We Must End the Economic War among the States. Here’s How, Urges Watchdog

February 19, 2019

For Immediate Release February 19, 2019

Contact Greg LeRoy at [email protected] or 202-232-1616 ext. 211

Amazon HQ2 Auction Exposes Tax Break-Industrial Complex

Shows a map of the United States with arrows going in both directionsWashington, DC — Good Jobs First, the watchdog group on economic development incentives, today released a strategic proposal for ending the “economic war among the states.”

Greg LeRoy, GJF’s executive director, said it issued the strategy because it has received so many inquiries from public officials and concerned citizens outraged by the public auction staged by Amazon.com for its second headquarters, or HQ2 project. The strategy is online at GJF’s website.

The proposal states:

The recent auction… has rightly outraged many Americans. How is it, many ask, that a company valued at almost $1 trillion and led by the world’s richest person could be allowed to stage a public relations blitz that caused hundreds of politicians— Democrats and Republicans alike—to publicly grovel, many of them offering undisclosed, multibillion-dollar subsidy packages?

The truth is, such auctions happen hundreds of times per year, though to be sure the HQ2 trophy deal was exceptional for its size. But mainly it was unusual for being public… No matter why it happened, it is objectively true that the Amazon HQ2 auction has created a powerfully teachable moment in how the U.S. tax break-industrial complex works. [ Read the proposal]

…The other fresh textbook we have now is the faltering Foxconn deal in Wisconsin. Call it the failed “Trump Effect.” Never before has a president weighed in for or against the “economic war among the states.” [ Read the proposal]

The proposal outlines five remedies for federal, state and local governments:

  • State “cease-fire” pacts, like the one Missouri and Kansas are again considering.
  • Subsidy caps to keep spending in check and save revenues for strategies that work.
  • A reinvigorated federal commitment against interstate job piracy, bundling and enhancing existing federal incentive program regulations.
  • A federal “carrot” to stop states from actively pirating jobs from each other, to stop legally designating existing jobs as “new,” and to embrace process reforms and best disclosure practices.
  • Process reforms, such as advance notice of deals, neighborhood-friendly hearings and systemic public engagement so taxpayers can weigh a proposed deal’s costs and benefits.  Plus robust disclosure so that records are not shielded by nondisclosure agreements or by privatized economic development functions.

The proposal notes:

Most of the American public did not previously understand how corporate-dominated our nation’s economic development system is: how incentive bids are negotiated secretly, how many cities outsource recruitment functions to Chambers of Commerce (which can mean that records will never be disclosed), how constrained public officials are (in the “prisoners’ dilemma”) from cooperating with each other, and how long-standing secretive norms make it impossible for community groups to have any meaningful input at the critical formative stages of a deal. And they had no idea now irrelevant subsidies are to companies’ site location decisions until Amazon didn’t choose [many bids worth far more than Northern Virginia’s or the aborted one from New York]…

Editor’s note: Good Jobs First, founded 20 years ago, is a non-profit, non-partisan research group on economic development subsidies.