Quote:
Originally Posted by Atlanta3000
An unfunded tax liability may be priced into Chicago area housing value, but it has yet to hit retail, city and state taxes - hence the reason they are still unfunded. Once that occurs and taxes across the board are raised, your city's ability to attract talent declines. How much of an impact this will have is TBD, but it could be significant. I would think any company considering Chicago/IL for a large expansion/relocation would be considering this. I am interested in hearing your perspective on this.
FYI - I was a computer science and economics major. Therefore, I am nerd(ing) out on this conversation.
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Haha awesome! Always fun to talk to fellow econ nerds, especially because this is a great topic to try and apply our knowledge. The problem of course is that it’s easier to use it to challenge predictions than to make them. My PhD advisor has actually been quoted in a lot of the big Amazon prediction articles out there. But when I talked to him about it he laughed and called their predictions BS since they fundamentally misunderstood his research and just the general framework used to understand these issues. Even some of the more “complex” analyses are complete nonsense, like the really fancy Moody’s one - they’re using fundamentally inconsistent methodologies in their model.
Anyway, that’s a good point. There’s still uncertainty over *how* taxes will be raised, and that uncertainty means it might not be priced in in a way that Amazon is sufficiently insured against it. What’s more is that there could be legitimate concern that future investments in infrastructure will be limited due to the fiscal problems. That said, I think this is precisely why Amazon is going through this competition to get incentives and infrastructure investment promises.
But again, I mean if it’s not priced in already, how then do we explain why so many people and firms are still coming to Chicago? If the flow was small then I do think that would be a strong reason for Amazon to not come, but there is a huge inflow of college grads and just general labor market churn that I don’t think they should have any trouble recruiting.
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