For many Americans, the holiday season means gift-wrapped packages arriving from Amazon.com.
But for long-suffering New York taxpayers, this year the giving is going in the opposite direction. The state is giving the Seattle-based online retailer $5 million in tax credits "to help lure" an Amazon office with 500 jobs to 7 W. 34th St. in Midtown Manhattan, Bloomberg News reports.
That $5 million is in addition to $2 million in New York state tax credits already awarded to Amazon for a Brooklyn fashion-photo studio. And it raises some issues that come up whenever government at any level decides to reward a business with special tax treatment.
The first is one of equity. Amazon's CEO, Jeff Bezos, is worth about $28.8 billion, according to Bloomberg. Amazon's market capitalization is about $144 billion. Why should individual New Yorkers who are worth less, or who work for smaller companies, pay the full tax rate, while Amazon gets a special discount?
What's more, Amazon is in a competitive industry. Why should New Yorkers who own or work at Amazon competitors such as Barnes & Noble or small independent bookstores be taxed to support their business rival? Why should literary agents, publishers, and authors who increasingly fear Amazon's market clout be taxed at full rates to subsidize Amazon?
Or, looking at Amazon as a general retailer rather than a bookseller, consider the disparity in New York government's treatment of Walmart and Amazon. Amazon gets $7 million in taxpayer subsidies. Walmart, on the other hand, is treated like such a pariah that politicians, including Mayor de Blasio, compete to keep it out of New York City. More than half of the New York City Council's members—26 of 51—went so far as signing a letter demanding that Walmart and the Walton Family Foundation stop giving charitable donations to New York City charities. What happened to the idea of a government that treats all retailers by a single impartial standard, rather than playing favorites?
The second issue is one of effectiveness. These tax credits tend to go to well-established companies with the clout and patience to navigate the application process. Often by the time a company gets to that stage, the real explosive job creation is already over. New York's tax strategy of high rates with special exceptions is competing with other states that have lower overall tax burdens and that are business-friendly in other ways, such as allowing natural-gas drilling methods that are banned by Governor Cuomo.
The New York approach doesn't seem to be generating very impressive results. New York State's unemployment rate is higher than that of the United States overall. While America overall added 209,000 private sector jobs in October, New York State lost 4,700 private sector jobs.
For disclosure, I am an Amazon customer and an author whose books are sold on the site. I operate some websites that earn money by referring customers to Amazon. I own some stock in a competing retailer but none directly in Amazon. I was not one of the authors who organized against Amazon. I have nothing against Amazon. I think it's a fine company, and I don't blame it for trying to pay the least taxes it legally can.
I do, however, blame the politicians in New York. Rather than trusting individual consumers to decide where to shop, they try to decide for us by playing favorites, subsidizing Amazon while hassling Walmart. Rather than establishing low tax rates across the board, they carve out special programs, such as the Excelsior Jobs Program, that claim to target favored industries: "strategic businesses such as high tech, bio-tech, clean-tech and manufacturing."
This is not a failing unique to Democrats such as Governor Cuomo. Mayor Bloomberg, a Democrat-turned-Republican-turned-independent, and Governor Pataki, a Republican, played this game, too, though Bloomberg at times made efforts, or at least talked about making efforts, to avoid the worst practices. The politicians are giving holiday gifts away to companies like Amazon using money that was earned by taxpayers. If Governor Cuomo wants to give Jeff Bezos a Christmas present, let Cuomo dip into his personal funds rather than using money collected by taxing the non-Bezos New Yorkers at full rates.
Reason is your voice in debates about politics, culture, and ideas. Our annual Webathon is underway and your tax-deductible gift will help us fight against big government, crony capitalism, the drug war, and so much more. For details on giving levels and swag, go here now.