Apple, Amazon and the scourge of homelessness

A Stanford academic with a European perspective is aghast.

From Frederic Filloux’s Monday Note: With Greed and Cynicism, Big Tech is Fueling Inequalities in America

Recently, a CEO of a roaring unicorn in Silicon Valley drew my attention to the following: “If you compare Amazon’s stock price over the recent years against the cost of housing and the rise of homelessness in Seattle, the progression is identical.”

He is mostly right. Over the last five years, Amazon stock has grown 5.6 times. In the meantime, in Seattle, where the e-commerce giant is headquartered, the number of people making at least $250,000 a year increased by 50 percent, pushing the average price of homes by 70 percent. As for the homeless population, it has grown 3 times since 2010. With 11,000 homeless for the entire metro area, Seattle is now the third largest homeless city in America behind New York (76,500) and Los Angeles (55,000). As for the Bay Area, the homeless population officially numbered in the counties of San Francisco, San Mateo, San Jose, and Santa Clara hovers at 15,500…

The selection of Amazon’s new hometown has led to the most cynical corporate beauty contest ever. A first batch of 200 cities was approached, with a choice narrowed down to 20, ready to fight tooth and nail for the prize. Amazon came up with its demands — public transportation, proximity to an international airport nearby, a sizable talent pool (universities, research centers), etc. But the most critical part is the $5 billion to $10 billion tax break requested by Amazon.

Let’s put this in perspective. In 2017, Amazon collected $5.6 billion in profit, but paid zero federal taxes, thanks to multiples tax schemes. Even better, since 2008, Amazon paid $1.4 billion in taxes when Walmart paid $64 billion. Not only Amazon does not have enough with an effective tax rate of 11 percent for the last five years, but it wants more from American cities widely known for their crumbling infrastructure. New Jersey is ready to cough up $7 billion in tax advantage (think about it next time you drive west of New York City)…

These tax breaks are not free money. The exemptions granted to Amazon (or Apple which is also looking for another campus, or Tesla, or Foxconn), is part of a zero-sum game in which the contribution will come at the expense of something else, as explained in a series of articles by the Guardian (read Big Tech, Desperate Cities).

My take: Yup. And as near as I can tell, the problem is getting worse. With no end in sight.

UPDATE: In fairness to Amazon, they’ve created a ton of jobs in Seattle and poured a lot of money into making the city safe for their employees—including a commitment of more than $40 million to provide shelter and services to the homeless. The company has even set aside space in one of their new headquarters buildings that by 2020 could provide permanent shelter for 200 families. That’s how bad the problem is.

4 Comments

  1. Gregg Thurman said:

    Financial inducements to locate should be illegal. End of story.

    0
    July 9, 2018
  2. David Drinkwater said:

    With all this morning sunshine, I think I should just go back to bed!

    Something to also consider, in the case of Seattle is Starbucks and Microsoft. Although Redmond (Microsoft) doesn’t scream Seattle to a lot of folks, it’s just across a bridge. The progression may still be real (and Amazon may, indeed, be what is keeping it alive today), but the problem of Seattleites not being able to afford their own homes or the ability to move within their own city is not new.

    I fear similar in Dallas, with all the incentives that the Metro is providing to headquarter here (and a contestant for Amazon’s HQ2, which I do not personally particularly feel a need to demonize).

    Lucre, Mammon … it’s all the same beast.

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    July 9, 2018
  3. Richard Wanderman said:

    “These tax breaks are not free money.”

    In the case of Carrier it was a tax increase for Hoosiers. Carrier still shipped most of their jobs to Mexico but Hoosiers are stuck with the higher taxes. The insane piece is that Carrier isn’t an Indiana company, it’s part of UT, a Connecticut company.

    My wife was born in Indiana and still has family there. Mike Pence wasn’t all that well liked before the Carrier deal (that he helped put together before he left the state to become VP) after it he was liked even less.

    Sigh.

    0
    July 9, 2018
  4. Steven Noyes said:

    While there are some serious issues with the aspect of housing and the discussions of tax incentives could fill tombs of books, I read some of the Guardian articles (specifically Greg LeRoy and Maryann Feldman article) and found them, at best, a grade school level of thought process. They really were that bad. For example:

    “The Apple centre, a cloud computing facility, will have only 50 permanent jobs, so the cost per job exceeds $4.2m.”

    This is based on a $214 million tax break given to Apple by Iowa and the surrounding region for the Apple data center. This simple analysis to appeal to the reader of taking $214 million and dividing it by 50 is mind-numbingly simplistic and is highly misrepresented.

    The sentence out-right states the “the cost per job exceeds $4.2m” and this is a 100% lie and fabrication.

    First up is it took far more than 50 people to construct the data-center. There will be over 500 local jobs needed for construction over about 18 months. BTW: This is easily searchable information with minimal research needed.

    Second is these local construction jobs will pay a significant amount of taxes (as in millions) into local, state and federal tax coffers. Greg and Maryann’s simplistic article did not even consider these increases to taxes.

    Third, and biggest, is this is about abatement of taxes and not gifts of free money as indicated by the article. I say gifts of free money because Greg and Maryann indicated a “cost per employee of $4.2 million”. Another way to look at it is the surrounding area will collect roughly an ADDITIONAL $60 million, or $1.2 million per employee. The 4.2 million is an “opportunity cost” of what would NOT have been collected if no tax breaks were given. Given Apple is supplying a significant amount of the power infrastructure I would say $1.2 million per employee will go along way to helping local projects like schools.

    Phillip, I have always found you to be a balanced journalist but most of the Guardian articles you linked to, are rife with errors and pander to minds incapable of rational analytical thought. They really are atrocious.

    4
    July 9, 2018

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