Development Incentives That Make Sense.

Author:Goldsmith, Stephen
Position:Commentary - Reprint

The lesson from New York City's experience with Amazon: There are smarter ways to attract businesses than just dangling tax breaks.

Every local elected official I know is laser-focused on creating good jobs for his or her constituents. In that sense, the celebration we're witnessing among many in New York City now that Amazon has announced it will take most of its proposed 25,000 headquarters-expansion jobs elsewhere is deeply perplexing.

At the same time, I can't stop dwelling on the fact that the highest-valued company in the world controlled by the richest man in the world, whose business model is largely built on undermining the traditional brick and mortar shops on Main Street, had its hand out trying to extract extraordinary financial incentives from cities across the country.

Many businesses ask for incentives, be they tax exemptions or credits. On the surface, there's nothing unseemly about this. But as the Brookings Institution's Amy Liu, president and director of the Metropolitan Policy Program at the Brookings Institution, correctly spelled out recently in the New York Times ("A Better Way to Attract Amazon's Jobs," February 16, 2019), when it came to dangling incentives to attract Amazon, Virginia got it right and New York got it wrong. Liu supports her argument with an evaluation of how the Northern Virginia incentives mostly would not go to Amazon directly but to local transportation, education and training. For Virginia taxpayers, the return on the total package was quite good.

For cities and states trying to lure the next Amazon, one thing should be clear: The best economic incentive is a well-run, safe city with good infrastructure, excellent schools, and a competitive tax rate. All of the tax credits in the world won't matter if your infrastructure is crumbling and your schools are not graduating qualified future employees.

That said, even in the best-run cities there will often be a need for project-based incentives that include environmental remediation, street and sewer improvements, job training and transit expansion. A clear-eyed focus on how struggling neighborhoods and underemployed residents would benefit from the proposed investment must be at the core of these efforts.

In my career, I have seen many requests for incentive packages that made little sense. In most instances the company and its jobs were coming anyway, and there was no reason to give the company advantages over those already producing jobs and tax...

To continue reading