05 March 2019 15:40:28 IST

A management and technology professional with 17 years of experience at Big-4 business consulting firms, and seven years of experience in high-technology manufacturing, Rajkamal Rao is a results-driven strategy expert. A US citizen with OCI (Overseas Citizen of India) privileges that allow him to live and work in India, he divides his time between the two countries. Rao heads Rao Advisors, a firm that counsels students aspiring to study in the United States on ways to maximise their return on investment. He lives with his wife and son in Texas. Rao has been a columnist for from the year the website was launched, in 2015, and writes regularly for BusinessLine as well. Twitter: @rajkamalrao

Socialists kill Amazon’s expansion plans in New York

Amazon has abandoned plans to create a HQ2 in New York’s Long Island City, selected last year as one of the two locations for a second headquarters.

In driving Amazon away, the Left has established that New York is unfriendly to business

If you thought socialism — and an intense hatred towards capitalism — was dead in America, you’ve been living in an alternate universe.

America, the home to laissez faire capitalism — and more so, New York City, the bastion of everything which made America a world leader, including in financial services, technology and media — is now wilting under the assault of newly-minted and self-described Democratic Socialists.

Brick by brick, they’re laying the foundation for a new America that is completely at odds with the great capitalists who built the US into the wealthiest nation on earth. Carnegie, Rockefeller and JP Morgan would all be turning in their graves.

The latest victim this past month was the world’s richest person, Jeff Bezos, and his behemoth, Amazon. Having selected New York City and Crystal City, VA (a Washington DC suburb) as co-locations of Amazon’s second Headquarters (HQ2), with a promise to create 25,000 new jobs at each location, Amazon hastily withdrew its plans in New York. Never a company that could stomach bad press, Amazon had been mercilessly butchered in the media by leftist politicians in the city who repeatedly charged that the company had somehow negotiated a sly deal with the city to get tax breaks that could otherwise have been used for public investment.

A taxing proposal

The problem was that these politicians, led by the Democratic party’s latest young star, Alexandria Ocasio-Cortez, had no clue how the deal worked. With each politician trying to out-socialise the next, the noise level became too uncomfortable for Amazon. And it announced that the entire deal was null and void.

The saga started over two years ago, when Amazon got into a fight with city leaders in Seattle, its corporate home. Although it had invested over $5 billion in new buildings downtown — and created a windfall in jobs and tax revenues — leftist politicians tried to beat down on Amazon by introducing a new poll tax. This would impose a tax on each employee working at companies that generate large revenues — to help pay for housing. It was clear that the law was designed to get Amazon.

Amazon vigorously fought back against the tax, first by announcing that it would suspend its building expansion plans and then lobbying for the tax proposal to be dropped, saying that city governments were not the most efficient at spending tax dollars. City leaders finally caved and the poll tax idea was withdrawn.

The hunt for HQ2

With this as a backdrop, Amazon announced that it was outgrowing its headquarters space in Seattle and invited bids from cities all over North America to host Amazon’s HQ2. The company required bidding cities to have a population of at least 1 million; be close to an international airport; have good highways and mass transit; and room for up to 8 million sq. ft. of office space. The company promised to invest $5 billion in the new location, creating up to 50,000 new jobs.

Over 200 cities in the US and Canada submitted bids. For nearly two years, city planners could think of nothing but to offer the best deal to Amazon — promising free land, tax breaks, expansion of transit lines and even investments to expand local colleges and universities. Landing the Amazon HQ2 location would forever transform the winning city because of the multiplier effect of such a massive investment. The area would see new companies, restaurants, service establishments and small businesses move in, creating opportunities in real estate and even more jobs. HQ2 would be a city mayor’s lifelong dream come true.

Amazon played its cards tremendously well. It got intense free media as local and national outlets covered this story for more than a year. Amazon made it feel like a sports competition, announcing 20 finalists, and media coverage intensified in those markets. Which city would land the deal?

Last November, Amazon announced the victors: Crystal City in Arlington, Virginia (which offered tax incentives of $573 million) and Long Island City in Queens, New York (which offered nearly $3 billion in tax incentives).

A sour grape

While Arlington continued to woo Amazon and say all the right things publicly, New York City politicians, showed their true colour. They began criticising the deal complaining that the $3 billion in tax incentives was too expensive and a cop-out to the ultra wealthy. Most of the 25,000 jobs would have salaries of $150,000 or more, so the socialist concern was that the new rich would edge out the working poor by bidding more for apartments. Gentrification has already caused havoc for the poor in San Francisco as the poor can no longer afford to live there.

But these politicians bungled big time on a key fact. New York was not paying Amazon one dime from its existing budget. Amazon’s investment was expected to bring in $30 billion in new taxes to the city and state over the next 10 years — and if Amazon fulfilled its end of the bargain of creating at least 25,000 new jobs, then and then alone would New York give Amazon a tax break of $3 billion. A tax refund is not the same as a cash handout.

So New York now doesn’t have the new jobs, nor the new tax revenue. And naturally, it doesn’t have to refund the $3 billion in taxes — because you can’t refund that which you don’t have.

In driving Amazon away, the Left has established New York as a place which is unfriendly to business. Companies and residents are already leaving the state because of New York’s high tax rates. In the next census, New York will likely lose three seats in the House of Representatives because of out-migration.

This is not the New York that we have all loved over the years. The big apple, unfortunately, has become a sour grape.