Unintended Umbrage: Other Firms Demand Benefits Cities Have Offered Amazon

Why him, not me? JL

Shayndi Raice and Laura Stevens report in the Wall Street Journal:

“Economic incentives are subject to the reverse potato chip rule: You can’t hand out just one.” State officials can find themselves in a tricky situation after handing out big tax breaks to newcomers. There may be political pressure for a state to pay for jobs it already has. Trying to retroactively match deals for existing companies could be tricky. It could turn into a game of “whack a mole.”
U.S. cities vying for Amazon.com Inc.’s second headquarters risk facing an unexpected consequence to victory: Other companies will demand the same hefty tax breaks conferred on the online retail giant.
Already, some companies with a presence in the finalist cities are calling for similar tax breaks from elected officials. It is a pitfall that often accompanies large tax incentive packages used to lure employers to a state.

In Washington, D.C., a group of tech companies wrote last week to the city’s mayor with a detailed list of requests—from training bonuses to property tax breaks—that the city is reportedly offering to Amazon. JPMorgan Chase & Co. Chief Executive James Dimon recently said that he plans to call up the governor from the winning city and demand a similar deal. Finalist cities like Dallas, Chicago and Columbus, Ohio, are all places where JPMorgan already has tens of thousands of employees, Mr. Dimon said.
“The last company that needs perks is Amazon,” said Dan Berger, chief executive of the Washington, D.C.,-based Social Tables, a hospitality software company which employs about 120 people. “We believe we should get those kinds of benefits as well.” Through a spokeswoman, Washington, D.C., said it was in discussions with the group of tech firms.
“Economic incentives are subject to the reverse potato chip rule: You can’t hand out just one,” said Timothy Bartik, an economist at the Kalamazoo, Mich.-based W.E. Upjohn Institute for Employment Research.
Seattle-based Amazon announced in September it was searching for a second headquarters to house as many as 50,000 new employees with investments that could total more than $5 billion over nearly two decades. More than 200 cities and regions applied and it narrowed the list to 20 metro areas in January. Amazon is now conducting site visits.
Amazon has said incentives will factor in to where the company locates. Newark and New Jersey have proposed a combined $7 billion, while Maryland’s governor has put $5 billion on the table.
Aisha Glover, president and chief executive of the Newark Community Economic Development Corporation, said the city hopes other businesses will take advantage of new legislation offering hefty tax breaks to companies.
“We definitely intend to use the legislation to attract other large-scale job creation projects,” Ms. Glover said.
Andrew Trueblood, who works on economic development for Washington, D.C., Mayor Muriel Bowser, said the city hands out incentives when companies can show a strong financial return to the district.
“We want to see three to four times the tax revenues to whatever we put in,” he said.
State officials can find themselves in a tricky situation after handing out big tax breaks to newcomers. There may be political pressure for a state to pay for jobs it already has.
The state of Wisconsin faced a similar conundrum when it announced in July that it was offering a $3 billion tax incentive package to Taiwan’s Foxconn Technology Group. The company plans to invest $10 billion to build a 20 million-square-foot campus that could employ up to 13,000 people.
After paper products maker Kimberly Clark Corp. said in January it would be shuttering two Wisconsin plants employing 600 people, Wisconsin Gov. Scott Walker said he would give the firm the same percentage tax break as Foxconn if the plants stayed open.
A spokesman for Kimberly Clark said the company appreciated the governor’s efforts and was negotiating with its union about the proposed incentives.
Trying to retroactively match deals for existing companies could be tricky, said Greg LeRoy, executive director of Good Jobs First, a Washington, D.C.-based group opposed to tax incentives. In Wisconsin’s case, for example, Mr. Leroy said it could turn into a game of “whack a mole.” “There’s lots of big employers in Wisconsin,” he said.
Mark Maley, a spokesman for the Wisconsin Economic Development Corporation, which arranged the deal, said it made sense for Wisconsin as a leader in the paper industry.
But Mark Sweeney, a senior principal with McCallum Sweeney Consulting, said matching tax deals for existing firms “has a lot of political weight. It doesn’t necessarily have a lot of economic weight.”