An Early Victory in the War on Wealth

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When United Airlines Flight 93 crashed into a field in Somerset County, Pennsylvania, on September 11, 2001, it quickly became known as “the first victory in the War on Terror.”

True, everyone on board died. But the terrorists did not achieve their goal of crashing the plane into the White House.

Something far less tragic but similar happened yesterday.

When Amazon (Nasdaq: AMZN) abruptly canceled its expensive plans to build an expansive corporate campus in New York City, it was an early victory in the War on Wealth.

Amazon, of course, is the world’s largest company, and CEO Jeff Bezos is the world’s wealthiest man. That is enough to inspire hatred in some.

Over a year ago, the company announced that it was scouting locations for a new headquarters, dubbed HQ2.

After a fierce bidding war by various states to attract the e-commerce giant – and the significant economic stimulus it would bring – Amazon chose Northern Virginia and New York City.

It was a big victory for New York.

Amazon promised to bring 25,000 jobs paying at least $150,000. The deal would potentially remake Long Island City as a high-tech hub. And it would generate billions of dollars in badly needed state and local tax revenue in coming years.

Yet anti-business activists came out in force against the deal.

They said it would worsen congestion on the subway and in the streets. (That’s what growth does.)

They said it would drive up real estate values. (Also a side-effect of growth and, incidentally, not bad for existing homeowners.)

They were also unhappy with the $3 billion in-state and local incentives that Amazon received.

It’s smart business to let cities and states bid to attract your corporation. After all, big companies bring jobs, create prosperity and pay taxes.

That’s why a large majority of New Yorkers supported the deal.

And, incidentally, New York City was not the highest bidder. Newark, less than 20 miles away, offered $7 billion worth of incentives.

(It would be poetic justice if Amazon ultimately moved there.)

Plus, as Governor Andrew Cuomo noted, Amazon’s operations would have brought in nearly $30 billion in tax revenue – a 9-to-1 return.

Yet activists and local politicians pledged to do everything in their power to make life difficult for Amazon.

So the company pulled out yesterday, noting, “A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward.”

Kaboom! New Yorkers must now deal with a depressing reality.

All those high-paying jobs that Amazon promised? Gone.

The tens of billions of dollars in additional tax revenue? Gone.

And the city’s reputation for sky-high taxes, strangling regulations and unfavorable political headwinds? Worse than ever.

Surveying the damage – like visiting that field in Somerset County – it’s hard to see anything good.

Yet this skirmish was a clear victory for capitalism and common sense.

It puts politicians and pundits on notice that anti-business rhetoric and behavior have real-world consequences.

And workers, investors and voters aren’t going to like them.

Good investing,

Alex

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