$7 billion to bring Amazon to Newark. Its not a deal I would want to see. What do you think?

https://www.bloomberg.com/news/articles/2017-10-16/christie-backs-newark-s-amazon-bid-with-7-billion-in-tax-breaks

I would have to read more but it sounds good to me. Newark needs help as does the state.

and how does the state get helped by giving up 7 billion in taxes?

The devil is in the details but this could be so good for Newark that I would really have to see those details.  Location, Number of jobs guaranteed, impact on Newarks' budget, etc.  

This could be a huge deal for Newark but I I would hope that Christie did not negotiate himself but engaged some experts as well as the Mayor of Newark.  So I would not say yes or no until we had all the facts (which might never be forthcoming knowing how Christie operates).

NJ's credit has been down rated nine times under Christie. And yet, lo and behold, NJ can manage to give up seven billion in taxes to benefit a business. 

I'd like to see them give me a tax break to stay. Never happen.

Why do I have a feeling this tax break a large benefit to real estate and financial stakeholders? The elite rubbing each other?

drummerboy said:

and how does the state get helped by giving up 7 billion in taxes?

I'm not sure if that's a serious question. 

it’s not exactly giving it up if they don’t have it currently. So, yes you’d be giving up a larger piece of the pie but, right now, there’s no pie at all.

The state has been subsidizing Newark in many ways for many years.  If I were in the position of making this decision, I would want to know how this would make Newark less dependent on the rest of us.

Just to recount the bidding: 

Last month, Christie and the state legislature, with the support of both parties, agreed to raise the present tax credit for the creation of new jobs from up to $5000 per new employee to up $10,000 per new employee. Amazon says that the new second headquarters will employ 55,000 people. That's $10,000 x 55,000 = $5 billion . This was not specific to Newark - it was available to any NJ city, e.g., Camden, Patterson, etc. 

Newark added to the $5 billion tax credit against NJ income tax its own $2 billion - $1 billion in property tax abatement and a $1 billion city wage tax waiver, which would put the money in the pockets of the employees. 

cramer said:

Just to recount the bidding: 

Last month, Christie and the state legislature, with the support of both parties, agreed to raise the present tax credit for the creation of news from up to $5000 per new employee to up $10,000 per new employee. Amazon says that the new second headquarters will employ 55,000 people. That's $10,000 x 55,000 = $5 billion . This was not specific to Newark - it was available to any NJ city, e.g., Camden, Patterson, etc. 

Newark added to the $5 billion tax credit against NJ income tax its own $2 billion - $1 billion in property tax abatement and a $1 billion city wage tax waiver, which would put the money in the pockets of the employees. 

Does Newark have city income tax?

Klinker said:

cramer said:

Just to recount the bidding: 

Last month, Christie and the state legislature, with the support of both parties, agreed to raise the present tax credit for the creation of news from up to $5000 per new employee to up $10,000 per new employee. Amazon says that the new second headquarters will employ 55,000 people. That's $10,000 x 55,000 = $5 billion . This was not specific to Newark - it was available to any NJ city, e.g., Camden, Patterson, etc. 

Newark added to the $5 billion tax credit against NJ income tax its own $2 billion - $1 billion in property tax abatement and a $1 billion city wage tax waiver, which would put the money in the pockets of the employees. 

Does Newark have city income tax?

It does. I wasn't aware that it had one until I started trying to understand the deal.  

http://www.tax-rates.org/new_jersey/newark-income-tax

Correction: Newark has a payroll tax, not an income tax. See my post below. 

cramer said:

Klinker said:

cramer said:

Just to recount the bidding: 

Last month, Christie and the state legislature, with the support of both parties, agreed to raise the present tax credit for the creation of news from up to $5000 per new employee to up $10,000 per new employee. Amazon says that the new second headquarters will employ 55,000 people. That's $10,000 x 55,000 = $5 billion . This was not specific to Newark - it was available to any NJ city, e.g., Camden, Patterson, etc. 

Newark added to the $5 billion tax credit against NJ income tax its own $2 billion - $1 billion in property tax abatement and a $1 billion city wage tax waiver, which would put the money in the pockets of the employees. 

Does Newark have city income tax?

It does. I wasn't aware that it had one until I started trying to understand the deal.  

http://www.tax-rates.org/new_jersey/newark-income-tax

Upon further research, It seems that Newark has a payroll tax, paid by the employer  - not an income tax. The deal that Newark is proposing is that Amazon would get a $1 billion waiver of the payroll tax.

https://drive.google.com/file/d/0B50M0aXe70I6S1hZMU5RTk5DeFk/view 

$7 billion for approximately 50,000 jobs.  Roughly $140,000 per job in tax giveaways.

Corporate welfare for a company that had revenue of $136 billion in 2016.  Amazon does not need the money but New Jersey and Newark need jobs. 

Giving away $7b seems like a lot of but what is 100% of nothing? That's the alternative.

conandrob240 said:

Giving away $7b seems like a lot of but what is 100% of nothing? That's the alternative.

--- and the state gets the income tax from the employees and the sales tax from what the paid employees spend.

I'm sure they state gets much more than that. If the tax break is $7Billion, I'm sure there's still lots of taxes out there to collect. Plus the creation of 50,000 jobs. 50,000. And infusion into an area that's riddled with crime and has never been able to claw its way out. It seems a no brainer to me.

where does the 50000 number come from?  That's a huge number from a company that is trying to automate everything.  That's a huge number for one location.  What kind of jobs are these?  Are they all guaranteed to be local hires, or all commuters from the suburbs?  

Red_Barchetta said:

The state has been subsidizing Newark in many ways for many years.  If I were in the position of making this decision, I would want to know how this would make Newark less dependent on the rest of us.

2017 is the last year that Newark will be receiving state aid. Newark's financial picture has been steadily improving since Ras Baraka took office in 2014. When he took office, he was faced with a $93 million budget deficit, inherited from Booker. In 2014, because Newark received $10 million in state aid, Newark's finances were placed under state oversight. 

"Baraka said this will be the last year the city prepares its budget under state supervision. The budget includes $8 million of transitional aid from the state, about $1 million less than last year. Baraka said city finances are healthy enough that it won't need to request such aid next year. 

"The city has completed the last two years under state supervision with a healthy surplus. We have been using the surplus to pay down the debts we inherited when we took office," he said. "We are whittling down a fifty-million-dollar deficit and a myriad of unpaid bills."

http://www.nj.com/essex/index.ssf/2017/07/newarks_666m_budget_wil_hire_200_cops_raise_taxes.html

Right in the article 

FilmCarp said:

where does the 50000 number come from?  That's a huge number from a company that is trying to automate everything.  That's a huge number for one location.  What kind of jobs are these?  Are they all guaranteed to be local hires, or all commuters from the suburbs?  

Some good government groups and economists have criticized the offer.

“They’re talking about doubling already generous corporate tax breaks,” said Jon Whiten, vice president of New Jersey Policy Perspective. “They’re not saying, we’ll invest billions in New Jersey Transit so workers can get to work on time, or in affordable housing so workers can have a decent place to live.”

https://www.nytimes.com/2017/10/16/nyregion/newark-amazon-headquarters.html

I'd be in favor if NJ had the luxury of being able to afford this instead of being sunk in a pit of debt.

conandrob240 said:

Right in the article 

FilmCarp said:

where does the 50000 number come from?  That's a huge number from a company that is trying to automate everything.  That's a huge number for one location.  What kind of jobs are these?  Are they all guaranteed to be local hires, or all commuters from the suburbs?  

I know.  I read it.  But where did the number come from? Who dreamed it up?.  I know it counts every construction worker, and job turnover since it covers 17-20 years, but many times those numbers are just show, and in no way a promise or commitment.

BG9 said:

Some good government groups and economists have criticized the offer.

“They’re talking about doubling already generous corporate tax breaks,” said Jon Whiten, vice president of New Jersey Policy Perspective. “They’re not saying, we’ll invest billions in New Jersey Transit so workers can get to work on time, or in affordable housing so workers can have a decent place to live.”

https://www.nytimes.com/2017/10/16/nyregion/newark-amazon-headquarters.html


I'd be in favor if NJ had the luxury of being able to afford this instead of being sunk in a pit of debt.

What do you think the chances of Newark attracting Amazon without state and local incentives are with 34 other cities bidding for it?  I think they are zero. 

The $5 billion tax credit from the state (the bill hasn't been signed yet) is a doubling of the tax credit that is already on the books which has been responsible for attracting other businesses to locate in NJ. 

Attracting Amazon and the creation of 55,000 new jobs is not just good for Newark - it's good for SOMA and the state. What are Newark and the state really losing?

History shows that the job estimates pitched by companies are far more often than not wildly overstated.

ska said:

History shows that the job estimates pitched by companies are far more often than not wildly overstated.

The $5 billion tax credit from the state that is being talked about is not a fixed amount. The tax credit is $10,000 per employee - if there are only 20,000 new employees, the tax credit would be a maximum of 20,000 x $10,000 = $2 billion. And the $10,000 per employee is a maximum amount - it's determined by a calculation. 

It would seem that the total $2 billion being proposed by Newark should also have some kind of sliding scale to determine whether Amazon would be entitled to the full $2 billion. 

cramer said:

BG9 said:

Some good government groups and economists have criticized the offer.

“They’re talking about doubling already generous corporate tax breaks,” said Jon Whiten, vice president of New Jersey Policy Perspective. “They’re not saying, we’ll invest billions in New Jersey Transit so workers can get to work on time, or in affordable housing so workers can have a decent place to live.”

https://www.nytimes.com/2017/10/16/nyregion/newark-amazon-headquarters.html


I'd be in favor if NJ had the luxury of being able to afford this instead of being sunk in a pit of debt.

What do you think the chances of Newark attracting Amazon without state and local incentives are with 34 other cities bidding for it?  I think they are zero. 

The $5 billion tax credit from the state (the bill hasn't been signed yet) is a doubling of the tax credit that is already on the books which has been responsible for attracting other businesses to locate in NJ. 

Attracting Amazon and the creation of 55,000 new jobs is not just good for Newark - it's good for SOMA and the state. What are Newark and the state really losing?

Budgets are tight. NJ is going into deeper debt because we spend more than we receive in revenue. Giving a seven billion dollar tax break will effectively add seven billion to our debt. That's just how money works. Revenue given up is debt added when there are consistent debt budgets.

Or we cut seven billion in services or increase the tax load to others by seven billion. Maybe offset some by reducing many millions in NJ school aid to SOMA and other towns.

You can hope that the jobs generated by Amazon over the years will create enough revenue to offset the tax revenue loss. Which usually is helpful in a loose labor market. In tight labor markets those not having opportunities at Amazon can get them elsewhere, at firms that are not or did not need additional taxpayer subsidies. In the end, there may be a net loss to us  taxpayers as other subsidized venues have shown us.

If you feel that the possibility of adding billions in debt is fine, then go ahead. However, the golden rule is "there is no such thing as a free lunch."

BG9 - $7 billion (really $5 billion from the state) is not being added to the debt - this is not $5 billion in revenues that was there and is now being taken away, leaving NJ $5 billion further in debt. The $5 billion was never there. 

Not zero, but very very close to zero.

If Newark isn't aggressively making this cheap for Amazon, they'll just locate in NYC since proximity to NYC is almost certainly at the top of Newark's short list of pluses.

cramer said: What do you think the chances of Newark attracting Amazon without state and local incentives are with 34 other cities bidding for it?  I think they are zero. 

2 things to consider- services for employees and services for corporate. The employees have to eat somewhere get their dry cleaning done, etc. 

More importantly, Amazon is one of the largest and fastest growing companies in the world, leading a secular, not cyclical, shift in the global economy. Many, many will come to Newark to kiss the ring and try in some way to capture what Amazon has. Just as service providers and startups spring up like mushrooms around Amazon’s current abode, and as they do around other tech behemoths, so they shall around Amazon Newark.

NJ has largely been left out of tech for the last 20 years. Getting an Amazon or an Apple would be incredibly impactful. And that is understatement. 

I am shocked to say I applaud Baraka and Christie for an aggressive offer. They share no similarities in political belief but they are on the same page here. 

I have a sneaking suspicion that the whole thing is theater by Bezos to forestall the continuing battle Amazon is waging regarding tax collection from 3rd party sellers. At least in the short term, states may feel they can’t weigh in against Amazon in the dispute, which is coming to a head nationally.

cramer said:

BG9 - $7 billion (really $5 billion from the state) is not being added to the debt - this is not $5 billion in revenues that was there and is now being taken away, leaving NJ $5 billion further in debt. The $5 billion was never there. 

To some degree you're right, depending how its looked at.

Take the payroll tax waiver. Amazon will be excused for about a billion in payroll taxes even though the business will use city services. In a tight market, those same employees can be working in Newark for a firm that did not get a break and is therefore paying its share for city services. 

Amazon is really asking the State of NJ (and Newark) to pay the cost of building and establishing its headquarters. Corporate welfare at its best.

If I were to move to Newark from NY and be willing to work there with a high income and promise to spend my money there, would NJ and Newark offer me a 100,000 tax break to help buy my house or condo? Of course not. They would tell me I'm being ridiculous. Yet they will do it for a corporation because they promise 50,000 jobs. 

Why? Because its supposedly 50,000 jobs?

Suppose I tell them I can get 50,000 NY residents to move to Newark, to work there and spend their money there provided government give each resident a 100,000 tax break. Would government jump at the offer? 50,000 jobs. Of course not, ridiculous. But when a corporation does an offer they fall over each other to bidding on it.

There has been nothing like this since Lebron was deciding where to go at the end of his first Cleveland stint. Will Bezos have a TV show to reveal the location?