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Amazon Won't Build HQ2 in New York, But it Will Continue Grifting Taxpayers Elsewhere

It's a huge win for New Yorkers, but Amazon's practice of extracting subsidies from state and local governments is still hugely successful all over the country.

by Jason Koebler
Feb 14 2019, 6:20pm

Image: Shutterstock

After months of opposition from local politicians, tech industry activists, and residents, Amazon announced Thursday that it would not be building a massive new campus in Queens, New York after all. It’s a win for millions of New York state taxpayers, who were poised to give the richest man on Earth $1.7 billion in incentives and subsidies.

Amazon’s much-hyped “HQ2” search was a sweepstakes to see which cities would give it the best subsidies, tax breaks, and other handouts to build there. Today's news is a huge for the people of New York, and a big win for activists, but it is not the end of the era of massive subsidies for big companies.

“It’s remarkable that the community rose up and said ‘this isn’t a deal that works for us,” Rob Weissman, president of Public Citizen, told me in a phone call. “But you can’t ignore the other part of the process that led to this. You had other cities across the country prostrating themselves before Amazon to land the headquarters. To say we’ve reached the end of subsidies is premature.”

It’s too early to say what’s going to happen next, but Amazon still presumably plans to grow its workforce around the country—including in New York, without subsidies. In a statement, the company said that “there are currently over 5,000 Amazon employees in Brooklyn, Manhattan, and Staten Island, and we plan to continue growing those teams.” The Associated Press reported that the company has no specific plans to build “HQ2” elsewhere (besides its already-planned office in Northern Virginia.)

Weissman said that the fact that Amazon plans to continue to grow in New York regardless is part of a phenomenon he and others who have studied corporate handouts have seen for years: Subsidies are rarely the deciding factor for a company that plans to expand or relocate.

“It’s generally the case that corporate locations and decisions are not made based on subsidies even when they’re asking for them,” he said. “Maybe Amazon just realized this was going to be more complicated than they anticipated. In general with subsidies, companies try to extract whatever they can from a city, but they’re not the deciding factor.”

Stacy Mitchell, co-director at the Institute for Local Self-Reliance and coauthor of “Amazon’s Stranglehold: How the Company’s Tightening Grip Is Stifling Competition, Eroding Jobs, and Threatening Communities,” tweeted that this is in line with what she has seen before: “In other words: ‘We’re going to expand in NYC, much as we had planned, but not so splashy and without billions of dollars in giveaways.’”

And yet, cities and towns around the country largely seem to have little problem giving corporate subsidies that rarely ever pan out in the ways companies promise. Mitchell’s 2016 report was the most extensive on how Amazon CEO Jeff Bezos’s built an empire on the back of taxpayer handouts—and destroyed local economies in the process.

It found that between 2005 and 2016, Amazon received at least $613 million in public subsidies for fulfillment facilities. Her report was damning: It found that across the United States, Amazon has destroyed far more jobs than it has created by displacing local retail workers and small businesses around the country.

“Amazon’s expansion has resulted in a net loss of about 149,000 American jobs,” she wrote. “By supporting this model with tax breaks and subsidies, elected officials are encouraging a widening of income inequality rather than broadening opportunity.”

Compare New York’s resistance to Amazon to what’s happening in Northern Virginia, where Amazon also plans to expand. While activists in New York were protesting at City Hall, Northern Virginia has largely been quiet; last month, the Virginia House of Representatives approved $750 million in subsidies for Amazon after just nine minutes of debate.

“There’s no comparable opposition in Virginia,” Weissman said. “A national siting decision is based on supply issues, distribution networks, appropriate workforce availability. [They ask for subsidies and] frequently, they get the subsidy anyway for a decision they would have already made.”’

Amazon will surely keep asking for handouts, all over the country, even if it doesn’t label a new office “HQ2.” As Mitchell’s coauthor Olivia LaVecchia wrote for Motherboard in 2017, the company has a team of employees whose job is to extract subsidies from local governments:

“Amazon's well-oiled subsidy-extraction machine includes in-house site location experts who travel the country negotiating with local and state officials for incentive deals, and region-by-region policy teams that coordinate its local and state lobbying efforts.

‘I effectively identify, negotiate, and implement economic development incentives,’ reads the LinkedIn page of [a former] manager in Amazon's economic development department.’”

And so, yes, it’s a big deal that New York successfully fought back against Amazon. But wins like that have thus far been few and far-between. If Amazon has learned anything, perhaps it will simply be quieter next time it asks for handouts.