MENU

Reason.com

Free Minds & Free Markets

Amazon Snags $2 Billion in Bribes and Tax Credits From New York and Virginia

But Amazon's decision to put it's new headquarters in Arlington and Queens also shows it wasn't all about the money.

PASCAL ROSSIGNOL/REUTERS/NewscomPASCAL ROSSIGNOL/REUTERS/NewscomAmazon is getting some prime real estate.

In exchange for more than $2 billion in economic incentives, the online shopping giant will locate a pair of new corporate headquarters just across the Potomac River from Washington, D.C., and just across the East River from Manhattan. Tuesday's much-anticipated announcement of the locations for Amazon's "HQ2" also included details—which had previously been kept from the public—about the economic incentives that successfully lured the Seattle-based firm to the east coast's political and economic hubs.

Amazon says it will invest $5 billion and create more than 50,000 jobs across the two new locations, with at least 25,000 employees at each of its new corporate campuses, to be located in Virginia's Crystal City and New York's Long Island City. Nashville wins a consolation prize: a new supply chain and logistics center that promises 5,000 jobs in exchange for $102 million in economic incentives.

In New York, Amazon will receive $1.2 billion in refundable tax credits through a state-level economic development program and a cash grant of $325 million that's tied to the construction of new buildings at the Long Island City location over the next 10 years. In Virginia, the state is ponying up $573 million in tax breaks tied to the creation of 25,000 jobs, and the city of Arlington will provide a cash grant of $23 million over 15 years funded by an existing tax on hotel rooms.

Yes, the numbers are staggering—New York state's pledge of $1.52 billion for 25,000 jobs works out to more than $60,000 in taxpayer support per new job created—but Amazon appears to have selected New York and the D.C. area based on more than just how many zeroes local officials agreed to put on the giant cardboard check.

After all, New Jersey offered Amazon $5 billion (with another $2 billion from Newark), and Maryland offered $8.5 billion. Yet Amazon passed them both over to pick their neighbors.

"At the end of the day, it suggests that even New York City and Virginia and Nashville didn't really need to offer those subsidies, because Amazon is chasing other factors," Michael Farren, a research fellow at the Mercatus Center, a free market think tank housed at George Mason University, tells Reason. Although most of the Amazon HQ2 bids were kept secret—sometimes in direct violation of state open records laws—Farren's research estimates that the average offer to Amazon from the 20 finalist cities totaled around $2.15 billion from cities and $6.75 billion from states over the next 15 years.

For that amount of spending, the average state could cut its corporate income tax for all businesses by 29 percent, says Farren. That's the sort of thing a place like New York (home to one of the nation's worst business tax climates) could have used. But instead of helping businesses from the Bronx to Buffalo to be more competitive, New York taxpayers will help a wildly successful company bring more jobs to Long Island City.

The fact that Amazon was willing to accept a smaller incentive package for a more ideal location should send a message to politicians everywhere. Namely, landing major employers has more to do with running a thriving, sustainable city than it does with how much of other peoples' money you throw around.

Of course, being close to the seat of political power matters too. Virginia's deal comes with the unwritten promise that Amazon will be just a stone's throw away from not only the country's top lawmakers, but from the most important lobbying firms too. It's yet another unfortunate side effect of an all-powerful central government that seemingly draws all aspects of American life closer to it, both literally and metaphorically.

Add to that the fact that New York City has been the center of American economic and cultural life for hundreds of years. When it comes right down to it, Amazon's decision to plop down new headquarters in these two locations is something of a no-brainer. It's also a symbolic transition for a company that was born in the start-up culture of Seattle but has now become the symbol of American capitalism in the 21st century. Even though most of Amazon's business can be done from anywhere—indeed, that's the very essence of Amazon—location still matters.

Of course, the $2 billion in other peoples' money doesn't hurt either.

Photo Credit: PASCAL ROSSIGNOL/REUTERS/Newscom

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  • Fist of Etiquette||

    Yes, the numbers are staggering—New York state's pledge of $1.52 billion for 25,000 jobs works out to more than $60,000 in taxpayer support per new job created—but Amazon appears to have selected New York and the D.C. area based on more than just how many zeroes local officials agreed to put on the giant cardboard check.

    I normally point out in these situations, regardless of government spending, that money is always better in the hands of the private sector than in the hands of the bureaucracy, but in this case the bureaucracy is just shifting those dollars from one set of taxpayers to another (maybe) set of taxpayers.

  • albo||

    Why not save money for their company and their employees by setting up in the Iowa or Indiana sticks by a railroad and interstate highway instead of going to already-expensive locations and making them even more expensive to live? Can't attract good employees to Dubuque or Gary?

  • Shirley Knott||

    Dell didn't do so well at attracting top management when it was headquartered in South Dakota, so it moved headquarters to a major metro.
    Yeah, good help is hard to find in the places good help has been encouraged to flee.

  • Doug Heffernan||

    It is not only that the pool of potential employees is suckier in dubuque and gary, those cities are also not proximate to the largest proportion of people with money who buy amazon's stuff. To make the most money, a business needs to be near the most money. Unless the work can be outsourced to a low wage country - which mostly can't be done for distribution and executive functions. At least for now. Robots and A.I. algorithms will eventually take over many of those jobs on long island.

  • Philadelphia Collins||

    I'm glad they didn't pick Columbus Ohio. Rent is high enough.

  • CLM1227||

    No one buys their stuff locally. It's that employees want ready-made cities.

  • CE||

    Amazon's whole business plan and corporate history is based on you not having to be close by to buy everything you want.

  • JWatts||

    Buried in that announcement was the 3rd city. Nashville got a 5,000 job office from Amazon.

    "Nashville wins a consolation prize: a new supply chain and logistics center that promises 5,000 jobs in exchange for $102 million in economic incentives."

  • CE||

    The better to poach FedEx employees from Tennessee with, plus drunken corporate parties in Nashville.

  • tlapp||

    Their growing businesses are advertising so NY was logical. Also landing defense contracts so Arlington Va is logical. That they leveraged all the other cities to squeeze as much as possible is also logical. The answer would be for the voters to not support such subsidies. While many have an opinion so few care.

  • OpenBordersLiberal-tarian||

    Come on, let's stop the Amazon criticism. Bezos is an open borders guy, isn't he?

  • Dizzle||

    I remember in highschool Walmart was the bane of my super liberal ap English teacher and the emo (hipster wasn't a thing yet) kids that flocked to him for "ruining America with greed and killing mom and pops shops". Now those same people buy everything on Amazon instead of mom n pops's place and they open credit cards (aka take out loans) to pay for their new i phone from the world's greediest and most dominant company in its field.

  • Bubba Jones||

    The fact that money wasn't the ONLY factor doesn't mean that it wasn't a factor.

  • NashTiger||

    I guess this makes nashville the 3rd most powerful city on Earth.

    And at only $24k/job!

    SUCK IT, PEASANT LOSERS

  • Echo Chamber||

    There's only room for one Titan in Nashville

  • JWatts||

    Actually $20K/job.

  • CE||

    Better than the 50K per commuter Seattle spends on transit. Could just buy everyone a Prius for that.

  • Wise Old Fool||

    This is probably equal to $150K in NYC though.

  • Jerryskids||

    In exchange for more than $2 billion in economic incentives, the online shopping giant will locate a pair of new corporate headquarters just across the Potomac River from Washington, D.C., and just across the East River from Manhattan.

    Conveniently located adjacentish to Trump Tower (the classiest address on the classiest street in the classiest city in all the world - Trump Tower, you'll positively reek with class) and the newest global destination for all the classy people, the Trump Organization's classy transformation of the ugly duckling historic Old Post Office into the big, beautiful swan of Trump International Hotel Washington DC, so much class even failing losers nobody likes like Jeff Bezos are attracted to its brassy glare like a moth to a flame, a cat to a laser pointer, a deer to a headlight.

  • sharmota4zeb||

    I walked past Trump Tower last week and only noticed that it was there when the unhinged protesters explained to me why they had chosen that location to protest. I was on my way from Penn Station to the Met. After viewing the exhibit, I decided to walk to the GWB from there and take a Washington Heights bus home in part to avoid bumping into them again.

    Trump Tower is not particularly classy for a Manhattan building. The Waldorf Astoria is classy. That place is the classiest place I've ever pissed in.

  • Wise Old Fool||

    Trump tower is a bit of a garish dump compared to a lot of other buildings in NYC.

  • Uncle Jay||

    It wasn't a "bribe."
    It was a premature political donation.
    Can't Reason tell the difference?

  • CE||

    Every business should be free to negotiate with the warlords. If you're a big enough prize, they have to split some of the loot with you to entice you into their domain.

  • CLM1227||

    So how expensive does inner city real estate need to get before re-settlement of the interior begins?

  • sharmota4zeb||

    My guess is that Philadelphia and Baltimore will be the first interior cities to be re-settled. Keep an eye on their real estate markets.

  • CE||

    In California, suburban real estate is over 900K for a 2 bedroom condo, and people are moving out.

  • Red Rocks White Privilege||

    Amazon says it will invest $5 billion and create more than 50,000 jobs across the two new locations, with at least 25,000 employees at each of its new corporate campuses, to be located in Virginia's Crystal City and New York's Long Island City.

    Here's the thing--they aren't actually "creating" most of those jobs, they're just importing a large chunk of their workforce from Seattle to those areas.

    When Denver found out it was in the running for this, a lot of people didn't want to have anything to do with it because the roads were already bad enough without the additional traffic, and the cost of living already getting far out of proportion to what people who have lived there for years could previously afford.

  • Wise Old Fool||

    No, they will bring in skeleton crews from Seattle for management, but their Seattle location will remain in tact and the vast majority will be new hires. You really don't know what you're talking about.

  • Red Rocks White Privilege||

    No, they will bring in skeleton crews from Seattle for management, but their Seattle location will remain in tact and the vast majority will be new hires

    It was reported in the local press that most of those jobs would be transferred from the Seattle location, so it appears it's actually you who doesn't know what he's talking about. if you have a problem with the accuracy, take it up with them.

  • Dillinger||

    beauty about amazon is i don't have to care where the fuck their offices are the shit comes to my door.

  • Longtobefree||

    So exactly how many miles of subway can 1.5 billion repair?

  • Agammamon||

    One. Maybe two if you can keep the unions under control.

  • Sevo||

    "So exactly how many miles of subway can 1.5 billion repair?"

    Dunno, but in San Francisco, it can build 3/4 of a bus stop.

  • sharmota4zeb||

    After all, New Jersey offered Amazon $5 billion (with another $2 billion from Newark)

    Um, about that fire alarm that went off in a Central New Jersey Amazon warehouse the day guys from corporate were there to help them determine where the new HQ would go ... oh, never mind.

    ;)

  • loveconstitution1789||

    Who called that amazon would pick Virginia and NY city?

  • loveconstitution1789||

    Sucker employees will hate living in those two places.

    NY has outrageous tax schemes and The Virginia location is near ronald reagan airport and D.C.

    D.C. had one of the highest crime rates in the USA around 20 years ago.

  • CE||

    young knowledge workers love living in big cities. they get invited to the best parties.

  • aajax||

    But which site will be HQ2a and which HQ2b?

  • Wise Old Fool||

    That's not the way computer versioning works. It would be HQ2.0 and HW2.1

  • Wise Old Fool||

    This was never about the incentives for Amazon other than using them to convince Washington and NYC to give more concessions. Amazon knew where they were going to put their new locations before this mess even started. Hell they even passed up Maryland with an $8 billion offer and it's not that far from Washington DC. If that doesn't prove it, I don't know what does.

  • HenryC||

    Tax credits allow you to keep your own money, they do not give you the public's money.

  • JP88||

    Tax credits will also give Amazon an advantage over competition that does not get any tax credits. We all know Amazon needs any advantage it can get over its competitors!

  • B Wilds||

    Oh, the sad irony of paying the richest man in the world to locate a few jobs in your area!

    The fact is that Amazon is no stranger to sweetheart deals and has lined the pockets of its CEO Jeff Bezos at taxpayer expense is quietly moving in a direction that is destined to create even more controversy. Amazon is on the verge of winning a multibillion-dollar advantage over rivals by taking over large swaths of federal procurement.

    When you couple the voice of the Washington Post with a company so deeply involved with discovering and archiving detailed files and information about individuals and politicians across America you command a great deal of muscle and clout. The article below delves into why it is time to face the fact Amazon needs to be curtailed.

    http://brucewilds.blogspot.com.....y-and.html

  • tlapp||

    It seems this should be challenged on a basis of fair competition. Could a smaller e-commerce retailer demand the same tax rates as their larger competitor? Or are we doomed to big business loving big government while using that power to crush smaller competitors? Unfortunately I believe I know the answer.

GET REASON MAGAZINE

Get Reason's print or digital edition before it’s posted online