As the winners of the biggest corporate prize in decades – the new Amazon headquarters – relished their victory, debate was still raging over the billions of dollars in incentives offered to attract the fast-growing US technology colossus. The new Amazon “HQ2” with an estimated $5 billion investment creating 50,000 new jobs will be split between the Long Island City district in New York and Crystal City, a Virginia community across the Potomac River from the US capital Washington.
Officials in both communities welcomed what they said would be a major economic boost from Amazon in creating jobs, new facilities and infrastructure, and that the plans would be positive for public coffers. But critics warned that tax incentives and investments from state and local governments – up to $3 billion in New York and $2.5 billion in Virginia – may outweigh the economic benefits from Amazon’s investments. Amazon’s search for incentives – derided by some as a “Hunger Games” competition – is a common practice in the United States. A Brookings Institution report, based on New York Times data, estimates some $90 billion given annually in corporate incentives from state and local governments.
Michael Farren, a George Mason University research fellow who specializes in corporate relocations, said these kinds of incentives rarely make the difference in a company decision.
“Corporate relocation decisions are made on the basis of things that have deeper impact on the business’ bottom line, like the availability of a skilled workforce,” he said.
“So why do they do this? It’s because otherwise politicians couldn’t claim credit for the deals.”
Farren noted that Amazon could have won even heftier tax benefits if it had crossed the Potomac into Maryland which offered a package worth more than $8 billion, or chose to locate west of New York in Newark, where $7 billion was being offered.
Still, the deal has faced criticism from those claiming Amazon does not need what some describe as “corporate welfare.” “One of the wealthiest companies in history should not be receiving financial assistance from the taxpayers while too many New York families struggle to make ends meet,” New York Democratic Senator Kirsten Gillibrand said on Twitter.
Alexandria Ocasio-Cortez, a progressive Democrat elected to Congress from a district that includes part of Queens, voiced similar concerns, tweeting that, “We need to focus on good health care, living wages, affordable rent. Corporations that offer none of those things should be met w/ skepticism.” The deal has been hit from the right as well, with conservative economist Veronique de Rugy writing in the National Review: “I can’t believe I’m saying this, but Ocasio-Cortez is mostly correct on this matter, and her conservative critics are wrong. Handouts like this to Amazon and other prominent companies are appalling in their cronyism, pure and simple.”
