Author: Ben Casselman / Source: New York Times
Gov. Andrew M. Cuomo of New York looked on as Mayor Bill de Blasio shook hands Tuesday with John Schoettler, an Amazon executive. The state will give the company more than $1.5 billion in incentives to locate an operation in Long Island City, Queens, and hire 25,000 workers.
Chang W. Lee/The New York TimesAmazon built a retail empire on low prices and free shipping. But for taxpayers, its new headquarters didn’t come cheap.
New York and Virginia collectively offered more than $2 billion in tax credits, rebates and other incentives to attract the company. That figure doesn’t include what could amount to hundreds of millions of dollars in infrastructure spending, worker training and other government assistance.
Economists have long criticized tax incentives as inefficient and unnecessary, arguing that they pit cities or states against each other and leave less money for education and public works that ultimately do more to lift local economies and improve livelihoods. Research has shown that incentives play at most a small role in corporate decisions, meaning governments often end up paying businesses to do what they would have done anyway.
Indeed, in selecting New York and Virginia for its new locations, Amazon turned down seemingly richer offers just next door. Maryland and New Jersey each offered multibillion-dollar incentive packages that dwarfed the ones Amazon accepted.
“An additional $7.5 billion in subsidies wasn’t enough to get Amazon to move across the river,” said Michael Farren, an economist at the Mercatus Center, a libertarian think tank, referring to the difference between Maryland’s offer of $8.
5 billion and Virginia’s of less than $1 billion. “That just says that subsidies were never what mattered in the first place.”In its announcement on Tuesday, Amazon said that “attracting top talent was the leading driver” of its decision. Incentives were “one factor,” it said, but a secondary one.
New York’s incentive package is much larger than Virginia’s. Amazon promised to create about 25,000 jobs at each location, but New York offered twice as much as Virginia did.
“That’s the first thing we said,” said Maria Doulis, vice president of the nonpartisan Citizens Budget Commission, which has offices in New York City and Albany. “We’re like, ‘Wait, you’re splitting this down the middle — why does it look like we’re paying so much?’ ”
New York promised Amazon $1.525 billion in incentives, including $1.2 billion over the next 10 years as part of the state’s Excelsior tax credit. The state also pledged to help Amazon with infrastructure upgrades, job-training programs and even assistance “securing access to a helipad” — none of which came with a price tag.
Virginia promised Amazon an incentive package worth $573 million, including $550 million in cash grants — $22,000 per job. The state also pledged $250 million to help Virginia Tech build a campus in Alexandria, near the Amazon site in Arlington, offering degrees in computer science and software engineering. (Virginia, too, offered to help the company get a helipad.)
New York has a history of offering generous incentive packages, including a 2007 deal for subsidized electricity to keep an Alcoa plant that was worth $5.6 billion over 30 years, according to Good Jobs First, which tracks corporate subsidies.
On a per-job basis,…
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