Commentary: The global ecommerce giant’s search for a second headquarters has the economic development profession in a tizzy. The fact that Amazon CEO Jeff Bezos was born in Albuquerque has further driven hopes up among many New Mexicans that somehow, some way, The Land of Enchantment will be picked. In fact, three separate proposals (Albuquerque, Borderplex Alliance, and Santa Theresa) were sent to the company from New Mexico.
Don’t count on New Mexico being chosen or even among the finalists.
This is not a case of being unduly negative. Have a look at Amazon’s own site selection guidelines:
· New Mexico lacks a truly international airport and has no existing buildings of 500,000 square feet and it doesn’t have a city or even a metro area with 1 million people;
· Our tax structure is not “business friendly,” particularly our gross receipts tax (more on that later);
· In terms of incentives, Amazon wants them (a lot of them). It is an open question whether providing these incentives will be good for New Mexico (or whoever wins Amazon);
· When it comes to quality of life, New Mexico’s crime issues will be a big negative.
It’s pretty clear New Mexico doesn’t fit Amazon’s wish list. Some issues are fixable and, to the extent they are, our elected officials and economic development leaders must get to work. A realistic assessment of New Mexico shows that we can do a lot to make our State more attractive as a place for other companies as a potential location or relocation site.
1) There isn’t much that can be done about our population or airports, but by taking steps to revitalize our economy there is no reason that New Mexico can’t be a destination for population growth with its great weather and cultural amenities. We have plenty of room and yes, even water, to accommodate economic growth.
2) Our gross receipts tax (GRT) structure is NOT business friendly. If Amazon (or any business) were to locate here they would be forced to pay taxes on all manner of services and contractors that are not taxed in other states. Reforming the GRT must be a top priority for the Legislature in 2018.
Also, while New Mexico’s income tax is reasonable, Amazon can easily decide to locate in one of the nine zero income tax states including Texas, Tennessee, or Florida (they are already located in zero-income tax Washington).
3) While the Rio Grande Foundation is a skeptic of incentives, the fact is that New Mexico’s budget is tight and incentives of the kind Amazon is looking for will be expensive. We hope states don’t foolishly rush to throw massive incentives at Amazon, but if they do, it is unlikely New Mexico will be able to compete with larger, more economically-prosperous states.
4) And then there is the significant crime problem in New Mexico and particularly its largest city, Albuquerque. Crime has always been a significant challenge for New Mexico, but there is no doubt that the high-profile cases will make any business think twice about locating here.
Simply put, resources need to be dedicated to putting dangerous criminals (including those who perpetrate serious property crimes) behind bars. Systems including the judiciary, policing agencies, the education system, and our own family units need to do a better job.
From a policy perspective, the low-hanging-fruit to make us a more attractive destination for Amazon or another business would be tax reform. The GRT should be dramatically-overhauled in 2018. Also, while “right to work” may not be a priority for Amazon, it is a priority for other business leaders. 78% of CEO’s surveyed earlier this year said they either preferred or would only locate new jobs in “right to work” states.
Although Amazon has not specifically cited “right to work” as a priority, this is not an uncommon practice due to the political controversy such statements generate. There is a strong likelihood Amazon will locate its second headquarters in a “right to work” state. Again, New Mexico could enact such a law immediately.
Clearly, New Mexico does not fit what Amazon says they want. But with a few significant policy reforms and a serious effort to tackle crime, our state could be in the running for numerous other businesses and thousands of jobs. The status quo is not good enough.
Paul Gessing is the President of New Mexico’s Rio Grande Foundation. The Rio Grande Foundation is an independent, non-partisan, tax-exempt research and educational organization dedicated to promoting prosperity for New Mexico based on principles of limited government, economic freedom and individual responsibility