Guest editorial: Amazon ‘HQ2’ bids cronyism by definition

The Orange County Register
Guest Editorial

Last week, Amazon announced the 20 finalists under consideration for the company’s second headquarters. The Los Angeles area is the only West Coast entrant to make the cut.

Back in September, the Internet giant announced plans to open a second headquarters in North America and solicited bids from states, counties and cities for why their respective jurisdictions should be chosen as the site for the headquarters.

The announcement sparked a frenzy of offers across the country to encourage Amazon to select their areas. More than 200 jurisdictions in the United States, Mexico and Canada submitted proposals, which were largely kept secret.

Some localities sent gifts, including a cactus from Tucson. The city of Stonecrest, Georgia, offered to deannex a portion of its boundaries to create “the city of Amazon.” Others appealed, through video or newspapers, for the sake of bringing jobs to their communities.

But above all, what Amazon sought — and received — was offers of massive taxpayer subsidies, promises of favorable regulatory treatment and other such incentives.

The governor of Maryland is seeking passage of a $5 billion incentive package to lure Amazon to Montgomery County, which is among the finalists. New Jersey has offered $7 billion in incentives to bring Amazon to finalist Newark.

While it isn’t known if the Los Angeles Economic Development Corp. bid being considered by Amazon will include similar incentives, Gov. Jerry Brown last year publicly offered Amazon $200 million in tax credits, local property tax abatements, and expedited permits and approvals if the company selected a site in California.

What is known so far is that the LAEDC proposal includes nine locations throughout Los Angeles County, including three in the city of Los Angeles. Further details have not been disclosed.

Meanwhile, the details of a rejected combined Long Beach and Huntington Beach bid for Amazon has been released. The Press-Telegram reported that the two cities were willing to allow Amazon keep a portion of sales tax dollars that would have come from Amazon employees spending in the city, set aside a portion of bed tax revenues for services and infrastructure needs near Amazon locations and form a “red team” to speed up permits.

Fundamentally, the idea of state and local governments giving special privileges and breaks to large corporations capable of financing their own operations should offend taxpayers and business owners across the state. If local governments recognize that lower taxes and speedier permits make their respective jurisdictions more competitive, they should reduce taxes and hurdles across the board.

The tax credit program Brown has offered to leverage to solicit Amazon was recently called out by the nonpartisan Legislative Analyst’s Office for poor metrics of success. The LAO instead suggested the state consider reducing the corporate tax rate, reducing the minimum tax or pursue other changes to improve the state’s business climate.

Large corporations should not receive special treatment or special tax breaks from government. Crony capitalism is antithetical to a free enterprise system and wrongly privileges those with the most money and most political clout.

— The Orange County Register, Jan. 23