully 20 made its short list. Big businesses probably do create net economic benefits for cities, though how big is notoriously difficult even to guesstimate. But when you’re bidding against 19 other jurisdictions, when your political future partly hinges on the outcome, and when you’re playing with taxpayer money, not your own, conditions are ripe for over-bidding. Yes, there will be net economic benefits to New York. But New York may well have signed them all back over to Amazon.

What’s true of Amazon is also true of the Olympics. Yes, there may well be net benefits from holding an Olympics. But in an auction as frenzied as the Olympic auditions typically become, cities are all but certain to overbid. Overbids used to involve satchels of cash for shadier members of the International Olympic Committee. Now they take the form of excessive spending commitments to the various often self-appointed stakeholders in the process.

The one consideration that may give pause to Calgarians who voted 56-43 against bidding for the 2026 Olympics is that so many cities and their sponsoring regional and national governments have become so skeptical about getting net benefits from hosting the Olympics that maybe now it’s the IOC that’s desperate. Which means a reasonable deal might actually have been had.

IF WE DO NOTHING, THEY’RE GOING TO TEXAS.