Warnings of 'Race to the Bottom' as Amazon Holds Nationwide Tax Break Contest
"Whichever city 'wins' Amazon's headquarters will do so by ceding to the enormously powerful company money that should, by normal laws, be going into the public till."
Cities across the country are vying to be Amazon's new second home, after the retail company unveiled a Request for Proposals (RFP) aimed at selecting the site of an additional headquarters to complement its Seattle campus. While a number of city governments are eager to participate in the bidding war, critics are calling Amazon's proposition a "race to the bottom," with civic leaders competing to see who can offer the multi-billion-dollar corporate giant the biggest incentives to build in their cities—at potentially high prices for taxpayers.
Amazon's request, released last week, makes clear that in addition to being a fairly large metropolitan area with the ability to attract and retain talented tech workers, the winner of the company's coveted $5 billion investment will be the city that offers the best tax rates, although, as Lydia DePillis of the Houston Chronicle wrote last week, "Amazon clearly doesn't need the money." The RFP reads:
A stable and business-friendly environment and tax structure will be high-priority considerations for the Project. Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process.
Amazon is asking cities to "identify incentive programs available for the Project at the state/province and local levels" including tax credits/exemptions, relocation grants, workforce grants, utility incentives/grants, fee reductions, and the precise amount they can offer.
Rep. Ro Khanna (D-Calif.), who represents much of California's Silicon Valley, spoke out against Amazon's approach on Twitter:
Tech companies, flush w cash, must not demand local tax breaks up front. They shld partner w communities on jobs. https://t.co/3O1bkHbouF— Ro Khanna (@RoKhanna) September 7, 2017
I don't think they should be asking for tax breaks from cities within my district or those outside. They should be investing in communities— Ro Khanna (@RoKhanna) September 7, 2017
That's why we need federal policy to encourage tech investment and training across country instead of race to bottom— Ro Khanna (@RoKhanna) September 7, 2017
Hamilton Nolan of Splinter decried the ongoing trend of companies pitting states and cities against one another in a race to offer the cheapest return on investment—recently seen in Wisconsin, which beat out six other states to win a $10 billion contract with the Taiwanese electronics company Foxconn and offered the company $3 billion in tax credits—to the dismay of many residents. Nolan wrote:
These corporate attempts to play state and local governments against one another at taxpayer expense should be made illegal. Instead, they are treated as fun competitions to be "won," exhibitions of civic pride. They're not. They are exhibitions of the grotesque power imbalance between private and public capital in America...Whichever city "wins" Amazon's headquarters will do so by ceding to the enormously powerful company money that should, by normal laws, be going into the public till, to build schools and roads and pay firefighters and do things that support everyone.
Meanwhile, critics in some of the cities hoping to score Amazon's investment are expressing concern about being left out of a decision that would have a huge impact on the residents of the "winning" city.
A resident of Portland, Oregon wrote a letter to the editor of the Oregonian on Monday, "Our region is struggling to accommodate the growth that's happening now...we have big issues to settle before we take a bite as big as the Amazon opportunity. Our schools need resources to keep up and excel. We're still trying to find the balance between automobiles and public transportation...Before jumping onto Amazon's growth strategy, let's be sure we know our own."
Will Bunch, a columnist at the Philadelphia Inquirer, warned on Sunday against "soaring rents and a crisis of affordable housing, pricing out young artists and dreamers, and crushing any and all cultural diversity and vibrancy. All to win a competition based not on what Bezos can do for you, but on what you can do for Bezos."
While Amazon estimates its corporate headquarters has added $38 billion to Seattle's economy since 2010, the development has not been without its downsides. The city currently has the fastest-growing home prices in the nation, skyrocketing by 13 percent in the past year. With Amazon's promise to bring 50,000 jobs to its chosen city with average salaries topping $100,000, civic leaders may be racing to offer the company the most attractive deal at the expense of the working families who are already there.