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The coronavirus pandemic, simply put, is going to decimate state and local budgets, as sales taxes dry up due to economic lockdowns, tourism vanishes, and income tax receipts tumble due to people losing their jobs. Even under the rosiest scenarios, public employees are going to be laid off in huge numbers and there will be deep cuts to schools and other social services. Nine in 10 cities are anticipating a revenue shortfall due to the virus (and I think the tenth is lying).
Given that stark reality, lawmakers need to be very careful with every dollar they spend — which brings us to Onondaga County, New York, and a new Amazon warehouse.
The pandemic has been very good for Amazon, boosting sales through the roof. CEO Jeff Bezos is on his way to being the world’s first trillionaire. And yet Onondaga County gave the company $70.8 million in tax breaks to build a distribution center in Clay, New York.
Largesse like this is totally unnecessary, and plays into Amazon’s plans for retail domination.
The subsidies include a PILOT — just like the one Facebook recently received that I discussed here — worth $49.1 million, plus a sales tax exemption worth $20 million and a $1.7 million exemption from the state’s mortgage recording tax. In return, Amazon is promising 1,000 jobs and loads of new revenue for the local area (but is getting a partial exemption from requirements to use local construction workers).
Oh, and it pulled the usual trick tech companies use, refusing to acknowledge it was the company behind the deal until everything was already set.
Now, it’s true that an Amazon warehouse will result, even with the property tax giveaway, in more property tax revenue than that paid by the site’s current occupant, a golf course. That’s what proponents of the deal want you to focus on.
But that focus assumes Amazon would never have come to the site without massive subsidies. There’s reason to be very skeptical that’s true.
After all, Amazon’s distribution network depends on being in key spots in order to get packages where they’re supposed to be within a certain amount of time. As detailed here by Good Jobs First, Amazon locates facilities where there are either a lot of people with disposable income or a lot of Prime subscribers (or ideally both).
Lo and behold, the Clay facility is in a concentrated area of Prime subscribers.
The takeaway is that Amazon needs to be in certain places for strategic reasons having nothing to do with tax incentives. (That’s the case for at least 75 percent of all corporate tax deals, in fact.)
Even proponents of the deal stumble onto this fact without really realizing it. As one local economic development strategist put it defending the subsidies, “We have long advocated for and pursued opportunities to draw a major warehouse and logistics facility to the region, given our strategic location and other warehouse and distribution assets.”
If those latter points are true, then the subsidies should be unnecessary. Clay and Onondaga County could have their cake and full property tax revenue too. With sales tax revenue down 30 percent there, and the county anticipating up to a $100 million budget gap, every dollar will help.
Research has also shown that Amazon warehouses aren’t necessarily a boon for local jobs. According to the Economic Policy Institute, yes, growth occurs specifically in the warehouse job sector, but wider employment growth does not, meaning the warehouse either blunts other economic activity or has simply too small of an impact to even measure.
The extra kick in the pants is that this giveaway comes just as Amazon is showing its callous disregard for its warehouse workers. At least eight have died of coronavirus, and the company is so uninterested in providing full tracking data that employees have started doing it themselves.
And forget unionizing for better conditions: Amazon prevents that too. Instead, it invests in laundering propaganda through local TV news stations.
Without significant government action, the pandemic is going to entrench Amazon’s monopoly even further. Cities, counties, and states don’t need to help it along by giving it piles of cash, especially when they’re all going to be facing budget struggles of unknowable proportions.
One more thing: President Trump is threatening to move the Republican National Convention scheduled for August from Charlotte, North Carolina, if the city can’t guarantee soon that it will lift its coronavirus restrictions and allow for a full, in-person convention. As I explained on Twitter, this is attempted blackmail to which the city shouldn’t cave.
Donald J. Trump @realDonaldTrump
...to find, with all of the jobs and economic development it brings, another Republican National Convention site. This is not something I want to do. Thank you, and I LOVE the people of North Carolina!Thanks for reading this edition of Boondoggle. If you liked it, please take a moment to click the little heart under the headline or below. And forward it around to friends, family, or neighbors using the green buttons. Every click and share really helps.
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Finally, if you’d like to pick up a copy of my book, The Billionaire Boondoggle, go here.
Thanks again!
— Pat Garofalo
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