Two Reasons Coronavirus Should Shut Down the HQ Shuffle

Plus: One Bernie idea Biden should adopt ... but probably won't.

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Amazon’s 2018 search for what was dubbed HQ2 earned a lot of attention — and then a backlash after the deal was announced. But it was just a high-profile version of something that happens all the time: Corporations demanding money in order to relocate or rebuild their headquarters.

Recently, three HQ-related news items caught my eye:

• 1-800-Flowers is asking Nassau County, New York, for 15 years worth of property tax breaks and a half a million dollar sales tax exemption, as well as state level tax breaks, in order to keep its headquarters on Long Island. The company’s site selection consultant noted “We looked at several dozen sites across the country,” implying the company could leave if those incentives aren’t granted.

• JobsOhio, the Buckeye State’s weird quasi-privatized economic development agency, gave Sherwin-Williams more than $37 million in funding toward a new Cleveland HQ. (Other incentive packages from the city itself and the state have been promised, but are on hold due to coronavirus.)

• Memphis is preparing to give a 15-year property tax break worth more than $800,000 to Kemmons Wilson Companies, an investment firm run by the family of the guy who founded Holiday Inn, in order for it to move downtown from its current spot in the suburbs. (As I explained in my book, Memphis is one of America’s worst offenders when it comes to over-reliance on corporate tax giveaways.)

In all three instances, the companies are getting money not to relocate, but to stay in their current home. That’s a too-common feature of corporate giveaways: Lawmakers aren’t even trying to gin up new economic activity. They’re just desperate to preserve what currently exists, so they cave when a company threatens to leave, never mind that those threats might not be real due to the real hassle of uprooting an entire HQ and all of its employees.

But the coronavirus pandemic makes these choices even worse for two reasons.

First, as I noted recently, the pandemic is going to blow a giant hole in state and local budgets. Hundreds of billions of dollars in revenue are going to be vaporized. Cities are laying off workers, and states are scrambling to cut budgets that, in nearly every instance, have to be balanced by law. So every dollar given away in a corporate tax incentive today is one fewer dollar to help stop the budget bleeding later.

And no, to preempt the criticism: These deals likely won’t lead to better state or city finances down the road, as a new study once again showed.

Second, it’s unclear what coronavirus is going to do to the very nature of white collar work. It could well challenge the convention that an HQ is necessary at all. When I tweeted about the Sherwin-Williams news, I heard from several Ohio folks who pointed out that everyone there is tele-working at the moment, so the company’s argument for needing a new headquarters at all is pretty weak.

Plenty of people are suggesting the pandemic will result in at least some sort of shift in our collective conception of office space, since, as the joke goes, it turns out all of those meetings really could have been emails this whole time.

I don’t know how much of a permanent change will result from the coronavirus white-collar quarantine. But neither does anyone else. So putting a ton of money into a structure that may be immediately obsolete is not the best idea. Save those dollars for something useful.

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One more thing: The Democratic presidential primary is over now that Sen. Bernie Sanders has officially suspended his campaign. Former Vice President and presumptive Democratic nominee Joe Biden is trying to win over Sanders’ supporters by adopting some Bernie-ish ideas: Opening Medicare to more people and expanding opportunities to forgive student loan debt.

I’d like to suggest one more: Sanders’ corporate tax plan. It was the most far-reaching and well-designed proposal to end America’s plague of corporate tax avoidance and preferential treatment, at least when it comes to the federal corporate income tax.

Meanwhile, Biden hasn’t even endorsed repealing all of Donald Trump’s 2017 corporate tax cut, just part of it.

I’m under no illusions that this will actually happen. Democrats are nearly always terrified of being painted as anti-business, and hide under their desks from anything that could be portrayed, even disingenuously, as raising taxes on small business owners. But Sanders’ plan would be a huge improvement over the status quo.

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— Pat Garofalo