By Ben Casselman, New York Times News Service
Amazon built a retail empire based on low prices and free shipping. But for taxpayers, their new office was not cheap.
New York and Virginia jointly offered more than $ 2 billion in tax credits, repayments and other incentives to attract the company. That figure does not include other hundreds of millions of dollars in possible infrastructure costs, employee training and other state aid.
Recently, economists have criticized tax incentives because they consider them to be ineffective and unnecessary, arguing that they meet cities and states against each other, leaving less money for education and public works, which ultimately do more to boost local economies and improve supply . Research has shown that most incentives have a small role in business decisions, that is, governments usually stop paying companies to do what they would do anyway.
In fact, in the choice of New York and Virginia for their new offices, Amazon apparently rejected juicer deals from its neighbors. Maryland and New Jersey offered multimillion dollar incentive packages that would have exceeded those accepted by Amazon.
"Additional contributions of $ 7.5 billion were not enough to convince Amazon to move to the other side of the river," said Michael Farren, economist at Mercatus Center, a Libertarian Research Center, referring to the difference between the US $ 8.5 billion from Maryland and less than $ 1 billion from Virginia. "That means that subsidies were never the most important in the first place."
In his announcement on Tuesday, Amazon mentioned that "attracting the best talent was the main driver" of its decision. The incentives were "a factor," he said, but a secondary.
The New York incentive package is much larger than Virginia. Amazon promised to create about 25,000 jobs on each side, but New York offered twice as much as Virginia promised.
"That's the first thing we said," said Maria Doulis, Vice President of the Non-Party Citizens Budget Committee, which has offices in New York City and Albany. "Our reaction:" How? Will they pay half? Why do we seem to pay so much? & # 39; "
New York promised $ 1,525 million Amazon incentive, including $ 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, staff training programs and even "guarantee access to a helicopter road" … none of the above had a price.
Virginia promised Amazon an incentive package worth $ 573 million, including $ 550 million in cash donations: $ 22,000 per job. The state also promised to assist the 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 development (Likewise, Virginia offered to help the company get a helicopter road).
New York has a history of generous offerings in the incentive package including a $ 5,600,000 US $ 2007 subsidy for subsidized electricity for an Alcoa plant over 30 years to maintain it in the state, according to Good Jobs First, a Surveillance Authority Monitoring Company .
For each job, the offer from New York to Amazon is almost typical of the state, but far above the national average for such agreements, "said Timothy J. Bartik, economist at Upjohn Institute of Kalamazoo, Mich., Who has studied incentives. prosecutor.
"New York does its usual methods," said Bartik. "Give away many big incentives, many long-term incentives."
Governor Andrew Cuomo defended the agreement and argued that New York must offer incentives because it takes high taxes in comparison. The tax rate for corporate income in New York is 6.5%, slightly higher than 6% of Virginia, according to the tax fund. However, other business and individual taxes are higher in New York.
"It does not start in an area of equal conditions," said Cuomo Tuesday. "If everything was the same, unless we did anything, they went to Texas."
Amazon's facilities in New York can also qualify for federal tax deductions under the tax law approved by the Republicans last year. This team created a program to encourage development in so-called "zones of opportunity", including parts of Long Island City.
New York City does not offer any special tax deductions for Amazon as part of the agreement. However, the company will be able to utilize the city's tax credits, including a program designed to encourage businesses to create jobs outside of the busiest parts of Manhattan. For Amazon, the program, open to all businesses, may have a value of up to 900 million USD over twelve years, in addition to government incentives.
Doulis, from the Committee on Budgets for Citizens, pointed out that this credit and other similar could have ceased to be useful. In the 1980s and 1990s, Doulis explained that companies risked expanding to Queens or Brooklyn, and tax deductions were an important incentive. But at the moment, Long Island City is a fast developing district, full of trendy bars and luxurious apartment complexes.
"It was very different 25 years ago," he said. "We live in a completely different world now."
However, Doulis commented that Amazon's arrival was a major blow to the city, as it has attempted to establish itself as a technology center that rivals Boston, Seattle and also Silicon Valley. On Tuesday, Cuomo and Mayor Bill de Blasio said that Amason's decision was a regulation of the strategy that will benefit all New Yorkers, according to the mayor.
Tom Stringer, who works for BDO consulting firm as a consultant for decision-making companies in place selection, said that expensive places like New York and Virginia needed to offer incentives to compete with cheaper areas. In addition, Stringer said that the agreements would pay off in the long term in terms of employment and tax collection.
"Incentives are not subsidies," said Stringer. "They are investments".
Alexandria Ocasio-Cortez, a Democrat who, from January, represents parts of Queens in the House of Representatives, was one of several elected officials who criticized the agreement. In a series of tweets, Ocasio-Cortez said that a company like the Amazon size would not "get hundreds of millions of dollars in tax credits at a time when our subway falls apart and our communities need more investment."