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The Amazon Sweepstakes Racket

Why the giant e-tailer is gearing up for another round of bids for its second headquarters

Chip Somodevilla/Getty Images

On Thursday, Amazon announced that it had a finally whittled the hundreds of cities vying to house its second headquarters to just 20. The finalists are scattered throughout the country, from Los Angeles to Austin to Boston to Washington, D.C. (which has three candidates in the mix, including the nebulous “Northern Virginia”). They all more or less offer what Amazon is looking for. Quality of life is high. Public transportation, for the most part, exists. And there are incentives upon incentives—tax breaks, land grants, workforce training funds, and more tax breaks.  

This announcement should end what has been an embarrassing and depressing nationwide spectacle, in which cities debased themselves in attempts to gain Amazon’s favor. The mayor of Kansas City (not a finalist) wrote 1,000 five-star reviews on The mayor of New York (a finalist, unfortunately) lit up the Empire State Building “Amazon Orange.” Georgia’s Stonecrest (not a finalist) promised to make Jeff Bezos its King. And every location has offered Amazon the billions in incentives it is looking for.

But for the cities that made the cut, the race to the bottom may only be beginning. Amazon likely already has a real shortlist in mind. Denver has long been considered a favorite and Washington should be considered one as well, given that it takes up 15 percent of the finalists and would presumably help the company in the regulatory wars to come. In reality, the shortlist is a longlist, designed for Amazon to get a second round of kickbacks, perks, and stunts. But it’s not worth it.  

The offer that Amazon is making to cities is straightforward. In exchange for a sweetheart deal, the company will bring tens of thousands of high-paying jobs and spend $5 billion in capital expenditures. These jobs and investments, in turn, will presumably create other forms of growth, which will raise standards of living and tax revenue, and possibly even turn the location of HQ2 into a second Silicon Valley where tech jobs beget other tech jobs.

Mayors had no choice other than to play along, though the shamelessness with which many (I’m looking at you, Bill de Blasio) groveled before Amazon went far beyond what was necessary. Even for the mayor of New York, which has its fair share of mega-wealthy corporations, declining to court Amazon would have been political malpractice, giving easy fodder to one’s opponents. By making attention-grabbing proposals, 99 percent of cities were faced with a win-win. They could get headlines for being open for business—possibly winning the attention of other, smaller suitors—without actually having to go through with the kinds of ludicrous tax giveaways that could turn Amazon’s HQ2 into an albatross.

The incentives promised to Amazon are now standard practice in America, where states, desperate for high-paying jobs, bend over backwards to accommodate business. Amazon has received nearly $1 billion in such perks over the last decade, according to a study from Good Jobs First. In 2012, The New York Times found that states, counties, and cities are doling out $80 billion a year in corporate incentives.

But there is ample evidence that going all out for HQ2 will not be worth it—especially so now that Amazon is looking for localities to raise their bets. Because the costs of bringing these companies in is so high, the tax benefits are ultimately low. An influx of gentrification can lead to costly social ills. And while these new jobs may bring demands for better jobs and new infrastructure, the money tied up in luring corporations in the first place can make such expenditures infeasible.

By subsidizing high-paying jobs—often to the tune of hundreds of thousands of dollars per job—cities and states end up cancelling out whatever economic benefit these jobs bring. As David Dayen wrote for The New Republic during the first round of the Amazon HQ2 sweepstakes, “[T]hey’re worse than a zero-sum game between metropolitan areas; they’re net-negative, because the corporation extracts the subsidy while cities lose revenue that would otherwise go to education or infrastructure investment to benefit the common good.”

Amazon will now go to its 20 finalists and ask for another slate of high-profile concessions. Writing on Twitter, the professor Richard Florida argued that the 20 finalists should band together and resist the temptation.

This is an intriguing, albeit unlikely, idea. Amazon is, as Brian Ferguson writes in The Atlantic, exploiting an “advantage of the American system,” the division of power between states and the federal government. The only way to stop this nationwide bribery ring is through legislation. That won’t happen anytime soon, and certainly not before Amazon sticks certain taxpayers with the bill.