The case against using taxpayer money to lure Amazon

Let us inspect closer the feeding frenzy Amazon has created by putting its second national headquarters location out to bid. What’s basically involved is a contest to see which state can give the most taxpayer money — corporate welfare — to attract Amazon’s HQ2. But the dynamic of the Amazon deal, like so many others in this category, is to encourage state and local governments to bid ever higher with more and more taxpayer money to attract the economic prospect. It is truly a race to the bottom.

The cumulative result of this race has been to create ever more tax incentives and other subsidies, now conservatively estimated to cost states and localities $70 billion per year.

Good Jobs First, a nonprofit set up to track this brand of corporate welfare, has documented almost 400 “megadeals,” most of them costing taxpayers hundreds of millions or even billions of dollars, at an average cost per job of more than $658,000. Some local governments caught up in the bidding exempt their new

prospects from property taxes for decades, all the while using taxpayer money to deal with the costs induced by the growth of jobs and population.

Good Jobs First finds that some of these deals involve little if any new job creation; indeed one in 10 of the deals involve the mere relocation of an existing facility, often within the same state and sometimes with the same metropolitan area.

Over the long run there are no winners in this game except corporate America. When this game is played over decades, most locals will win something but at a terrible loss of tax base and the whole game is so unnecessary. States should compete on their business climate, their roads, their infrastructure, their education systems: all of those things that require the tax base being given to these large cor- porations.

When Toyota chose San Antonio for a new pickup truck plant, its senior vice president in charge of site selection in North America said: “If you pull too many incentives out of the community in the beginning, you pay the price down the road. It’s a penny-wise but dollar-foolish thing to do. We believe it is in our best business interest to be a good corporate citizen and contribute to the community right away.”

Toyota passed up incentives reportedly up to $370 million more than San Antonio offered, and actually donated back most of the incentives it received.

Colorado already has one of the nation’s lowest unemployment rates. Most of Amazon’s new workers would come from out of state. Research on the effects of “labor demand shocks” — a sudden increase in jobs as a result of a new plant or plant expansion — indicates that for every 100 new jobs in a region, about seven will be filled from the ranks of the unemployed, about 16 by existing residents into the labor force, and the remaining 77 from in-migration. It generally costs taxpayers $25,000 to $30,000 per new household in roads, schools, water and sewer, etc. All of this taxpayer expense will be in addition to whatever specific concessions Amazon is given.

Colorado could learn from Former Idaho Gov. Cecil Andrus, who once refused demands by Hewlett-packard for tax concessions in order for HP to locate a manufacturing plant in Idaho. In a frank discussion with David Packard, Andrus said that there would be no concessions. Andrus pointed out to Packard that when a company, or an individual, came to Idaho, it became a citizen of that state and played by the same rules as everyone else. Packard, though unhappy, agreed that Andrus’ argument made sense and opened a plant in Idaho.

Now that’s real leadership!