business news in context, analysis with attitude

Responding to our story last week about an interactive map that vividly illustrates how climate change could affect communities in North America 60 years from now, one MNB reader wrote:

While I am not a huge believer in Human made climate change, I couldn't help but notice that LA will be like Las Palmas, MX, but San Diego would be like........ Westmont, CA? Since they are only 80 miles apart, that seems somewhat counter intuitive.

There will be some places where the changes will be enormous, and some less so … but I’m completely on board with the idea that there is likely to be change, that all scientists can do is make intelligent and informed estimates, and that both the public and private sectors ought to be paying attention and planning for how these shifts could affect their citizens and customers in the future. To not do so, I think, would be a kind of malpractice.

A note from another reader, on another subject:

Probably apropos of nothing, but I thought it strange to see a Kroger TV commercial for their Simple Truth brand of products, considering I live in NH.  It was Sunday night during the Grammy's.  Unusual, no?

It was a national buy, I’m sure.

On the other hand, now that people will be able to buy Kroger products online and pick them up and a local Walgreen store, it may be that Kroger is starting to play the awareness game … believing that it may be able to generate market share even in places where it has no physical stores.

I’d certainly be testing that premise if I were at Kroger. Then again, I’m not nearly as smart as Rodney McMullen and his folks.

Got a number of emails about Amazon’s decision to not build its HQ2 campus in New York City, and the revelation that it will pay no federal taxes this year.

From MNB reader Mike Bach:

I’m of two (very different) viewpoints on the Amazon tax situation:  Maybe there should be an AMT for corporations, just as there is for high earners today.

Or, we should consider a national sales tax instead of all the convoluted income and property taxes.  No deductions just a national sales tax applied to all, including imports.  Then we avoid all the tax abatements.  I’m certain there’s a debate to be had about either option.  At least with Amazon, we’re reasonably certain of having new jobs that pay over $150k / year.  That guarantee doesn’t exist every time a local jurisdiction gives a tax break to Target, Walmart, Costco or Wegmans to build.  In fact, we’re more assured that health insurance for those workers is covered by taxpayers.

MNB reader Andy Casey wrote:

Not too concerned about the breakup as my guess is both Amazon and NYC will each be just fine going forward, together or not. But if I were Amazon, I would be more than a little worried about publicity around that zero tax bill. Populist politics seems rapidly swinging to something of an “eat the rich” mentality and one of the world’s largest companies not paying any income tax will likely not play well.

MNB reader Ron Pizur wrote:

Your observation is right on.
There isn’t a pot with $3 billion in it. Those incentives are dependent on Amazon spending a certain amount of money and creating a certain number of jobs. Those jobs now won’t be created, nor will the ancillary businesses be created that would’ve served Amazon and its workers. That’s an enormous loss.
The politicians cheering the pullout do not seem to have a solid understanding of how their budgets work. That is scary!

From MNB reader Roy St.Clair:

I am a simple man with no expertise in tax law, etc.
But please, someone, explain to me how a company worth $800 Billion, that generates over $11 Billion in profits, pays ZERO taxes?
I don’t get it, and it makes me kind of sick to my stomach actually.
Am I contributing to this absurdity by virtue of my status as an Amazon Prime customer?
Maybe I should re-think this whole thing?

There may be moire than a few people asking themselves that question.

However, MNB reader Dan Jones has one answer:

Amazon is valued at $800B by the stock market – and its value changes daily based on the whims of the market.  Amazon has made a profit in the last two years, but made no profit for several years prior.  It is perfectly legal and appropriate to offset current federal taxable income with prior income losses.  There is a reason that we have an Income tax and not a Value tax.

As for a tax on value and net worth, that policy change has been proposed by Elizabeth Warren, AOC and others.  That will take a Constitutional Amendment – and we should have that debate. 

But for Income Tax liabilities to be compared to company value is an inappropriate metric.  It does nothing but stir the emotions of the people that do not think this through.

Lots of emotions being stirred these days.

Another MNB reader chimed in:

I also think the city could have made a better job selling this deal to the citizens, and trying to put some perspective on how this will help the real people of NYC in the short and long term. The problem is that not a lot of us believe it's going to happen.

On a personal level, the potential of at least a billion dollars in revenue for the city sounds good to me, but I don't think it will benefit me, people in the area, or the city. It will probably benefit Cuomo and DiBlasio in a political sense but no one else. The project could have had more support if they would have made a deal that makes real people feel benefited, not just politicians. What about promising a % of those jobs to residents of NYC? training for STEM jobs for people in the community (Queens)? or just explaining better how this supposedly $ +1B is going to be invested? (I am dreaming, I know).

After many years living in NYC and being priced out of Manhattan myself, I can only imagine what the people that rent not in Long Island City, but Jackson Highs or Ditmas Steinway could be feeling when they heard the news. I have options because I have education and a high paying job (with student loans), but many of them not.

The people that live in LIC (Long Island City) are now households that can rent a small studio for almost $3k a month in a high rise. The rest of the neighborhood are old warehouses and very few middle class or low income residents. It's very small.

Just one subway stop away is where the real Queens starts. Astoria, Ditmas and Jackson Heights. Astoria is gentrified but affordable to middle class, young people. Ditmas and Jackson are heavily low income or immigrant communities that don't own their places and have long commutes to the highest paying jobs in the service industry, Manhattan. Gentrification is coming to these places as well but Amazon would have done that in a year instead of 10. The perspective of losing your home of years and increasing the already long commute in the next 6 months is not pleasant.

On top of that, it's not clear if these 25k jobs could benefit those communities. People think they are most likely STEM jobs which of course they are not trained for. Even high education here is about Finance and Business, not STEM. So most likely the people that would get these jobs are going to be from out of the state in the short term until our universities and colleges could supply a demand for an Amazon HQ.

Anyway, I can't say I am happy that the deal is off, it could have been great to have another industry here, but I think that at least here in NYC there is already so much $ from corporations that people feel there are options. I can imagine in a smaller city in Virginia is a different story. I agree with you that this city needs to progress in terms of infrastructure to host a HQ like that.  NYC is a lovely but messy place to live. But we are not starting from scratch like in Virginia. I saw those buildings near the airport being built for the technology industry and it looks amazing, but there is so much land there that I can imagine they didn't need to displace a large group of people to build it.
KC's View: