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Tech giant Google recently announced that it bought a building in New York City in a massive $2.1 billion deal, which is the largest real estate purchase in the U.S. since the pandemic began. Google also said it would not avail itself of the corporate subsidy programs offered by New York State when it builds out a new campus centered on that building. A Google spokesperson reportedly specifically confirmed that the corporation won’t be applying for two of New York’s largest tax handout programs.
This set off a victory lap of sorts for those who opposed the subsidy package offered to Amazon for its HQ2 facility in New York back in 2018, a facility which Amazon ultimately scuttled due to said opposition. They rightly claimed it vindicated their position that New York is an attractive place to do business without any sort of “incentives.”
Indeed, the fact that Google and Amazon have both expanded in the Big Apple without subsidies shows the HQ2 opponents had it right: New York has plenty to offer corporations without having to dole out taxpayer largesse.
But there’s also a bigger story here. This is the third straight subsidy-free new office facility Google has announced, following those in San Jose, California, and Raleigh, North Carolina. (It’s possible, of course, that there are some non-disclosed subsidies happening at any of those locations, but let’s circle back to that if it turns out to be true.) It’s pretty unique to see such a massive corporation, which has collected $923,824,006 in state and local subsidies dating back to 2000, suddenly eschew them like this, and so publicly.
And to be clear, Google is not turning away from all public money, just that connected to a few high-profile offices. Google is still perfectly happy to collect tax breaks elsewhere. Here’s an article from this week about Google planning to tap into Oregon’s public subsidy programs for data centers — again. It recently received $54 million to create just 20 jobs at a data facility in Columbus, Ohio.
So what is Google up to?
My guess is that Google learned from the public relations fiasco that was Amazon’s HQ2 experience. Though Amazon did receive a major subsidy from Virginia for its new “headquarters,” the further we get from that episode the more it looks like a strategic blunder. Not only did it help galvanize an anti-corporate power movement in New York State, but since then, more and more communities have organized opposition to local Amazon subsidies. The Teamsters union has also sensed an opportunity to challenge Amazon at the local level and moved in.
The combination of normal people seeing hundreds of cities joining an Amazon competition that was rigged from the start, the corporation’s sky-high pandemic profits, and former CEO Jeff Bezos’ penchant for being in the news for everything from divorces to taxpayer-funded space flights has put the spotlight on Amazon’s actions in a way that it wasn’t pre-HQ2. In many ways, Amazon has made the transition to full political villain.
Google sees that, and would like to avoid a repeat, especially since federal and state antitrust enforcers and lawmakers are taking a long, hard look at its practices — hence those goofy ads many of you have likely seen on TV about how awesome Google is at all things.
I think Google’s leadership has calculated that throwing gasoline on the fire by taking a huge subsidy package to open a new white-collar office somewhere isn’t worth the headache, hassle, and increased attention. Lending more credence to this theory, this Washington Post article sure makes it seem like Google wanted subsidies for those San Jose and New York offices back before they became more of a potential political liability.
That said, Google still clearly feels it can pick on the smaller jurisdictions desperate for tech investment, and continue to collect monies for things perceived as creating construction gigs. As I’ve written before, it’s smaller communities, especially in rural places, that really lose out when Big Tech comes to town, as they pay more to receive less than the bigger cities that have become tech hubs, for lack of a better term.
That divide is only going to grow if corporations like Google feel its best politically to stop extracting resources from wealthy, economically vibrant cities, while still taking them from places that don’t have as much political power or as much of a national media spotlight. (And it certainly doesn’t hurt that Google is one of the main culprits responsible for the precipitous decline in local news outlets.)
My inclination then is to pocket the win — Google not asking for subsidies for new offices is certainly better than trying to fend off those requests — but not give the corporation too much credit. It’s good to see that public pressure and concerns over optics have led it to forego at least one particular set of subsidies; it’ll be better when states and cities get out of the businesses of subsidizing Google entirely.
ONE MORE THING: First it was California subsidizing movie production, and now it’s Kentucky giving $30 million in tax breaks to a bourbon distillery to move 50 jobs from Ohio to the Bluegrass State.
I enjoyed this reaction:
Tax Notes @TaxNotesKentucky — world-famous for its bourbon industry — has approved nearly $30 million in tax incentives to lure a bourbon distillery from Ohio, a project that could bring more than 50 jobs to the state. 📰 Read @LaurenLoricchio's latest: https://t.co/YVlad9LXeE https://t.co/8wXdw18hAd
If you’re interested, here’s a deep dive into what percentage of the world’s bourbon is actually made in Kentucky. The short version is: Nearly all of it. There’s literally a whole tourist experience named after this particular product in this particular place. So the case that production there needs to be incentivized is, shall we say, pretty weak.
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— Pat Garofalo