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During the 2020 presidential campaign, it was businessman Andrew Yang who was the most explicitly anti-corporate tax incentive candidate in the field. He literally had a policy page on his website calling to “End Bidding Wars for Corporate Relocation.” His correct reasoning?: “These subsidies amount to money that could otherwise go to school, road repair, and other important functions. These incentives are meant to steal jobs and investment from other states, not from offshoring or to entice businesses to expand when they otherwise wouldn’t.”
But now that Yang has morphed from presidential long shot to one of the front-runners in the New York City mayoral race, his position has gotten, well, weird. He’s trying to placate business interests who love corporate handouts, while still not ticking off the activists who rightly fight against inequitable deals, resulting in a policy mish-mash that leaves him nowhere.
Yang’s transformation shows how local politics screw up the debate over corporate incentives, even when the pols in question know just what a boondoggle these giveaways are.
During the 2020 race, Yang pegged his criticism of corporate handouts to the nationally embarrassing effort by cities and states to offer up billions of dollars in tax giveaways and outright subsidies to Amazon, in an effort to win the nod for the company’s HQ2. He noted rightly that Amazon was going to what it wanted to do, regardless of tax breaks. “The recent circus surrounding Amazon’s HQ2 project should highlight how damaging the practice of allowing localities to ‘bid’ for investment from corporations can be to our country, and how important it is for us to find a solution to this problem,” he said in his campaign platform. “Considering Amazon’s business, DC and NY were likely locations for HQ2 even before they received 238 proposals from cities across the country.” (The recent reveal in Brad Stone’s Amazon Unbound that Philadelphia was in the running, till a top executive joked he disliked the city only solidifies Yang’s critique.)
Yang, instead of supporting these giveaways, called for company-specific tax benefits to be taxed at 100 percent, rendering them worthless. “No more bribing companies to do something they were already planning to do. The only ones who win are the companies,” he said.
In short, in 2019 Yang offered a a clear articulation of the problem of local corporate handouts and a straightforward and plausible solution, the only instance I’ve seen of a national candidate directly calling for such a policy intervention.
But it’s now 2021, and Yang’s trying to win votes in New York City, the place where a coalition of local activists and lawmakers chased HQ2 away, but where there is also still a solid base of people who believe that foregoing gifting hundreds of millions of public dollars to Amazon was a mistake. (I wrote here about why defeating the HQ2 push was the right thing for New York, if folks want a review.)
This reality’s led Yang to try to split the baby in a strange manner, as evidenced by how he responded to questions about HQ2 during an interview last month with TechCrunch, which I’ve excerpted below. Apologies for the length, but you need to see the full context to figure out what Yang is doing.
You recently said that letting Amazon and its 26,000 jobs walk away from New York City was not a good thing in reference to HQ2. But you, along with other Democratic politicians, have criticized the fact that they don’t pay federal taxes. If a company like Amazon were to relocate or bring a substantial number of jobs in New York City, how would you hold them accountable?
I guess there’s a difference between the local impact and the federal impact. I don’t think it’s a good thing that a trillion-dollar company doesn’t pay any federal taxes, but if you are a locality and someone comes along and it’s going to be good for your community, then you say, “yes.” I want to make the case that New York City loves business. It loves businesses big and small that are based here. And it wants more companies to know that New York City is the best place to build a world-class company and culture. So, that would be my stance as mayor, if a large tech company wanted to come to New York, and if there’s a large tech company that’s reading this right now or a small one or an entrepreneur, come to New York! Early next year, if I’m mayor, I’m going to be doing everything I can to help you.
A lot of the pushback that they were getting were around incentives. Is there a way to bring a company like Amazon into New York without offering that? I don’t think it’s good when localities end up bidding against each other to try and bring in various companies. One of my proposals when I was running for national office was that we should actually make it impossible to do so by making any benefits that are provided to a company in that manner themselves taxable, at a rate of a 100%.
So, the entire thing becomes a non-starter and companies then would be based where they think it’s most advantageous to their organization to be based, not by pitting cities against each other as to who’s going to bend over backwards the most. I think that would be a better system and people were upset about the level of subsidies that were supposed to be directed to Amazon with HQ2, and that was legitimate concern.
And some of the local impacts were also of legitimate concern. But again, big picture, you cannot let an employer that’s going to create 26,000 high-paying jobs and probably an additional 100,000 or so service jobs walk away. You have to say New York City is the place for you.
These answers, taken together, make no sense. First, Yang tries some sleight of hand, making it seem as if federal tax dodging was the issue with Amazon coming to New York, when it wasn’t. The issue was the impact on municipal and state tax revenues. When the interviewer calls him on that, he circles back to his 2020 campaign position, but tries to square it with an assertion that you can’t say no to Amazon because it offered up so many jobs. .So you have to say yes to Amazon, except the thing Amazon wanted was maybe bad, but you can’t let Amazon walk away, but the local concerns over incentives were legitimate, but in the end, you have to say yes to Amazon.
Instead of this word salad, Yang could have said what is, in fact, true: The incentive package Amazon wanted for HQ2 was wildly expensive and unfair. Amazon is now expanding in the city anyway, without it, so everyone’s a winner. He could credibly say he was right all along, and that he wants to work on building up the advantages New York has over other places, rather than resorting to corporate handouts.
And, to clear, New York City has serious issues with these sorts of giveaways. As John Mozena noted in City Journal recently, New York lost $3.8 billion to tax abatements in 2019, enough to fund the fire department and department of corrections entirely, with a few hundred million dollars left over. There’s no reason for New York — the financial capital of the world! — to shell out that kind of cash to entice corporations to come there.
So why doesn’t Yang want to discuss all this? Here’s my theory: Yang is in a neck and neck race for the lead spot in the Democratic primary race for New York City mayor. The Democratic nominee will almost certainly win the general election. He has his signature policy that he really cares about — a universal basic income program — and on just about everything else, he’s simply trying to land in the middle and not make anyone too mad, thereby protecting his position in the polls.
Yang knows there are important constituencies on both sides of the HQ2 debate: on one side, Rep. Alexandria Ocasio-Cortez, State Sen. Michael Gianaris, and the activists who beat back Amazon; on the other, Mayor Bill de Blasio, Gov. Andrew Cuomo, and many large business interests. He’s trying to keep them all if not happy, then at least not mad enough to come at him over his position on corporate handouts, one way or the other.
As a result, Yang, once a staunch opponent of corporate handouts, is now supporting such economic development junk, such as a tax credit for forcing workers to stop working remotely and an expansion of casino gambling. He’s placating business interests with a hodge-podge of stuff, while trying to not fire up the forces that caused Jeff Bezos to turn tail and run.
Yang’s position makes sense politically, I guess. He’s got a shot at Gracie Mansion he’s and trying not to blow it. He knows that more corporate dealmaking can lead to good local political outcomes for those who engage in it. But it’s not just leading to nonsensical policy positions, it’s likely leading to the continuation of bad policies by someone, who if he is elected mayor, knows better.
Yang watering down his position to render it meaningless is a perfect example of how corporate handouts warp our politics. Someone who has thought about the problem and clearly knows better still feels compelled to at least nod in the direction of outsized handouts out of electoral necessity. Until we upend the politics of these giveaways, we’ll continue to see an endless parade of folks doing what Yang did: getting the issue right until winning an election requires them to get it wrong.
Pat Garofalo is the author of The Billionaire Boondoggle: How Our Politicians Let Corporations and Bigwigs Steal Our Money and Jobs, the Boondoggle newsletter, and the director of state and local policy at the American Economic Liberties Project.