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Amazon HQ2 deal in NYC killed by Socialists and Socialist principles

Written By | Feb 20, 2019
Amazon HQ2 NYC project vs Socialists and socialist principles

Part of the site proposed for the now-defunct Amazon HQ2 construction project in Queens, NYC. (Screen grab from NYC CBS channel 2 video news report)

WASHINGTON., America’s dominant online retailer, has pulled out of its agreement to build half of its “second headquarters” (HQ2) operations in New York City. The new HQ2 complex was announced as the company awarded its other HQ2 operations to Arlington, Virginia. The Amazon HQ2 project in NYC would have provided more than 25,000 high paying jobs to NYC area residents. Unfortunately, the deal did not appeal to New York’s hardcore Socialists.

The Socialists’ problem? To help clinch the deal, both the city and state of New York had offered Amazon an incentive package including a $3 billion tax break over time. A small portion of the Amazon HQ2 incentive package involved improvements to the infrastructure at the chosen site in Queens. Though sometimes controversial, such enticements routinely attract large businesses to eager locales that need employment opportunities for their residents.

Amazon HQ2: The economic reasoning behind it

The city and the state both reasoned that they would be far better off with Amazon than without. In reality, the true cost was only a few hundred million dollars and the true benefits will be tens or even hundreds of millions of dollars over time.  Many of the 25,000 workers could come from the surrounding area and the rest will be attracted from other areas, which will increase the population and help add growth.

However, this was entirely too much capitalism for new US Respresenative Alexandria Ocasio-Cortez (Socialist-NY). She and her socialist friends organized protests against the deal. Added to other obstacles and set-asides demanded by other city Democrat politicians, these protests and after-the-fact demands led to the Amazon pullout.

As a result, New York City will lose those new buildings, infrastructure improvements, and, of course, those 25,000 jobs. They’ll go instead to the Virginia HQ2 complex, to another large Amazon complex in Nashville, Tennessee, and to several other Amazon operations as well, including the city of Chicago.

Amazon would actually have paid $3 billion in taxes.

Based on Amazon’s projections, they would likely have paid almost $6 billion in taxes to the city and the state over the next ten years. The deal said they could get half off. That meant Amazon would save nearly $3 billion. New York offered no actual money to the company. The “incentive” was the simple fact that the company would have a lower tax bill for a time.

But New York’s always active Socialists, led by media darling Alexandria Ocasio-Cortez (AOC), cried foul. They viewed the whole situation as just another example of crony Capitalism. The kind where a large corporation gets favorable treatment while the average person loses. Except that the loss in this case was the disappearance of those 25,000 jobs, courtesy of AOC and company.

AOC and her socialist friends rejoice at the job-killing Amazon HQ exit

AOC rejoiced in the Amazon withdrawal, proclaiming her great victory far and wide to the Twitterverse.

“Anything is possible: today was the day a group of dedicated, everyday New Yorkers & their neighbors defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”

Socialists tried to support their triumph by stating that many prominent economists strongly criticize tax breaks given by state and local governments to corporations. They claim such incentives are counter-productive.

Some New York businesspeople also raised concerns about the Amazon HQ2 deal. Many noted that they had been in business for a number of years and would likely be in business for many more. So where, they wondered, are their tax breaks?  They funded their own expansions without the incentives that Amazon seemed to require. So why did Amazon get the tax breaks while the indiginous businesses did not?

Socialist politicians thought Amazon H2Q workers should be unionized.

The anti-Amazon movement involved other local special interests as well. Socialist-leaning politicians duly noted that Amazon’s employees are not unionized. This, the socialists reasoned, obviously menat that greedy Amazon possessed enough money and power to keep the union out. Amazon must, therefore, be exploiting the working class.

Perhaps surprisingly, a recent Sienna College poll showed that the majority of New Yorkers actually supported the Amazon headquarters project. Yet Socialist-leaning state and federal government officials managed to place enough roadblocks in front of Amazon that the company decided to withdraw. Jeff Bezos has a history of moving quickly and decisively. He concluded that would not happen in Queens.

In the end, Amazon was forced to abandon its plans because New York politicians wanted to follow Socialist principles. Among other things, the Socialists want to limit the profits of the most successful corporations, increase taxes on those who contribute the most to the economy and share every high-income individual’s earnings with the entire population. Nearly always, however, the result is failure.

Is New York better or worse off without the Amazon HQ2 complex?

It is true that Amazon would have saved almost $3 billion in taxes over the next ten years. But it is also true they would have paid almost $3 billion in taxes. Unless other businesses suddenly rush into New York, no Amazon HQ2 means no $3 billion in fresh tax revenue. In a city and state with a steadily declining tax base, no less.

In addition, no Amazon HQ2 also means no additional 25,000 jobs. Those jobs would have generated even more tax revenue annually for New York. Since many employees would likely want to live close to where they work, home values would increase as new houses were built and dilapidated older housing was renovated. That would mean higher property values for current residents.

Did local Queens businesses benefit from the Amazon HQ exit?

Local businesses would also have prospered and grown. Most would likely have needed to expand to meet the new demand from Amazon workers for goods and services. New businesses would have popped up around the new HQ2. That would have meant even more shopping choices and more services offered to local residents. Additional dining and entertainment establishments would have improved the quality of life. Not to mention providing new entry and mid-level jobs for many local residents.

The economic impact of 25,000 workers in any area is huge, especially since these jobs pay six-figure salaries. But now, without Amazon, growth and renewal will not happen in the sub-par Queens local where HQ2 would have put down roots. High growth would have benefited local businesses even if they didn’t get any tax breaks. Thanks to AOC and friends, however, local businesses won’t have to worry about that any more.

Socialist politices lead to economic contraction and a lack of worker freedom

Except for the argument that existing businesses would not see any tax breaks, the Socialists’ arguments don’t make sense. What Socialists call corporate greed is simply the desire of corporate stockholders to seek the maximum return on their investments.

What Socialists call worker exploitation is really the freedom of workers to freely choose to work at Amazon. At the same time, they freely choose to work for a salary that reflects the value of their output. Such workers, like a great many of their fellow Americans, would rather bargain individually for the best deal than collectively submit to a union scale.

Finally, this deal dis not reflect “the power of the richest man in the world.” Rather, it reflected the city and state of New York acting in their best self-interest, even as Amazon did the same. That’s the way our system is supposed to work.

But that’s not the way Socialism and collectivization works. Intransigent Socialist principles and its equally intransigent acolytes and apologists the Amazon HQ2 deal. But in reality, New York and its taxpaying citizens are the big losers.

— Headline image: Part of the site proposed for the now-defunct Amazon HQ2 construction project in Queens, NYC.
(Screen grab from NYC CBS channel 2 video news report)


Michael Busler

Michael Busler, Ph.D. is a public policy analyst and a Professor of Finance at Stockton University where he teaches undergraduate and graduate courses in Finance and Economics. He has written Op-ed columns in major newspapers for more than 35 years.