This week, Amazon announced that it has received 238 proposals from cities and regions in 54 states, provinces, districts, and territories across North America hoping that the company will select one of them as the site for its second headquarters (HQ2). But while many states and municipalities are offering multi-million-dollar tax rebates and other incentives, Amazon’s brash tactics in seeking its location for HQ2, and the millions in taxpayer funds it is demanding, has prompted a more prominent discussion about the practical wisdom of offering corporations huge tax incentives and subsidies. This scrutiny and debate follows widespread discussion of Amazon’s growing market consolidation and influence that was spurred by the company’s acquisition of Whole Foods.
About six weeks ago, Amazon made news when it issued a request-for-proposals (RFP) from communities in regards to its search for a location for a second headquarters somewhere in North America. The RFP expressly stated that “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.”
In exchange, Amazon is promising it will invest more than $5 billion in construction and will expand its second headquarters to include as many as 50,000 high-paying jobs. In addition to Amazon’s direct hiring and investment, the company noted that the “construction and ongoing operation of Amazon HQ2 is expected to create tens of thousands of additional jobs and tens of billions of dollars in additional investment in the surrounding community.”
Soon after the RFP was published, lawmakers and community officials in many communities across the country began crafting generous proposals for Amazon, in the hopes of securing HQ2. One of the more high-profile packages came from New Jersey, which offered Amazon $7 billion in incentives to build HQ2 in Newark, as reported by Business Insider.
But not every city was so enamored with Amazon’s strategy. San Antonio answered Amazon’s RFP with a very public reply, as reported by the Los Angeles Times. In an open letter to Amazon CEO Jeff Bezos, San Antonio Mayor Ron Nirenberg and Bexar County Judge Nelson Wolff noted that the city was no longer bidding on HQ2 and explained: “We’ve long been impressed by Amazon and its bold view of the future. Given this, it’s hard to imagine that a forward-thinking company like Amazon hasn’t already selected its preferred location. And if that’s the case, then this public process is, intentionally or not, creating a bidding war among states and cities… Sure, we have a competitive toolkit of incentives, but blindly giving away the farm isn’t our style.”
Amazon’s desire for subsidies was also criticized by others. In an op-ed for Vice’s Motherboard, Olivia LaVecchia, a researcher with the Institute for Local Self-Reliance (ILSR), wrote: “People tend to think that Amazon has gotten there simply by out-competing everyone else. But there’s another part of the story of Amazon’s rise. From the very beginning, a core part of Amazon’s strategy has been taking advantage of public benefits not available to its competitors.”
LaVecchia further stresses, “Amazon is increasingly getting public policy to work for its own benefit. It’s time for public officials to instead invest in broad-based economic development that benefits many types of employers — starting with passing on Amazon’s second headquarters arms race. Otherwise, before long, it will be Amazon’s game that the public is playing.”
Libertarian magazine Reason slammed officials who were throwing “baskets full of other people’s money” at Amazon, and congratulated the cities located in Arkansas, Hawaii, Montana, North Dakota, South Dakota, Vermont, and Wyoming — “the only places to resist the urge to prostrate themselves before the gods of economic development.”
The article argues that “a prosperous, thriving city isn’t something that can be won at all. Civic officials have to create the right environment for enterprises to start, grow, or relocate there. Among other things, that means not showing favoritism by granting special tax breaks or corporate welfare.”
And in an open letter to Bezos from more than 70 civic groups, including Good Jobs First and ILSR, the authors counter Amazon’s list of demands for its HQ2 location with their own. One of those demands was that Amazon support small businesses in the community where they locate.
“Small businesses give our cities character, charm, and local flavor,” the authors wrote. “They’re what people remember when they visit — and provide goods and services that local residents count on from one generation to the next. We’re committed to keeping them open and flourishing.”
The groups state that Amazon can support local businesses by providing grants, business loans, or services to strengthen neighboring small businesses that may be impacted by development, and by establishing a “robust” local vendor contracting program that ensures local small minority- and women-owned businesses in particular are able to benefit from contracting opportunities at HQ2.
“The issue is not with Amazon — or any company — building a headquarters in a preferred area, nor is it with communities trying to sell a company on what makes its area enticing,” said David Grogan, director of ABA public policy and advocacy. “But Amazon’s monetary demands have opened up both a policy and cultural discussion that is long overdue. What is it that makes a community a good place to live? And should the government be handing out millions and billions in taxpayer funds to multi-million-dollar out-of-state companies? We believe that elected officials should be working to cultivate healthy local economies, which, in the long run, will create the sustainable jobs, services, and communities that everyone wants.”