Amazon’s announcement that it plans to split its second headquarters between New York City and Crystal City, Virginia, with a logistics center in Nashville, has been met with unexpected pushback.
Politicians, especially in New York, are questioning the announced $2 billion in state and local tax incentives that were offered to lure the company. One state assemblyman has promised to sponsor a bill next year to eliminate public corporate subsidies and use that money instead to retire student loan debts. Others are calling on the state Assembly to not fund the money promised to Amazon, noting the city’s many other needs.
Elsewhere, people are beginning to ask what their states and cities were willing to give Amazon. Many are noting that Amazon’s owner, Jeff Bezos, is purported to be the wealthiest man on earth and that the company’s worth has climbed above $1 trillion. Why, they wonder, are taxpayers supposed to pay for the privilege of helping the company make more money?
Frankly, it’s about time people began asking these questions.
Utah has not made its incentive offer to Amazon public, although officials have said that, as with all incentives offered by the state, it would have required the company to achieve certain performance benchmarks before any money was given.
Still, that post-performance money would have come from taxpayers, and it would have had an effect on public institutions, such as schools. Economic development officials would argue that the benefit of providing many high-paying jobs would have generated tax revenues to help those institutions, but there can be no denying that companies receiving incentives are given a leg up over competitors who don’t get such deals, especially those companies that are homegrown.
Six years ago, a New York Times investigation found cities and counties nationwide gave a combined $80 billion a year in incentives to companies. Earlier this year, experts at the Brookings Institution estimated that figure now is about $90 billion, and growing.
Earlier this year, the Utah Foundation released a study on sales taxes that found Utah has granted 91 separate exemptions from that tax, costing the state hundreds of millions of dollars per year.
Each exemption sounds great at the time it is proposed, with the promise of future jobs and corporate investments. Taken together, however, they are a drain on public coffers that taxpayers must make up.
Some of the incentives other states offered to Amazon were obscene. New Jersey reportedly offered a $7 billion package. New York Magazine reported Georgia offered a package that included free parking for employees at Hartsfield-Jackson Atlanta International Airport, an Amazon-only car on the city’s rail transit system and funding for an “Amazon Academy” that would have included a recruitment center to help the company find employees at various universities.16 comments on this story
Bezos was smart enough to know that cities and states wouldn’t be able to resist the urge to compete against each other. Amazon’s initial request for proposals was blatant, saying in part, "Incentives offered by the state/province and local communities to offset initial capital outlay and ongoing operational costs will be significant factors in the decision-making process."
That spirit of competition can be a negative thing when it perpetuates bad public policies. The only way to combat it is through a nationwide examination of the long-term effects of tax subsidies and a clear-eyed examination of the benefits in relation to those costs.