'Amazon’s second headquarters has created a lot of hope and speculation since it was announced. Cities put together bids listing the benefits their areas could provide, including large tax breaks. One bid reportedly offered $7 billion in total benefits. The winners, Crystal City, Virginia, and Queens, New York, offered nearly a combined $2 billion in public funds ($2.4 billion when accounting for the late Nashville addition). This has generated a fair amount of public backlash.
Yet, as Veronique de Rugby explained, these dollars weren’t necessarily the deciding factor— local workforces, infrastructure, and access to other companies all played a more important role. Indeed, not only are other factors more important, but these costs—the subsidies and tax breaks meant to entice—do not benefit these cities in the long run. The influx of new jobs from Amazon is about what is expected without their contribution. These are areas already blessed with economic growth; jobs are created, and local economies flourish regardless of these special economic favors.
Local Cronyism
Sadly, Amazon is but one example of local governments bestowing special favor on the few at the expense of those less able to petition for tax dollars. At times, popular support rallies behind these bad deals because they appear beneficial on the surface. And since the costs are diffused and the benefits concentrated, political opposition is more difficult to rally. Some even believe they will reel in the benefits of property values or a growing economy.
A few examples of this local cronyism come to mind. In 2012, a long-standing local business, Central Radio, fought the City of Norfolk after the city seized their property for Old Dominion University, one of the largest, most notable presences in the area. Central Radio, which repaired and built ship radios, found that location particularly advantageous due to the proximity of local ports and other businesses, which allowed for better customer service. In other words, their location helped create a comparative advantage.
After the city attempted to seize their property, the owners protested with a banner on the wall of their building. The city responded with a citation for violating the local sign code. This prompted a free speech lawsuit represented by the Institute for Justice, which noted a multitude of examples of the same sign code violation that had gone unenforced. The city lost the case.
The city seized a whole neighborhood, where Susette Kelo resided, in order to entice new development. Today the lot stands empty.'
Read more: The Amazon Deal Shows Why We Must End Corporate Welfare
