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New York Doesn’t Need Amazon’s Sweetheart Deal

Huge incentive packages are a burden for taxpayers. Other cities should follow New York’s lead.

Protestors at New York City Hall in January rally against Amazon’s plans to expand in Queens.Credit...Drew Angerer/Getty Images

Contributing Opinion Writer

It’s an extraordinary moment. Amazon just said, “Goodbye, New York,” announcing that it was pulling out of its plans to open a headquarters in New York City, in exchange for which the city and state had promised as much as $3 billion in incentives.

These kinds of economic incentive deals are typically struck with little public oversight and get support from voters who seem satisfied that their leaders have at least tried to create jobs. But New York’s rage at Amazon’s sweetheart deal may finally signal a sea change in how the public reacts to these billion-dollar boondoggles.

In an age of rising rents and stagnating wages, after corporations just got a big handout from the Republican tax bill with much less relief for struggling families, as income inequality continues to ensure that the profit of our economic productivity is skimmed off by those at the top, the era of such incentive deals may be coming to an end.

Amazon’s departure comes after months of organizing and advocating against the deal by activists who canvassed door to door in Queens, arguing that the arrival of the online retail giant would bring rent hikes and displacement. They were joined by politicians, some of whom reversed course and started bashing the company they had once tried to lure to the city.

While not all of those who spoke out against the deal wanted it scrapped, they were united by a common concern: Why does a company with billions in profit need billions of New York’s money to bring 25,000 jobs to a city where it already has a significant presence? Especially after the company admitted that such enticements were a secondary factor in its decision making? That question gained urgency as it became clear that leadership had offered up lots of goodies, like help obtaining helipads on its buildings, without securing guarantees from Amazon in return, such as a promise from the company to remain neutral if its employees unionized.

Amazon probably didn’t expect such a vehement backlash. After all, these kinds of deals are struck by American cities all the time, although usually with less fanfare and somewhat lower price tags. Thousands were inked just last year. That’s partly because the public doesn’t usually scrutinize them very closely. Companies tend to fend off efforts at making the details transparent, particularly when they may not have lived up to the original promises made. If the public did dig into tax incentive deals, like the one offered to Amazon to come to Long Island City, they would find out that they don’t have the intended impact. There’s little correlation between cutting deals with big companies and improving a state’s employment or income picture. Most incentives go to employers that would have come to the state, anyway.

At the same time, New York City’s victory shows how difficult these deals can be to fight. The company said in its announcement ending the city’s deal that it doesn’t plan to reopen a search to replace New York, which was the second location, along with Northern Virginia, for its HQ2 expansion. But that doesn’t mean other places won’t try to cash in on what they see as New York City’s misfortune. Over the past several weeks, as the fight in New York worsened, Virginia officials said they’d welcome New York’s share. Cities that lost out, such as Chicago, Miami and Newark, went back to Amazon to try to woo it once again.

If Amazon were to, say, accept the whopping $7 billion offered by Newark, less than 20 miles away, and open up its headquarters there, proponents of the Long Island City deal would almost certainly throw a tantrum. Their protests would ignore the costs that the city faced, both in incentive dollars and in the demands on the city’s already overburdened housing, public transportation and schools from so many more high-income residents moving to the city. They would also ignore the reams of evidence that these deals typically fail to produce meaningful economic results.

But it’s this race to the bottom — to keep offering companies top dollar in order to beat out the competition — that has fueled the growth in these incentives, which have more than tripled since 1990. Politicians have been backed into a corner: offer up a hefty payout to at least get in the running for a company’s jobs, or risk the appearance of passing up an opportunity for job growth.

The only way out of the mess is for local and state leaders to wake up to the futility of these kinds of deals and call a truce. If another city succeeds in securing the 25,000 Amazon jobs promised to New York, the mania will only continue. Instead, it’s time for communities and their elected officials to recognize what New York already has: Big dollar tax breaks aren’t going to save their economies. They come with a real cost. The best way to compete is to invest in the attributes that make them attractive to employers — like education and infrastructure — and let companies make their decisions on the merits.

Bryce Covert is a contributor at The Nation and a contributing opinion writer.

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A version of this article appears in print on  , Section A, Page 27 of the New York edition with the headline: Better Off Without the Amazon Deal. Order Reprints | Today’s Paper | Subscribe

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