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The world’s biggest company, Amazon, went out to bid on their location for a second headquarters, nicknamed “HQ2.” This is a story that goes into the muck and the mud about how large corporations wield their financial and political influence to become even larger and more influential.

There were three “winners” of the bidding contest: Long Island City, New York; Arlington, Virginia; and Nashville, Tennessee. Amazon decided to split HQ2 into two branches in Long Island City and Arlington. Nashville will be home to their East Coast Operations Center. The company will receive up to $1.5 billion in tax incentives and cash grants from the State of New York, $600 million from the State of Virginia, and $100 million from the State of Tennessee. These figures do not include the hundreds of millions of dollars the state and local governments will pick up for infrastructure improvements which could easily increase the taxpayer liability well over $3 billion.

Predictively, certain local elected officials have expressed their concern that the money could be better spent on expanding social programs and fixing potholes in the streets. Also, they chirp (or tweet in many cases), why should Jeff Bezos, the richest man in the world, get over $2 billion in taxpayer funds, derisively known as corporate welfare? These are good points, issues that should be debated with all the stakeholders, including the taxpayers themselves.

That, however, is not how corporate politics work. A big company comes into a town promising high-paying jobs, housing, and revitalized neighborhoods. The politicians get excited and overbid for the privilege. Why would New York pay $900 million more than Virginia? Did New York overpay or Virginia get a great deal?

Coincidentally, the Long Island City location is a short subway train ride from Wall Street, the Arlington location is a hop, skip, and jump over the Potomac River from Capitol Hill, and the Nashville office is in a state with no income tax. Thus, in a few short years, Amazon will have direct access to the most influential money and political centers on Earth.

Amazon has also promised paying 25,000 employees an average salary of $150,000. Just for comparison purposes, the average Google employee earns $112,000, according to payscale.com. Most of those employees are based in the Silicon Valley which is comparable cost of living-wise to New York City. I have a hard time believing Amazon will pay their staff 34% more on average than Google.

The various governments are betting with taxpayer money that the return of incremental tax revenue will far exceed the initial investment. Of course, the elected officials who cut this deal will most likely be long out of office by the time anyone sees substantial tax revenue, if it happens at all. Roger Noll, a Stanford professor emeritus and senior fellow at the Stanford Institute for Economic Policy Research, has said for years it has never been proven that building a sports stadium or hosting a Super Bowl boosts the local economy to any significant degree. Close to home, the small city of Santa Clara guaranteed loans in excess of $900 million to build the San Francisco 49ers’ Levi’s Stadium. No one will know for decades if Santa Clara made a good deal.

It’s possible that New York, Virginia, and Tennessee have made a wise investment. One thing is for sure: Amazon, Inc. will fatten their bottom line and stock value with help from public money. My wish for the holiday season is that the taxpayers in those states get their bottom lines fattened as well.

David M. Green
(925) 335-3802