Why Amazon is not the kind of company Chicago needs

Mayor Rahm Emanuel and Gov. Bruce Rauner are BFFs again. What brings the pair of Republicrat drinking buddies back together after some highly publicized spats, including personal name-calling, are school vouchers, more and bigger tax breaks for the rich, and Amazon.

Both of them, along with all but a few state and city pols, have been prostrating themselves before the Seattle-based king of global e-commerce, offering up some of the city's best real estate and a virtual tax-free existence if the low-road, parasitic company will only agree to open its second headquarters in IL, and bring "50,000 jobs" to Chicago.

Where have we heard those kinds of wild promises before? Think Olympic Games or Boeing's move here from Seattle in 2001, which, despite Mayor Daley's overblown promises, produced only a few hundred jobs and little in the way of taxes.

Ben Joravsky writes:

While 50,000 jobs sounds great, Chicago's got a checkered history when it comes to companies making good on job promises. The most infamous case was Republic Windows and Doors. In the 1990s, the city gave Republic more than $10 million in tax increment financing money to build a factory on Goose Island that would employ at least 610 people. In 2008, Republic closed the factory but got to keep the TIF cash.

Amazon's founder, CEO and Trump clone, Jeff Bezos  claims that his company is going to invest more than $5 billion to create a second headquarters in a city like Chicago. He says the move will produce thousands of high-paying jobs over the next 10 to 15 years. And all he wants in return is free land and billions in corporate tax incentives. Bezos has been playing the same game for years.

When Bezos was first deciding where to base his new e-commerce business in 1995, Seattle was not his first choice. Instead, according to Newsweek, the CEO of Amazon, now the world’s largest online store, eyed a Native American reservation near San Francisco that would have considerably lowered his tax bill.

The state of California quashed that scheme, but Bezos’s zeal for tax avoidance did not stop there. Throughout much of Amazon’s more than 20-year history, he has carved out competitive tax positions for the company as it expanded globally. His business acumen in that regard has even attracted the wrath of presumptive Republican presidential candidate Donald Trump, who earlier this year accused Bezos of buying The Washington Post to gain political influence and avoid taxes. During a speech in Texas, Trump said, “If I become president, oh do they have problems. They’re going to have such problems.” 

Boy, did he lie. Bezos, with a net worth of more than $45 billion, pulls down and annual salary, including stock options, of nearly $2 million. That's a small part of what's local taxpayers are paying for if Amazon is allowed to ride virtually tax-free.

More from Newsweek:

Amazon’s IRS case in the U.S., which could force it to pay more than $1.5 billion in unpaid taxes, has revealed some findings that are, at best, awkward for the company. According to court documents, Amazon hired an economist from the global financial advisory company Deloitte in 2001 to review the various approaches that could be adopted to reduce its taxes.

Bezos is also a big backer of charter schools and other school privatization schemes in the state of Washington. According to a report in the Nation, the Bezos Foundation has donated to Education Reform Now, a nonprofit organization that funds attack advertisements against teachers’ unions and other advocacy efforts to promote test-based evaluations of teachers. Education Reform Now also sponsors Democrats for Education Reform (DFER).

Other education philanthropy supported by the Bezos Foundation include KIPP, Teach for America and many individual charter schools, including privately funded math and science programs across the country.

Both Rahm and Rauner, facing upcoming elections, see landing Amazon as a feather in their respective caps and are eager to jump at the bait. Bezos' name popped up in recently-released Rahm emails. In January 2013, Emanuel emailed Bezos, asking for more information about the possibility of the online retail giant locating a facility in Chicago.

"While this is below you, this is very important to me and would like to know if there any chance to set up a phone call with you to discuss?" Emanuel wrote the billionaire, who also owns the Washington Post. "Hope you had a Happy New Year."

Bezos responded by adding one of his executives to the email, "who leads our global fulfillment." Amazon has built multiple facilities in suburban collar counties, but only one in the city.

Bezos

While the city needs jobs, it's questionable whether all, or even most of those promised jobs will go to Chicagoans or to those in communities with the greatest need or highest youth unemployment rates. More likely, Amazon would move many of its existing staff and top execs here from other cities. It's not even clear that these execs will live in the city or in the burbs.

Secondly, there's the question of the negative impact this giant tax giveaway will have on public education and the current pension-debt crisis? America's corporate tax rate is 35%. But Amazon is one of 115 companies along with Boeing on the S&P500 that pay much less -- around 4%..

Finally, there's the problem of Amazon's unethical and even criminal modus operandi. The company was just hit with a $293 million fine from the European Union for failing to pay its tax obligations there.

According to the International Business Times, Amazon is far from alone in shrinking its effective tax rate by racking up state subsidies and credits — as those same states struggle to keep their public pension funds afloat. It cites a study released Wednesday by the advocacy group Good Jobs First and the National Public Pension Coalition which makes the connection between the huge tax breaks used to attract giant corporations to states and cities and their growing pension-debt crisis.

Greg LeRoy, the founder and executive director of Good Jobs First, said the best policy solution for governments looking to attract companies to their states is to prioritize small startups with high growth potential, rather than flocking to well-established behemoths, as well as choosing firms that require a lot of human capital, as opposed to those based mostly on automation. Either way, he said, the bottom line is there needs to be a clear payoff to not just the company but the surrounding economy — in which access to stable retirement income plays a significant role.

Mr. LeRoy makes a lot of sense.

In short, writes Joravsky,

 ...bringing Amazon to town will probably cost untold millions in tax credits—money diverted straight from the state's coffers. That spells a tax hike for everyone else as the state jacks up taxes to compensate for the money it's giving to Amazon.

 I'm hoping the Rahm/Rauner deal with Amazon goes the way of George Lucas' Star Wars Museum.