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Amazon, NYC shoot selves and each other in foot

Whole process shines spotlight on corporate tax subsidies cities feel they have to offer
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Demonstrators gather to protest Amazon's new location workplace in Long Island City of the Queens borough of New York, U.S., on Nov. 14, 2018. REUTERS/Shannon Stapleton

By Amanda Gomez

NEW YORK (Reuters Breakingviews) - Amazon.com and New York City have shot themselves and each other in the foot. The US$800 billion e-commerce giant on Thursday decided to ditch its plans to open a second headquarters, known as HQ2, in the Big Apple after local opposition to the US$3 billion in state and city incentives it would receive.

It makes Amazon look short-term greedy and not interested in community concerns. Politicians, meanwhile, have cost New York both tax revenue and up to 40,000 jobs.

The deal Amazon struck with New York Governor Andrew Cuomo and New York City Mayor Bill de Blasio was not the only issue. In two meetings with New York City Council, executives expressed a lack of support for unions. Amazon’s facial-recognition service, which is used by the U.S. government, didn’t help, either.

Amazon, though, doesn't need New York. Its business is hardly dependent on having a big presence in the city, where the corporate tax rate is a not insignificant nine per cent. Executives can shift resources, if they so choose, to Virginia, where the company is building its other HQ2.

Likewise, New York City doesn't need Amazon. It can attract big hitters without offering them tax breaks: Alphabet unit Google, for example, announced in December that it would invest US$1 billion and double its workforce of more than 7,000.

The top three non-governmental companies in NYC by employees, Northwell Health, JPMorgan and Mount Sinai Health System, increased their workforce eight per cent, four per cent and five per cent, respectively, between 2016 and 2017, according to Crain's New York Business. And the Big Apple has a better score for starting a business than the United States as a whole, according to The World Bank.

The whole process shines a spotlight on corporate tax subsidies that cities feel they have to offer. Amazon, Cuomo and de Blasio touted big gains for the region. But in the short term at least, Amazon looked set to get more back in incentives than it would pay in taxes, reckoned New York’s Independent Budget Office.

Canning such opaque and incendiary practices entirely – or making incentives applicable to all businesses - would be a smart move.

None of the players emerges from this fracas looking good. The only saving grace is that they have suffered little more than a flesh wound.

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