Should one of the world’s wealthiest companies receive taxpayer-funded handouts? Virginia thought so in 2019, when lawmakers voted to transfer hundreds of millions of tax dollars to Amazon. Four years later, the tech juggernaut is requesting some of the funds attached to this economic incentive package. While a deal is a deal, it highlights how perverse the system has become, with state and local governments giving wealthy companies money for performing the simple act of running a business.
Amazon Wants Its Money
Now that the first phase of its Northern Virginia offices is scheduled to open in June, Amazon submitted an application on April 1 requesting the first round of economic incentive payments totaling as much as $152 million. The corporation is asking for the millions to be paid by late 2026. Despite the deal being made in 2019, Amazon has refrained from requesting payment due to the coronavirus pandemic and how much it burdened the state budget. Now that conditions have normalized, it is time to pay up.
The Virginia Economic Development Partnership is reportedly reviewing the application. The problem? Amazon announced in March that it would suspend the construction on the second phase of its campus in Arlington. It also has unveiled thousands of job cuts this year, and employment levels played an integral role in state lawmakers voting overwhelmingly to extend millions in taxpayer funds to the corporation.
In January 2019, Old Dominion officials voted to give Amazon $22,000 for every full-time job that has an average salary of $150,000. Overall, the state committed to providing the company up to $750 million for the new Northern Virginia headquarters. That said, Amazon has stated that its construction pause is not an indicator of imminent job cuts.
Meanwhile, Arlington County also agreed to offer $23 million by 2030 to the $1.05 trillion behemoth. In addition, local officials vowed to provide a portion of revenues from a tax hike on hotels and short-term rentals if HQ2 bolstered hotel occupancy levels. So far, reports suggest that this additional revenue has yet to come to fruition. It is projected that money from these levies will not return to pre-pandemic levels until the fiscal year 2025.
But while the story is if Amazon will receive the cash, the debate might be about if one of the largest corporations on the planet should even be garnering public dollars in the first place.
Corporate Welfare
Every corporate welfare scheme governments establish is done in the name of job creation. In Virginia, taxpayers are on the hook for nearly 15% of salaries given to new Amazon employees. But subsidizing employment, whether job-creation tax investments or property tax abatements, is nothing new. In fact, it is almost expected — and was even before the COVID pandemic.
(Michael Siluk/UCG/Universal Images Group via Getty Images)
A famous example of this was in 2018 when Wisconsin announced it would pay up to $4.1 billion so Foxconn would create a factory in the Badger State. The Taiwanese electronics firm predicted it would create 13,000 new jobs. This meant state taxpayers would be on the hook for more than $346,000 per job. Foxconn eventually abandoned most of the project in April 2021. Experts agree that even if the factory had been completed, Wisconsin would never have made a return on the enormous investment.
Corporate welfare proponents assert that there would be little job creation without these subsidies. But if businesses require labor, they will hire employees without needing taxpayer funds. Instead, the proponents mean that positions would not be established in their preferred locations, meaning that governors, mayors, and legislatures are chasing and begging Corporate America to build a presence in their communities.
In 2017, ReasonTV’s Austin Bragg and Andrew Heaton produced a hilarious segment poking fun at mayors competing for Amazon HQ2. “Mayor Steve Hightower” offered to give the company $15 billion in refundable tax credits, while “Mayor Buck Schwartzmore” proposed removing $10 billion of tax burdens from Amazon and transferring these obligations to the rest of the town. This was satirical, but plenty of states and cities went the embarrassingly extra mile to lure Amazon to their jurisdictions, like New Jersey, which suggested handing out $7 billion in tax breaks.
Of course, it is no longer about producing jobs. The newest grift is the promise to go green. If you install new environmentally friendly appliances, your corporation will certainly receive some cash from government coffers!
A Subsidy Arms Race
Ultimately, corporate welfare has turned into a subsidy arms race, with officials sweetening the pot as much as they can. But this mutual destruction, endured by the taxpayers, does not create jobs. Studies show that subsidies merely shift jobs from one state to another and do not produce new ones. But this is a truth ignored by politicians who think from one election to the next and companies that wish to pad their bottom lines with free money. A subsidy tracker from Good Jobs First reveals thousands of taxpayer-funded awards to dozens of corporations – from Amazon to Boeing to Ford to Exxon – worth billions of dollars. This is the by-product of an environment where society depends on the government for everything. As Liberty Nation noted in 2019: “Policymakers need to learn that it is not the state’s mandate to pick winners and losers; only the free market can achieve that feat.”
