
Amazon’s “second headquarters” may be no such thing - jkuria
https://www.economist.com/business/2018/11/08/amazons-second-headquarters-may-be-no-such-thing
======
ballenf
I’d support a federal law basically outlawing these tax breaks for single
companies. 

Game theory means almost no single state can resist the temptation. 

But it has the net effect of pushing the tax burden down onto smaller
companies who are competing with the Amazons of the world. 

~~~
jandrese
But then they'll just move out of the country.  This is a fundamental power
imbalance between multinational corporations and governments.  Governments are
bound by jurisdiction while corporations are not. 

~~~
jcranmer
If the country in question is the US, the list of alternative countries boils
down to Canada.  One real consideration that companies have when choosing where
to put headquarters is aligning time zones and minimizing travel costs. 
International competition is a very real deal in Europe, where decamping from,
say, France to Germany is unlikely to change all that much, but it is a lot
more painful trying to move headquarters from the US to Germany. 

------
phakding
This is just Amazon looking for welfare.  This is not new.  Cabela's was doing
it for many years.  Asking for tax breaks because they bring "jobs and
prosperity" to the town.  It turned out to be a plain lie.  NFL teams are doing
it to many cities.  Making few hundred millions in profit while offloading
stadium to tax payers.  Sears, cboe and cme among other did it to Illinois for
millions of dollars in tax breaks. 

Pure and simple corporate greed. 

------
eganist
Sounds like bait and switch to me -- quite literally. 

"Hey, we have HQ2 for sale.  Name your price." 

"...hey, highest-bidders, we actually only have two smaller satellite offices
for sale; each of you gets one for the prices you named." 

Can't speak for NYC, but I hope Virginia refuses to honor any corporate
welfare packages as a result of what's basically an entirely legal form of
bait and switch. 

~~~
bilbo0s
Got bad news for you.  There are a lot of states out there, (ie - all the other
ones), that would give a whole lot more, for even a fraction of the jobs NoVA
and NYC are getting. 

It's a testimony to the wealth and power of NoVA and NYC that they scoff at
25,000 high paying jobs.  I'm from Wisconsin, for instance, and we will have
handed over roughly 4 to 5 BILLION dollars when it's all said and done. 

And that was for only _HALF_ the jobs that NoVA is getting. ( Each job likely
paying _LESS_ than what most of the Amazon jobs will pay.) 

I'm not jealous or anything.  You guys know your value.  Good for you.  Self-
Awareness is sorely lacking in the US these days.  But I'm just pointing out
that as corporate welfare goes, you guys in the coastal elite cities are in
the best positions in the country.  You're able to give out the least because
all the good knowledge economy corporations basically have to be there in any
case. 

~~~
eganist
Share the wealth!  There are other benefits to planting two QuarterHQs in
places that aren't Virginia or NY:

If anything, Amazon QuarterHQ3 can go in Wisconsin (though my primary pick for
this purpose might instead be a more disaster-resistant part of Florida) and
QuarterHQ4 can go in the heart of Texas.  It might draw some of the groupthink
apart a bit and into areas that actually need new blood, or at least need some
blood drawn from NorCal. 

~~~
bilbo0s
But none of what you just outlined has any effect on Amazon's bottom line, or
on NoVA and NYC's tax base.  The job of Amazon is to increase their bottom
line.  The job of the governments of the NoVA and NYC areas are to increase
their tax bases.  None of those entities have "draw some of the groupthink
apart" or "bring new blood into areas that need new blood" as part of their
job descriptions. 

I just think you're being a little idealistic and naive.  You're attempting to
advance what seem to be almost quasi-political objectives using the market. 
But market participants in NYC or NoVA don't really care if Wisconsin needs
new blood, or if SF has too much groupthink.  Those are not issues the market
is meant to address.  You only set yourself up for more frustration and failure
trying to use what are at their root market based devices to achieve these
sorts of quasi-political goals. 

~~~
eganist
> Got bad news for you. 

...

> I just think you're being a little idealistic and naive. 

In reading your initial reply to me and this subsequent comment of yours, it
seems you're more focused on scratching an itch for a debate.  I have no
interest:

My initial reply to you was _entirely_ fantastic; it had absolutely no basis
in reality.  I can assure you that my personal pipe dream of dispersing
rational and grounded ideologies for the sake of making more states purple
during elections _was not intended to be confused with a legitimate argument._ 

I do hope someone else gives you the debate you're seeking.  I'm just informing
you that that wasn't the intent of my initial reply to you.  I still stand by
the idea that it's in everyone's best interests for Amazon to plant large
satellite offices in locations that aren't thought-centers because they're
more likely to get the tax breaks that they need and they won't have any
issues attracting the necessary talent (it's Amazon), but I won't entangle
that argument with my dreams. 

Cheers

~~~
bilbo0s
Not looking for a debate at all. ( There's not really one to be had.) 

> _My initial reply to you was entirely fantastic; it had absolutely no basis
> in reality..._

As long as you realize this, it's good.  But there have been so many comments
on HN the past week or so putting forth ideas of the sort you, rightly, see as
more fantasy based that it's become difficult to ascertain exactly when
someone is being serious.  Such people have to be "sobered up" if we're going
to effectively concert in seeking a solution to the larger problem:

The "winner take all" nature of the tech economy. 

------
jazzyjackson
Really did say a lot about the state of government subsidizing big business
that mayors and governors were falling over themselves to offer tax rebates to
one of the richest companies on earth. 

~~~
dazc
The country of Ireland has done much the same on a grand scale, much to their
own benefit. 

I agree it does seem crazy but if these businesses bring about a net benefit
to where they are located it can't be all bad? 

I'm not familiar with the US tax system but in the UK, and much of Europe, the
system is lagging behind the real world of business by a measure of decades. 

~~~
pekko
And, thankfully, EU has regulations against such schemes.  We can have
international treaties and organisations to prevent cases of tradegy of
commons. 

For example, EU forces Ireland to collect taxes from Apple, because it deemed
such rebates to be illegal state aid.  See
[https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...](https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland)

~~~
asdfasgasdgasdg
They did not force them to raise their tax _rate_ though, so it is still
highly beneficial to Apple to be in Ireland compared to, say, France. 

What member countries really should do is similar to the revenue tax that was
recently proposed.  But not exactly, because that's a pretty blunt tool. 
Instead, the calculation should go something like this. 

    
    
        # Exclude payments to/from subsidiaries. 
        global_revenue = all external revenue
        global_expenses = all external non-tax costs
        global_profit = global_revenue - global_expenses
        global_tax = this_country_tax_rate * global_profit
        country_tax = this_country_revenue / global_revenue 
                      * global_tax
    

The goal being to remove the benefit of tax avoiding schemes like Ireland.  It
doesn't matter how you move the money around, you'll pay taxes to this country
based on how much money you make here. 

Require the company to estimate and pay this tax quarterly, and provide
reasonable fines for underpayment.  Granted the first two lines might be
difficult to compute, so you would only do this for companies big enough to be
worth going through the trouble for. 

Disclaimer: not a tax policy expert.  Would love to be corrected.  Please poke
holes. 

~~~
matt4077
While their rates are low, the issue was about additional, individual deals
that lead to effective tax rates around .5% (instead of the official 12.5%, I
believe). 

I think the EU has done a pretty good job to find a balance here: when Ireland
joined the EU in the 70s, it was among the poorest countries west of Moscow
and north of Morocco.  It became one of the largest recipients of net transfers
over the next 30 years, but everyone knew that their chances of catching up
required some economic competitiveness, and that it would take decades to pull
even in terms of "Features" (infrastructure, local market etc)

Low taxes were therefore the only viable path to attract investments.  That
scenario is explicitly accepted even among those advocating for coordinated
taxation. 

In the case of Ireland, everything actually worked out extremely well:
Speaking something almost resembling the english language, and having the
strength of character to make peace with the English, Ireland established
world-class universities and a rather remarkable knowledge economy in just one
generation. 

~~~
asdfasgasdgasdg
Sure.  But are these subsidies still needed?  In any case, my proposal was more
along the lines of an approach to unilaterally prevent companies from
benefiting from off-shoring tax schemes, under the assumption you want to do
that.  The thing I want holes poked in is the scheme itself, since I'm taking
as given that some people want to institute a scheme with this goal. 

------
chiph
Amazon putting two towns competing against each other in the amount of
incentives they'll offer?  Reason pretty much nailed it already:

[https://www.youtube.com/watch?v=H_eG7leM6ew](https://www.youtube.com/watch?v=H_eG7leM6ew)

------
toyg
None of this is really new.  Back when factories actually meant big money,
entire countries competed to get this or that manufacturer’s plant - every
time the plant would have been “the most advanced “, “key to the future of the
company” etc etc.  Then, a few years after the plant was built and subsidies
were collected, they would close the plant and start the carousel again. 
RyanAir did it with regional airports for a bit.  Every supermarket does it
with their suppliers. 

It’s sad that politicians always think they are smarter than anybody else,
that “this time it won’t happen” or simply that, even considering negatives,
the opportunity is still too good to pass.  Unfortunately, nobody ever got re-
elected for saying no to this sort of opportunities. 

~~~
shaki-dora
Politicians aren't quite as stupid as you (and, apparently, everyone else,
believes). 

The dynamics in such a situation are simply a prisoner's dilemma.  Meaning:
without cooperation, bidding for and getting HQ2 is net positive for the city. 
Nobody really sees much of a problem here, and your (and the sibling
comment's) tiresome invocation of the lazy stupid-corrupt-politician-cliché
is, as always, superfluous. 

The actual issue is that, quite obviously, Amazon would expand and hire more
employees anyway.  This competition exploits the dynamic mentioned above to
move money from the public to Amazon in a zero-sum game. 

And the total loss of this scheme is even larger than "just" billions in
taxes: when Amazon makes this decision based on the subsidies they are
promised, they (by definition) must put lesser weight on all the factors that
would otherwise dominate the decision.  So they will end up at a location with
lower quality-of-life, higher prices, or some other trade-offs.  Amazon is
essentially asking cities to pay them for crippling itself, and for
compromising their employees happiness.  Which, come to think of it, really
does not strike me as the set of priorities one would expect from a stable
company with a long-term focus and healthy values. 

Anyway, that's why somewhat sane jurisdictions such as the EU put limits on
subsidies and bespoke tax deals: it's cooperation that, when managed fairly,
benefits everyone. 

There's still competition between locations, but it's about quality-of-life,
infrastructure, or education, instead of a voluntary effort to impoverish. 

The fault, therefore, is the American fetishisation of market-based
mechanisms[0], the seemingly endless willingness to starve public
administrations of resources without any regard to their actual, absolute
levels, and a somewhat pathological fear of showing weakness by treating any
situation cooperatively, instead opting to turn everything into some sort of
competition that at least guarantees the sweet payoff of others losing even
worse. 

[0]: This is particularly interesting here: The dedication to a free market
runs so deep, that voters and politicians are essentially turning down the
possibility to form a cartel amongst themselves.  I one were to believe they
are doing this knowing- and willingly, one would have admire it as a rather
rare display of altruism in the service of a larger principle. 

~~~
specialist
_"...American fetishisation of market-based mechanisms"_

Conflating incentives, pricing, and competition drives me nuts.  They're
orthogonal concerns. 

Like conflating capitalism and corporatism.  Corporations are anti market,
driven to eliminate competition.  Duh.  But criticize corporatism and you're
branded an anti capitalist nut bar. 

It's almost as if there's a massive disinformation campaign about how
economies work. 

------
WhompingWindows
What a brilliantly capitalistic move.  Amazon pretends to have a huge, one-
locale supply of high-paying jobs and the promising ecosystem of economic
activity around that center, and the demand is huge from cities.  What if they
grow into the next SV or Seattle from this? 

Once the cities agreed to the deals with such growth prospects in mind, and
given the huge demand from other cities, Amazon bait and switched these saps. 
They get to have their cake and eat it too, NYC and DC, non-HQ2 premises, but
just satellite offices.  Well, that could have been done without the theater,
though the buzz was tantamount to free advertising for them and ratcheted up
all the incentives. 

------
dependsontheq
As a european the American view of "market" is always fascinating.  Most tax
breaks and subsidies amazon will get would be totally illegal under EU laws
[https://en.wikipedia.org/wiki/State_aid_(European_Union)](https://en.wikipedia.org/wiki/State_aid_\(European_Union\))
because they distort the market. 

~~~
graysonk
I’d agree with you if Ireland didn’t exist

~~~
dependsontheq
Yes, but we have to differentiate between general tax competition available to
most companies and company specific offers, these are clearly illegal
[https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_agai...](https://en.wikipedia.org/wiki/EU_illegal_State_aid_case_against_Apple_in_Ireland)

------
chrisco255
Yeah, we call those satellite offices. 

------
analog31
Foxconn in Wisconsin.  Football stadiums everywhere.  Car plants.  This has been
going on forever.  Why was anybody surprised? 

------
nautilus12
Ive thought all along the second headquarters was just a bargaining chip.  The
fact that when the location was leaked that they came up with yet another
“headquarters” proves it.  They are just using it as leverage.  These antics
should be shut down! 

~~~
dorfsmay
Shutdown by who?  Hopefully cities didn't write biding contracts with numbers
without biding numbers from amazon.  That'd be terrible bargaining...

~~~
rootsudo
We all know they did...

------
ausjke
Maybe it's just a scam and advertisement for Amazon?  actually not all cities
welcome Amazon, so Amazon if you have not totally lost your mind yet, don't
push this kind of stuff too much. 

While Amazon made a lot of correct decisions and is now a giant, without the
benefit of 'internet tax', it simply could not grow this fast, to some extent
the taxpayers carried it over the past two decades.  Maybe it's time for it to
consider paying back something instead of being intrusive like this stupid 2nd
HQ propaganda. 

~~~
asdfasgasdgasdg
> actually not all cities welcome Amazon

Based on the hilariously large stack of cities willing to bid on their
presence, I'm guessing it'll be a while before that effect (to the extent it
even exist) is a constraint. 

------
pointillistic
Wisconsin governor Walker lost a sure bet at Governorship because of his
giveaway to Foxconn. ( it's in the name...)

------
cityzen
Scott Galloway on the Recode podcast made a good point that the whole “search”
was a scam to get tax breaks.  Bezos knew where he wanted the second (and
third) HQ as they are both within 7 miles of his different homes.  I don’t know
the truth in that but I don’t doubt it for a second. 

Here we are.  All the little startups have grown up and are now the entitled
little snowflakes we treated them like through their infancy on to corporate
welfare adulthood. 

------
xapata
The Economist quoted the Onion! " The Onion got it right"

------
kevmo
This should be illegal. 

------
ovi256
FWIW, you can bypass the Economist's paywall by reloading the page and then
quickly stopping the reload.  The HTML loads but not the js that implements the
paywall. 

Hope I don't jinx it! 

------
village-idiot
I find the idea that localities are bidding on corporate offices with tax
breaks extremely dystopic. 

------
fashionrob
why dont we just wait, and you know, see what amazon actually does. 

------
jaytaylor
Paywall bypass:

[https://archive.is/osL0A](https://archive.is/osL0A)

