Why Is Philly Offering Amazon Money We Don’t Have?

Philadelphia skyscrapers are being squeezed by two hands, dripping into a pool of money

By Derry Todd; Art by Joseph Meier

In January, Philadelphia was announced as one of the 20 cities to possibly host Amazon’s second headquarters. The city is up against the likes of Chicago, Toronto, Atlanta, Dallas and Austin. Amazon says it will choose by the end of the year.

The Amazon HQ2 selection process has been a race to the bottom for the municipal governments. Amazon says it will hire 50,000 well-paid tech employees to work at the second headquarters. If HQ2 is built here, these jobs will not necessarily go to Philadelphians struggling with unemployment. In fact, they could bring an influx of wealthy new residents into the city’s increasingly unaffordable housing market.  However, Enrico Moretti, an economist from the University of California Berkeley, claims that those positions could indirectly create as many as 250,000 new jobs, because service and professional workers will be needed to meet the needs of these new additions to the city’s population.

The candidate cities are doing everything they can to entice Amazon to plant seeds in their city, including offering massive tax subsidies to the retail giant. New Jersey is offering tax breaks worth $7 billion over the next decade if Amazon sets up HQ2 in Newark. Chicago offered $1.32 billion of personal income taxes from future Amazon employees. Pennsylvania made an offer of $1 billion in tax breaks, and Philadelphia reportedly offered $2 billion in tax subsidies over 10 years. A few other cities and states are also offering Amazon billions of dollars to choose them.

This tax money that could go to schools, feeding the hungry, roads or homelessness instead would be given to a giant that can use the money to buy back shares of stock or pay executive bonuses if they wish. And if this fact weren’t uncomfortable enough, it’s possible that another round of bidding is on the horizon. Amazon never refers to these 20 cities as “finalists.” Some suspect there will be another brazen attempt to squeeze these municipalities and state governments for even more subsidies. Many cities have kept their offers private under non-disclosure agreements.

According to a report from Timothy Bartik of the W.E. Upjohn Institute for Employment Research , there is no correlation between tax incentives, increased employment, wages, or where companies actually choose to operate. The tax breaks are incredibly costly and ineffective. The companies have often already made up their minds on where to establish themselves, because of other factors such as vicinity to major colleges, a skilled labor pool, and public transit systems. They will create these competitions to squeeze money from taxpayers, often meaning that small business owners and workers are forced to make up the difference in the tax base. Since states and cities with less economic activity are more likely to use larger tax incentives, the end result is places that can least afford it being hurt the most by these useless practices.

How can a company have so much power over government? Instead of taxing corporations to benefit our cities, we are begging Amazon to build in our cities. Amazon controls so much of the online retail market that it is able to eliminate its competition. This is called monopoly power. Investors have so much faith in Amazon’s power that when it bought Whole Foods for $13 billion, its stock price rose by $14 billion, essentially letting them buy the grocery giant for free.

Amazon has about 45% of the market share of e-commerce, which is several times more than many top competitors combined. And it has more than 90% market share of five different products categories. Brick and mortar stores are closing at alarming rates, as Amazon sales rise and as it expands into the grocer market. According to Marketwatch, Amazon will probably destroy more than 2 million retail jobs in America within the next five years. For every job Amazon creates, several more are destroyed. And these newly created jobs are arguably inhumane — with reports of warehouse workers skipping bathroom breaks to keep their jobs.

So with all this in mind, would Amazon establishing a second headquarters in Philadelphia be worth lost tax dollars, dignity, and increased car traffic? We probably won’t be chosen regardless of what subsidies the politicians offer. Amazon has shown much less interest in Philadelphia than other cities on its list. Why should Philadelphia roll over and show its belly at our — the taxpayers — expense? If we let our leaders offer Amazon public resources, it could make it easier for other companies to do the same in the future. If a company wants to be a part of our community, then the bare minimum is that they need to contribute like everyone else, and we, or any other city, shouldn’t stand for anything less than that. This is blatantly putting companies above people, and we should work towards a society where that never happens.

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