Jan 26, 2018

Competition for Amazon's 'HQ2'

Chad Reese Managing Editor

Twenty finalists remain on Amazon’s list of potential cities for a new headquarters location.

Why it matters: With a $5 billion facility and as many as 50,000 new jobs on the line, many cities assume that being chosen by Amazon can dramatically shape their economic future for the better. At the same time, policy changes enacted to persuade Amazon to choose a particular city may backfire in the long run.

What you need to know:

  • Research Fellow Michael Farren notes that while cities have already offered more than $22 billion in tax write-offs, evidence suggests factors like geography, industrial mix, and the local workforce are likely to matter more over the long run than tax breaks
  • Cities offering significant subsidies do so at the expense of lowering taxes or improving public services
  • The tax subsidies offered by Chicago, for example, would be sufficient to fund the education of 145,000 students this year
  • As Senior Fellow Matthew D. Mitchell and Farren pointed out last year, academic research is clear that communities offering these types of subsidies do not end up benefiting from them

Which cities are in the best position to attract the new facility:

  • “Boston, Austin, and Atlanta are the early favorites,” but Miami’s location and workforce productivity make it competitive according to Senior Affiliated Scholar Adam Millsap
  • The Washington, DC metro area notably has three finalists (Montgomery County, Northern Virginia, and DC), each of which has a unique case for selection according to Tyler Cowen.

Learn more: A $3 billion subsidy provided to Foxconn Technology Group by the state of Wisconsin could have been used to finance a 21% cut in the state’s corporate income tax, paid by about 16,000 firms.

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