Commentary: Alexandria Ocasio-Cortez please come to New Mexico. We need you to explain to our political leaders the futility of tax breaks to lure business.
Ocasio-Cortez, or AOC, is the 29-year-old self-proclaimed socialist recently elected to congress from New York who was instrumental in convincing Amazon to cancel construction of its Queens campus.
Amazon famously had engaged in a nationwide search for a location for its new headquarters, dubbed HQ2, that pitted city against city in a bidding war. New York offered Amazon $3 billion in tax rebates and incentives, which works out to about $48,000 per job. The state also used special rules that overrode City zoning laws, streamlining construction.
While New Yorkers generally supported Amazon’s relocation, local Queens residents were not as happy. Queens is highly congested, and rents are high, problems to which Amazon would contribute. Protests by Queens residents, led by AOC, were instrumental in Amazon’s decision to cancel their New York HQ2.
Queens doesn’t need Amazon. The unemployment rate is only 4%. Job openings exceed job seekers. And the congestion and higher rents caused by Amazon likely would have convinced other potential employers to locate elsewhere. Thus, the $3 billion in incentives would have created few if any jobs on net.
Meanwhile, Michelle Lujan Grisham, known as MLG, campaigned on either bumping up or eliminating the cap on New Mexico’s film credit. Currently, New Mexico offers up to a 25% rebate on film production in the state, with a maximum payout per year of $50 million.
AOC come to New Mexico and explain to MLG why film rebates are bad policy. Explain to MLG that government giveaways to business transfers wealth from taxpayers to mostly out-of-state shareholders. That the rebates allow film producers to pay high salaries to executives and onscreen talent while impoverishing the typical tax payer.
Supporters of lifting the film credit cap will point correctly to the recent commitment from Netflix to spend $1 billion over ten years as a success of film credits. They would be right. There is little doubt that Netflix picked Albuquerque for its new studio in part due to the state film credits.
But at what cost? Lifting the film credit cap would mean giving Netflix $250 million dollars. That same money could pay the salaries of 500 teachers. Given our dismal educational system, does anyone doubt which expenditure would most benefit low income New Mexican?
There is also a bigger issue, which is that these tax incentives meant to attract businesses away from one state and two another state create no net value. The incentives don’t contribute to national productivity, but only serve to locate a business in place rather than another. New Mexico’s gain is another state's loss.
Yes, AOC please, please come and please, please met with MLG. Please, please. Help stop us from enacting bad policies.
Christopher A. Erickson, Ph.D., is a professor of economics at NMSU. He has taught for years in NMSU graduate program in economic development. The opinions expressed may not be shared by the regents and administration of NMSU. Chris can be reached at chrerick@nmsu.edu.