Dozens of economists and academics who study cities are asking the finalists for Amazon’s second headquarters to call a cease fire and forgo the use of tax breaks to lure the retail giant.
Amazon earlier last month month disclosed a shortlist of 20 regions out of the 238 bids it received to host what it calls HQ2. That kicks off the next phase of a process that Amazon says will ultimately lead to hiring up to 50,000 workers.
The Seattle company’s request for proposals outlining its wish list for HQ2 said that incentives – typically tax breaks, credits tied to job growth, free job training programmes – would be “significant factors” in its decision-making process.
The company has sought such incentives before, for projects like warehouses and datacentres. But criticism of spending public money to entice private projects has ramped up recently after big incentives were pledged to tech giants: US$3bil (RM11.71bil) for electronics maker Foxconn to locate a plant in Wisconsin, and US$250mil (RM976.02mil) for Apple to place a datacentre in Iowa.
A letter posted to petition website Change.org on Jan 30 said that “tax giveaways and business location incentives offered by local governments are often wasteful and counterproductive, according to a broad body of research.”
Incentives, the letter goes on, divert funds to private coffers that should be put to use supporting public services such as schools, housing programs, and transportation, which are “more effective ways to spur economic development.”
Newark appears to top the bidders who have disclosed their incentive offers to Amazon, proposing US$7bil (RM27.32bil) in combined state and local tax credits. Maryland officials recently outlined US$5bil (RM19.52bil) in incentives of their own on behalf of finalist Montgomery County, and Pennsylvania has offered more than US$1bil (RM3.90bil) in support of finalists Pittsburgh and Philadelphia.
“While we are supportive of Amazon’s quest to build a new headquarters, we fear that the contest among jurisdictions – cities, metro regions, states and provinces – for this facility threatens to spiral out of control,” the letter says. Cities should forgo that process, and sign a nonaggression pact committing them to abstain from tax breaks and cash transfers to Amazon.
The letter is the work of Richard Florida, an urban studies researcher currently at the University of Toronto’s Rotman School of Management.
Many of the letter’s first 100 signers hail from academia, think tanks and government service. The list includes economist Jeff Sachs, of Columbia University; former Labour Secretary Robert Reich; as well as Alan Krueger and Jason Furman, both former chairs of the President’s Council of Economic Advisers.
Amazon declined to comment.
Last year, a coalition of community groups from around the US also raised concerns about the bidding process for Amazon’s HQ2, asking Amazon “to pay your fair share if you end up being our neighbour.”