November 15, 2018

Visions of a Tech Hub? Landing Amazon Is Just a Start

“Many of our neighbors are still struggling in this economy, and this could be an amazing transformational thing to have 25,000 jobs come to the community,” she said. “But we have to ensure we don’t see another wave of mass displacement of working-class residents.”

Some of the HQ2 finalists promised enormous tax incentives to try to lure Amazon to their cities — a strategy criticized by many economists, who say such deals rarely pay off. It isn’t yet clear what subsidies Virginia and New York offered Amazon, but there are signs the project didn’t come cheap. Gov. Andrew M. Cuomo of New York said Monday that the state had offered “a great incentive package,” and quipped that he would change his name to “Amazon Cuomo if that’s what it takes” to land the deal.

Timothy J. Bartik, an economist for the Upjohn Institute in Kalamazoo, Mich., who has studied tax incentives, said comments such as Mr. Cuomo’s were concerning. He and other economists worry about a “race to the bottom,” where state and local governments compete to offer ever-bigger subsidies.

In one case, Wisconsin offered billions of dollars in incentives to attract a manufacturing plant from Foxconn, a Taiwan-based technology company. Since the project was announced last year, the price tag has grown, while the number of jobs has not. Mr. Bartik estimated this year that Wisconsin was paying more than eight times as much per job for the project as it did in earlier deals.

“It’s easy to hand out cash, and it’s especially easy to hand out cash if it’s going to be the next governor’s problem,” Mr. Bartik said.

But not all incentives are created equal, he noted. Efforts to streamline regulatory and permitting processes, for example, can make projects more attractive to companies without costing taxpayers much if anything. And investments in infrastructure or job training can reap benefits for the community even if they are initially promised as a way to help a specific company.

“I would be trying to leverage this into improvements that wouldn’t just benefit Amazon but benefit you more broadly,” Mr. Bartik said.

Article source: https://www.nytimes.com/2018/11/06/business/economy/amazon-hq2-lic-virginia-economy.html?partner=rss&emc=rss

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