By Ben Casselman, New York Times News Service
Amazon builds a retail empire based on low prices and free shipping. However, for taxpayers, their new office is not cheap.
New York and Virginia together offer more than US $ 2 billion in tax credits, refunds, and other incentives to attract companies. That figure does not include hundreds of millions of dollars in the cost of possible infrastructure, training of workers and other government assistance.
For some time, economists have criticized tax incentives because they consider them inefficient and unnecessary, arguing that they face cities and countries against each other and leave little money for education and public works, which ultimately do more to improve the local economy and improve livelihoods. Research has shown that most incentives have a small role in company decisions, that is, governments usually end up paying businesses to do what they will do.
In fact, in the New York and Virginia elections for its new office, Amazon refused a warmer offer from its neighbors. Maryland and New Jersey offer a multimillion-dollar incentive package that will far exceed Amazon's.
"Additional subsidies of US $ 7.5 billion are not enough to convince Amazon to move to the other side of the river," said Michael Farren, an economist at the Mercatus Center, a libertarian research center, to refer to the difference between a US $ 8.5 billion supply from Maryland and less than US $ 1 billion from Virginia. "This means that subsidies have never been important in the first place."
In its announcement on Tuesday, Amazon said that "attracting the best talent is the main driver" of his decision. The incentive is a "factor," he said, but the second.
The New York incentive package is much bigger than Virginia. Amazon promised to create around 25,000 jobs at each site, but New York offered twice that of Virginia.
"This is the first thing we say," said Maria Doulis, vice president of the nonpartisan Citizens Budget Committee, which has offices in New York City and Albany. "Our reaction: & # 39; How? Will they pay half? Why do we seem to pay so much? & # 39;"
New York promised Amazon incentives of US $ 1,525 million, including US $ 1,200 million over the next ten years as part of the state Excelsior tax credit. The state also promised to help Amazon with infrastructure improvements, personnel training programs and even help "guarantee access to the heliport" … none of the above had prices.
Virginia promises an Amazon incentive package worth US $ 573 million, including US $ 550 million in cash donations: US $ 22,000 per job. The state also pledged to help Virginia Polytechnic Institute and State University (Virginia Tech) with $ 250 million to build a campus in Alexandria, near the Amazon site in Arlington, where it would offer degrees in computer science and software engineering (also, Virginia offered to help the company get the heliport).
New York has a history of generous offers in incentive packages, including a 2007 agreement for US $ 5,600 million in electricity subsidies for the Alcoa plant for 30 years to maintain it in the state, according to Good Jobs First, a control agent that monitors corporate subsidies.
For each job, offers from New York to the Amazon are almost typical of countries, but far above the national average for such transactions, said Timothy J. Bartik, an economist at the Upjohn Institute in Kalamazoo, Mich., Who has studied incentives. fiscal.
"New York is doing normal practice," Bartik said. "Give a lot of incentives, lots of long-term incentives."
Governor Andrew Cuomo defended the agreement, arguing that New York had to offer incentives for taxing as a comparison. The tax rate for corporate income in New York is 6.5%, slightly higher than 6% Virginia, according to the Tax Foundation. However, business and other individual taxes are higher in New York.
"It does not start in the same conditions," Cuomo said on Tuesday. "If everything is the same, if we don't do anything, they go to Texas."
The Amazon facility in New York could also qualify for federal tax deductions under a tax law approved by the Republican Party last year. This law created a program to encourage development in the so-called "opportunity zone," including a part of Long Island City.
New York City does not offer special tax deductions to the Amazon as part of the agreement. However, companies will be able to take advantage of city tax credits, including programs designed to encourage companies to create jobs outside of the busiest parts of Manhattan. For Amazon, the program, open to all companies, can have a value of up to US $ 900 million for twelve years, in addition to state incentives.
Doulis, from the Citizens Budget Committee, pointed out that these loans and other similar things could stop being useful. In the 1980s and 1990s, Doulis explained, companies risked expansion into Queens or Brooklyn, and tax cuts were an important incentive. However, nowadays, Long Island City is a fast-growing environment, full of trendy bars and luxury apartment complexes.
"The environment was very different 25 years ago," he said. "We live in a very different world now."
However, Doulis commented that the arrival of the Amazon was a big blow to the city, having tried to establish itself as a technology center that rivaled Boston, Seattle and even Silicon Valley. On Tuesday, Cuomo and Mayor Bill de Blasio said Amazon's decision was justification for the strategy, which would benefit all New Yorkers, according to the mayor.
Tom Stringer, who worked for BDO consultants as consultants for companies in decision-making about site selection, said that expensive places like New York and Virginia needed to offer incentives to compete with cheaper regions. In addition, Stringer said the agreement would pay off in the long run in terms of work and tax collection.
"Incentives aren't subsidies," Stringer said. "They are investments".
Alexandria Ocasio-Cortez, a Democrat who will represent the Queens sections of the House of Representatives from January, is one of several elected officials who criticized the agreement. In a series of tweets, Ocasio-Cortez shows that companies the size of Amazon should not "receive hundreds of millions of dollars in tax deductions when our metro collapses and our community needs more investment."