On Cyber Monday last week, a raucous group of protesters swarmed an Amazon bookstore in New York chanting things like “no handouts for Amazon.”
They were upset about the company’s recently announced plans to build a pair of new headquarters — one in Crystal City, Virginia, just outside of Washington, D.C., and one in the New York borough of Queens — that will employ 25,000 people each and wreak havoc on housing markets and public transportation.
The same day, General Motors announced plans to close five North American plants — four in the United States and one in Canada — and lay off as many as 14,000 workers, which sparked a different kind of protest.
People in the United States don’t want the kind of cars those factories produced anymore, GM executives explained. And President Trump’s steel and aluminum tariffs are making automotive production more costly.
Amazon’s rise and GM’s fall demonstrate how profoundly major employers can affect a city, particularly the mostly smallish places where GM’s factories are closing. Jobs can make or break a place, which is why federal, state and local officials often go to tremendous lengths — and tremendous taxpayer expense — to bring in new jobs and keep them. But we might need to rethink that math.
Amazon, for example, was courted by dozens of cities over the past year with tax incentives worth billions of dollars for its new headquarters, despite the fact that the company is valued at about $1 trillion.
After all the groveling from city and state officials, Amazon made its decision based mostly on other considerations like proximity to tech talent, which tends to be more highly concentrated in New York than in, say, Nashville.
In other words, Amazon didn’t really need any tax breaks, which should have been obvious from the get-go. It made the choice that made the most sense for the company.
Amazon isn’t the only massively profitable company that gets offered unnecessary tax incentives to set up shop somewhere new. In fact, that kind of wheeling and dealing is more the rule than the exception.
To the extent that tax breaks create jobs, it’s reasonable enough to justify any tax dollars lost up-front as a long-term benefit. But if a business goes belly-up — or closes the town’s largest factory — governments can be left with lost tax revenue and lost jobs.
That’s what seems to be happening with GM.
Ohio, for instance, gave GM $82 million in tax breaks in 2008 — one of the largest giveaways in state history, according to the Cincinnati Enquirer — to shore up the company’s Lordstown factory. That money is gone. The jobs might soon be too.
The Baltimore-area White Marsh plant got a combined $110 million in federal, state and local grants. It didn’t last two decades.
In Hamtramck, Michigan, GM actually used eminent domain to raze an entire historic neighborhood so it could build a new factory. Oh well.
And every taxpayer in America owned a portion of GM via a $51 billion bailout following the 2008 financial crisis. Most of that money was eventually paid back, but GM still ended up with about $11 billion in free taxpayer cash.
Of course, GM can’t reasonably be expected to function like a charity. If factories aren’t profitable, it should shut them down. Then again, neither should we expect charity from the taxpayers of Ohio or Michigan or Maryland or anywhere else where wealthy corporations are granted handouts.
The most common justification for corporate tax breaks is that if we don’t offer the best deal, the jobs will go somewhere else. But what if we banned special tax breaks nationwide instead?
If the costs of doing business are too high, cut those costs across the board, not just for the companies that can afford to lobby for a sweetheart deal. Cities and states ought to compete to be the best places to live and work rather than racing to give away as much as possible.
Building an enticing, livable place is tougher than coming up with a tax package. But the benefits far outlast any factory or corporate headquarters.
Ed Buckley is an editorial writer with The Post and Courier.