What would you say if a billionaire wanted you to pay for his next venture? As anybody familiar with the ubiquity of taxpayer-subsidized sports stadiums can tell you, it’s something that has already happened. In fact, it’s happening again except this time you’re not being asked to pay for an arena, but the new headquarters of Amazon.
In September, Amazon announced its intent to build a second headquarters somewhere in North America, though where exactly is still undetermined. A set of requirements were put forth by the online shopping giant, including: a metropolitan area with a population in excess of one million, within 45 minutes of an international airport, and up to 8 million square feet for the new campus.
In the Capital and Operating Costs decision driver, the RFP states, “Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.”
On its own, this seems benign enough and could easily refer to a mere business-friendly tax structure, which is a perfectly reasonable request. In the following decision driver titled Incentives, Amazon reveals their wish for special treatment in the form of corporate welfare:
"Identify incentive programs available for the Project at the state/province and local levels. Outline the type of incentive (i.e. land, site preparation, tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, permitting, and fee reductions) and the amount. The initial cost and ongoing cost of doing business are critical decision drivers.”
Amazon boldly states they want to pay less taxes than their competition, that they don’t exactly want to pay for the new site on their own, and that they want grants which will come directly from the taxpayers. Dangling tens of thousands of jobs over their heads, cities are taking Amazon’s bait.
For instance, Stonecrest, Ga., has offered to give up a few hundred acres of its land so Amazon can have its own city named Amazon. New York City lit up some of their major landmarks in orange, Amazon’s signature color. Birmingham, Ala., ran a campaign where they built giant Amazon Dash buttons which send flirty tweets to Amazon, such as “We are Chipotle and these other cities are Taco Bell, Amazon.”
These marketing campaigns are humorous but that’s not the full extent to which cities are going in their bid. They read Amazon’s RFP carefully and clearly came away with the impression Amazon wanted them to have by reading between the lines: when Amazon says “incentives,” they’re referring to corporate welfare.
Newark, N.J., offered $7 billion in tax breaks to Amazon; Philadelphia, Penn., offered a tax exemption of $2 billion and that’s on top of Pennsylvania’s “more than $1 billion in tax breaks.” And as reported by the Baltimore Sun, Maryland is offering incentives “in the billions of dollars.”
With these sort of incentives, the free market suffers. These tax breaks and exemptions help Amazon, but they hurt businesses trying to compete with Amazon by having the government favor one supplier of goods over another. When it comes to competition, government would be wise to keep its thumb off the scales. What makes the private sector great is that it’s private and it should stay that way. Cities are engaging in a grotesque circus wherein they come up with “cute” marketing campaigns and offer billions of dollars to Amazon without so much as asking the people paying for it — the taxpayers. All this for a company which, in the United Kingdom, earned more through government grants than it paid in taxes in 2013. Do Americans want a similar story in our newspapers a couple years from now?
If our elected officials, from the local to the federal level, were to stop favoring one business over another for a political calculus, we would finally have a system that is not merely business-friendly, but market-friendly too. Until then, it should not come as a surprise when businesses try to play the existing system. Today it’s Amazon. Tomorrow it could be Google, Apple, or a myriad of others.
Surely, Amazon will bring prosperity to the community who wins the bet. However, what are the unseen consequences of giving taxpayers’ money to one company over another? These resources could have remained in the hands of workers and business people who also could have created jobs. We will never know about this since one flashy project attracts the politicians, media, and the public. Is an adherence to free market principles, that we know leads to prosperity, too abstract to become attractive?
Amazon is engaging in crony capitalism and people are falling for it because they appreciate the services provided by Amazon; because Amazon has become an important part of many Americans’ lives. Look at the HQ2 situation from a bird’s eye view and it’s abundantly clear that, due to the gangrenous cronyism run rampant in our current institutions, Amazon won’t care if the location is business-friendly, so long as it’s Amazon-friendly.
Michael Hall is the North American Communications Associate with Students For Liberty (SFL).