Locals Opposition Squelched New York’s Offer to Amazon, but Other Subsidies Remain

Published April 1, 2019

 Opposition from residents, activists, and local politicians to tax incentives for the giant online retailer Amazon led the company to drop its plan to build new corporate offices in New York City, but New York offers plenty of subsidies for other businesses.

New York City and the state had offered Amazon $1.2 billion in tax credits and a cash grant of $325 million over 10 years if the company reached its hiring and building targets, amounting to more than $60,000 in tax breaks and subsidies per new job created.

The cancellation of Amazon’s HQ2 will mean fewer job opportunities for New Yorkers, says Seth Barron, associate editor of City Journal and project director of the NYC Initiative at the Manhattan Institute.

“Amazon’s decision not to establish a major official presence in New York City is unfortunate for a number of reasons, not least of which is the loss of potentially tens of thousands of professional-level positions and the development of a long-forsaken corner of western Queens,” said Barron.

‘Picking Losers’ in New York

New York offers generous subsidies for economic development, says Barron.

“[T]he money being offered to Amazon was actually minor in the context of corporate subsidies already offered in New York State … and would have easily been made up for by additional tax revenue,” said Barron.

The incentives offered Amazon were a small portion of the sums New York has spent to lure new business development, states Will Bredderman in an article for Crain’s New York Business.

“[U]nder the umbrella of Empire State Development … Cuomo has given away $5.4 billion  … while the New York Power Authority, which the governor also controls, gives away hundreds of millions annually in discounted electricity,” Bredderman writes.

Aggrieved Politicians

Politicians who were not included in the negotiations responded negatively to the initial Amazon decision to come to New York, says Barron.

“Local politicians who were aggrieved at not being included in the bargaining process … took a demagogic stance of opposition to it afterward, focusing on details like a corporate helipad as evidence that the project was an elitist thumb in the eye of the average struggling New Yorker,” said Barron.

The officials who led opposition to the Amazon deal favor other corporate tax breaks, says Barron.

“These … same officials applaud other forms of direct corporate subsidy such as tax rebates on film and television production,” Barron said.

New York has subsidized ventures that have not yielded results, such as the Tesla solar factory in Buffalo, says Barron.

“[New York State] is notorious both for its crony capitalism and for picking losers, as in the case of the solar panel factory it spent $750 million on upstate,” said Barron.

‘Limited Government Outlook’

There are alternative policies that would create a better climate for business development, says Todd Gabel, clinical associate professor of economics at the University of Texas at Arlington and a policy advisor to The Heartland Institute, which publishes Budget & Tax News.

“Market solutions to public policy should generally not involve subsidizing or giving tax credits to firms but rather provide a climate where entrepreneurs are free to take risks and innovate while bearing the losses or profits in doing so,” said Gabel.

Greater economic freedom would be more beneficial to New Yorkers, says Gabel.

“[L]ow taxes, respect for private property, and commonsense regulation will foster the greatest economic growth,” said Gabel. “By contrast, artificially imposing barriers to this activity by picking winners and losers in the marketplace, ‘crony capitalism,’ … will reduce it.

“So while Amazon pulling out may mean short-term losses to New York, in principle the city stands to gain greater economic activity in the long run by adhering to a limited government outlook,” Gabel said.

Sarah Quinlan ([email protected]) writes from New York City, New York.