24/7 Wall St.

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.