Sunday , February 28 2021

New York Virginia Overpay for Amazon?

By Ben Kesselman, New York Times News Service

Amazon has built a retail empire based on low prices and free shipping. However, for taxpayers, their new offices were not cheap.

New York and Virginia jointly offered more than $ 2 billion in tax credits, refunds and other incentives to attract the company. This figure does not include hundreds of millions of additional dollars in possible infrastructure spending, employee training and other government assistance.

For some time, economists have criticized tax incentives because they see them as inefficient and redundant, arguing that they are dealing with cities and countries against one another and leaving less money for education and public works, which ultimately leads to the growth of local economies and improved livelihoods. Studies have shown that at most incentives have a small role in corporate decisions, that is, governments usually end up paying businesses to do what they are going to do anyway.

In fact, in the election of New York and Virginia for its new offices, Amazon allegedly rejects juicier proposals from its neighbors. Maryland and New Jersey offered millions of dollars in stimulus packages that were much higher than those received at Amazon.

"Further subsidies of $ 7.5 billion were not enough to persuade Amazon to move across the river," said Michael Fern, an economist at the Marquette Center, a Liberty research center, to look at the difference between $ 8.5 billion in supply from Maryland and less than $ 1 billion from Vogue, 39 Her children. "That means that subsidies were never really important in the first place."

In its announcement on Tuesday, Amazon mentioned that "attracting the best talent was the main driver" of his decision. The incentives were "a factor," he said, but secondary.

The package of incentives in New York is much larger than that of Virginia. Amazon has promised to create about 25,000 jobs at each site, but New York has offered twice as much as Virginia promised.

"This is the first thing we have said," said Maria Dolis, vice president of the non-party budget committee, whose offices are in New York and Albany. "Our response:" How? Will they pay half? Why do we pay so much? "

New York has promised Amazon's incentives of $ 1,525 million, including $ 1,200 million over the next 10 years as part of the Excelsior tax credit. The state also promised to help Amazon with improvements in infrastructure, training personnel and even help "ensure access to the airport" … None of the cases had a price.

Virginia has promised Amazon a $ 573 million stimulus package, including $ 550 million in cash: $ 22,000 per job. The state has also pledged to help the Virginia Polytechnic Institute and Virginia Tech with $ 250 million to set up a campus in Alexandria, near the Amazon site in Arlington, where it offers degrees in computer science and software engineering (also, (Jania offered to help the company reach the airport).

New York has a history of generous offers and incentive packages, including an agreement in 2007 for $ 5.6 million US subsidized electricity for the Alcoa plant over 30 years to keep it in the country, according to Good Jobs First, a control agency that monitors subsidies from companies.

For every offer, the offer from New York to Amazon is almost typical of the country, but far above the national average for such transactions, says Timothy J. Bartik, an economist at the Afghanistan Institute in Kalamazoo, Michigan, who has learned incentives. Fiscal.


"New York does its usual exercises," Bartik said. "Many give many incentives, many long-term incentives."

Governor Andrew Cuomo defended the agreement, arguing that New York must offer incentives that it charges higher taxes in comparison. The tax rate on corporate income in New York is 6.5%, slightly higher than 6% of Virginia, according to the IRS. However, other individual business taxes are higher in New York.

"It does not start in the field of equal conditions," Cuomo said on Tuesday. "If everything was the same, if we did nothing, they would go to Texas."

Amazon facilities in New York can also be eligible for federal tax deductions under the tax law that Republicans approved last year. This law created a program to encourage development in so-called "opportunity zones", including parts of Long Island City.

New York City has not offered any special Amazon tax deduction under the agreement. However, the company will be able to take advantage of the city's tax credits, including a program designed to encourage companies to create jobs outside the busiest parts of Manhattan. For Amazon, the program, open to all companies, could have a value of up to $ 900 million over 12 years, in addition to state incentives.

Dulis, of the Citizens' Budget Committee, pointed out that this right and other similarities could not have been useful. In the 1980s and 1990s, Dolis explained, companies risked their expansion to Queens or Brooklyn, and the tax deductions were an important incentive. However, today, Long Island City is a rapidly developing neighborhood, full of fashionable bars and luxurious apartment complexes.

"This neighborhood was very different 25 years ago," he said. "We live in a completely different world now."

However, Doulis noted that Amazon's arrival was a big blow to the city, as it tried to establish itself as a technological center for competitors in Boston, Seattle and even Silicon Valley. On Tuesday, Cuomo and Mayor Bill de Blasio said Amazon's decision was a justification of this strategy, which would benefit all New Yorkers, according to the mayor.

Tom Stringer, who works for a BDO consultant as a consultant to decision making companies in selecting sites, noted that expensive places like New York and Virginia should offer incentives to compete in cheaper areas. In addition, Stringer said the agreements would pay off in the long term in terms of jobs and tax collection.

"Incentives are not subsidies," Stringer said. "They are investments."

Alexandria Oxyo-Cortez, a Democrat from January representing parts of Queens in the House of Representatives, was one of several elected representatives to the agreement. In a series of tweets, Oxyo-Cortez said an Amazon-sized company should not "get hundreds of millions of dollars tax-deductible as our headquarters collapses and our communities need more investment."

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