When Alexandra Ocasio-Cortez and her followers managed to drive Amazon out of New York, she cost her constituents billions of dollars. It was a colossal mistake. New York City was right to offer Amazon the tax breaks they did. And, no, the politicians who scuttled this deal – despite what Cortez thinks – won’t get to spend the three billion dollars in giveaways they offered Amazon. And yet, she was right – for all the wrong reasons.
Major corporate headquarters represent a tax windfall to whatever jurisdiction they reside in. They pay taxes, their Executives pay taxes. The people who profit off them make more money and pay more taxes. As a result, cities, counties, and states are in a desperate race to offer the best deals to the biggest companies. Unlike what Cortez apparently believes, these deals don’t take money away from cities. We take in far, far more in taxes than the new infrastructure and population demands in spending, even factoring in tax breaks and other freebies.
So why is she right? Because the current approach gives benefits to the largest and most politically connected corporations and institutions, simultaneously creating an undue burden for everyone else. Keeping taxes as low as possible across the board is a far better approach. In other words, spread the benefit. Instead of competing with special deals, jurisdictions should be competing on the basis of our overall living and business environments. This approach has the added benefit that governments are incentivized to operate as efficiently as possible, and not view temporary tax windfalls as an opportunity to increase spending.
In the current environment, though, this approach is limited by the – perfectly understandable – willingness of jurisdictions to offer special deals to preferred corporations who can bring in new tax revenue, like Amazon. But what about a company that wants to start competing with Amazon (or, more realistically) wants to compete for a segment of Amazon’s business? Under the current system, they actually end up helping pay the freight for the very company they’re trying to compete against; we’re forcing the little guy to pay for the big guy. Instead, every company should pay for themselves.
Plenty of deals like Amazon’s, though much smaller in scale, happen here in Arizona every year. High profile examples include the World View fiasco in Pima County, about half the buildings in downtown Phoenix being subsidized via property tax abatement schemes, ASU’s sprawling new commercial developments, and the recent Suns stadium deal. Each one of the agreements that facilitated these deals was sold to local politicians on the same basis as the Amazon deal was sold to New York. And, with the exception of the World View mess (congrats, Chuck Huckleberry, on running the most ridiculous, back-room dealing local government operation outside of Chicago), each will likely end up delivery a benefit for taxpayers. But, as noted above, while taxpayers may not get the short end of the stick – directly, at least – every single other commercial enterprise does, which is what ultimately makes these insider-driven deals a bad deal.
What is needed now is a national campaign focused on state governments to ban these types of giveaways. The federal government does not have the authority to do so by itself, but we shouldn’t need the feds to step in. Voters on both sides of the aisle are equally fed up by this type of corporate welfare. Democrats object to feeding the fat cats. Republicans and libertarian types object to government choosing winners and losers in the market. It is absolutely one of the increasingly rare times when voters across the spectrum largely agree, and only the career politicians are standing in the way of true, bipartisan progress.
Already, we’ve seen members of the Arizona legislature have started to look for measures to curtail the efforts of ASU, Pima, Phoenix and others to use these deals. They need to step up those efforts. But we also need to reach out to other states to do the same. If Arizona stops offering these types of corporate giveaways while no one else does, it will only end up hurting us. Done in conjunction with a growing, bipartisan movement across the country, instead of being hurt, we all benefit.
If Ocasio-Cortez and her followers want to jump onboard that train, I’ll happily climb up with them.