Amazon New York, Tax Breaks, and Economic Incentives: A Critical Analysis
From an economic standpoint, the decision to provide tax incentives to Amazon in New York raises several critical questions. In this article, we delve into the potential costs and benefits associated with such economic incentives, focusing on three central queries that are pertinent to the discussion.
The Cost-Benefit Analysis: Worth the Price?
One of the primary concerns is the cost-benefit analysis of the financial incentives provided. If the total cost to New York City (NYC) for the additional 25,000 jobs is $1.5 billion or $3 billion, the question arises: was this the right price? Should NYC have settled for much less? For instance, according to the Census Bureau, New York City had 525,000 jobs paying $150,000 or more in 2016, up from 480,000 in 2015 and 465,000 in 2014. This suggests that there has been an influx of high-paying jobs to the city without the need for substantial financial incentives.
However, proponents of the deal often cite the potential long-term benefits, such as increased tax revenue and economic growth. But is the immediate $1.5 billion or $3 billion cost justified by the long-term benefits? This is a question that policymakers must grapple with.
Subsidizing an Already Resource-Rich Employer
Another significant question is whether NYC should subsidize an already resource-rich employer in the war for talent. Amazon, with its vast resources and presence, already has access to a large pool of talent. Why should a city that boasts numerous high-paying jobs continue to offer large-scale subsidies? This brings us to the broader issue of economic incentives and their effectiveness.
In a recent blog post by Barry Ritholtz, he argues that NYC should not risk bribing Amazon, as the city is already "relatively awesome." He suggests that New York should continue to attract high-paying jobs through its natural attributes, such as cultural vibrancy and economic opportunities, rather than through financial incentives.
Opportunity Cost and Economic Sensibility
The controversy also highlights the issue of opportunity cost and the sensibility of regressive corporate tax policies. There is a concern that offering more favorable tax rates to highly profitable companies may not necessarily lead to economic growth. In fact, a regressive corporate tax policy that supports more profitable companies at the expense of others might not be the most economically sound approach.
For instance, the New York State Budget Director's claim that Amazon's jobs return $27 billion from a $3 billion investment suggests a 9:1 return. However, this calculation raises questions about its accuracy. Is the idea of an infinite return truly the reality, or is there an underlying economic flaw in such assertions?
Conclusion: A Balanced Approach to Economic Development
In conclusion, the controversy surrounding Amazon New York and tax breaks underscores the need for a balanced approach to economic development. While tax incentives can sometimes bring much-needed jobs and investment, relying solely on such incentives may not be the most effective or efficient strategy. New York City, with its vibrant economy, should focus on leveraging its existing strengths and attracting high-paying jobs without the need for significant financial incentives.
The key takeaway is that while job creation and economic growth are crucial, the cost-benefit analysis, equitable distribution of resources, and a strong focus on natural economic attributes should all be considered when making such decisions.