By the time the promised subsidies come due, those politicians will have moved on to higher office and left their successors and taxpayers with the bill.
BY JOHN C. MOZENA
“It’s like a poker game,” Dallas Mayor Mike Rawlings told CNBC at the United States Conference of Mayors on Thursday, explaining that it’s time for cities to play their cards close to the vest. “Bring the bidding war on,” he said. – CNBC article on Amazon “HQ2” project, Jan. 25, 2018
What Should Be Said: Mayors might be gambling to win Amazon’s competition, but they’re not at the table with their own money. If politicians are bidding to attract a private corporation to their city, taxpayers should be allowed to watch the game and tell their elected officials when it’s time to fold.
Local politicians need taxpayers looking over their shoulders because the billions of dollars in subsidies and incentives they’re offering Amazon have to come from somewhere. Since governments must first take a dollar from someone before they can give it to someone else, that “somewhere” is the pool of taxpaying residents and businesses already in those communities. Instead of building and maintaining local government services like police and fire departments, roads and schools, the dollars on the table in this game are being offered to one of the largest companies in the world. This puts the future of those local services at risk when the subsidy bills come due.
Any discussion of this bidding war should come with context for how much money is at stake. Newark and New Jersey offered $7 billion — or more than eight and a half times Newark’s $811 million city budget. Montgomery County and Maryland proposed $5 billion in subsidies and investments, in a county with an annual operating budget of $5.5 billion. In comparison, Amazon reported $136 billion in revenues and $2.4 billion in profits last year. The company brings in more money selling products and services each year than any state (except New York or California) collects in taxes.
But at least those gigantic offers got Newark and Montgomery County selected for the list of 20 semi-finalists out of 237 initial proposals. Not so for Detroit’s failed bid, which reportedly offered Amazon the ability to operate virtually tax-free for 30 years with exemptions from real estate, personal property, utility or city corporate income taxes. The company also would have been permitted to keep all the state income taxes paid by its own workers for a decade. Amazingly, Michigan politicians offered these handouts despite recent lessons in the danger of subsidies. In 2016, the state faced a budget crisis when big corporations unexpectedly cashed in $1 billion in tax credits handed out during the Great Recession, offsetting virtually all state corporate income tax collections for the year.
Why would elected officials gamble so much money on just one company, when mistakes like Michigan’s could cripple finances for years? That’s because the true “bidding war” isn’t between cities or local economies, but rather between politicians. They’re bidding with taxpayers’ money to win the political prize of being the mayor or governor or county executive who beat the rest of the country for Amazon. By the time the promised subsidies come due, those politicians will have moved on to higher office and left their successors and taxpayers with the bill.
That’s why with so much to gain for themselves and so much to lose for their constituents, it’s no surprise that politicians welcome Amazon’s requirement that negotiations be conducted in secret.
“If I were to lay out now what we’ll offer it would be criticized and looked at, and determined whether it’s good or bad,” Philadelphia Mayor Jim Kenney told CNBC.
While he might not want that kind of input from his constituents, Philadelphians who question his assertion that rising housing prices or congestion from an Amazon project are “problems we’d love to manage” likely disagree.
“Economic development” is based on the promise that you will benefit more if a politician takes money from you or your business to give to a corporation to “grow the economy” than if they’d just left the money with you in the first place. As politicians gamble billions on Amazon, taxpayers understandably question what kind of game they’re really playing.
John C. Mozena is a communicator working to spread liberty and free markets. He has been a vice president at a free-market think tank, spent two decades in a variety of private-sector marketing and communications roles and began his career as a newspaper reporter and editor covering health care policy. Follow him on Twitter or visit his website.
What Should Be Said shows effective ways of communicating freedom principles by using a storytelling approach, taking the moral high ground, and staying hopeful and aspirational. Media, politicians and thought leaders often fail to include the freedom perspective at all by omitting critical facts. Alternatively, when they do make a sincere attempt to sell the freedom philosophy, they often do so with a stale and defensive approach that is missing stories that humanize the dry facts and figures. Here we show examples of how storytelling and emotionally compelling changes in message will make all the difference for those trying to advocate for liberty.