OCTOBER 7, 2021
Amazon is entering the holiday season having reaped more than $600 million in state and local government tax breaks, according to a tally from a watchdog group.
Even before 2021 is over, the year has been the second-highest for tax subsidies for the ecommerce giant, with a total of $669 million in tax abatements, rebates and workforce development funds notched as of last month. That figure is according to Good Jobs First, a nonprofit that opposes corporate subsidies. The group has tracked Amazon’s subsidies since 2000, during which time Jeff Bezos’ company has acquired $4.1 billion in tax breaks.
Most of those incentives have gone toward building out Amazon’s network of distribution centers around the country.
The watchdog group said the estimate was likely conservative, because some deals are not fully disclosed.
It’s the second-highest year for Amazon subsidies after 2019, according to the Financial Times, which first reported the story. That year, the company secured a $750 million incentive package to build a “second headquarters” in Northern Virginia.
The bulk of the tax sweeteners this year went to just a handful of facilities.
Two distribution centers in the Chicago suburbs together account for $400 million in subsidies, according to the tracker. A warehouse outside of Rochester, New York, accounted for another $170 million in tax sweeteners.
Amazon defends its use of subsidies, pointing to its hiring record and saying that the tax breaks are available to all companies.
“These incentives are typically available to any firm that meets the criteria and companies do not receive a penny until after they have created jobs and made capital investments,” the company said in a statement to the Financial Times. “In 2020 alone, Amazon invested $150 billion in the U.S., opened more than 100 sites and created more than 400,000 jobs across more than 40 states.”
Still, Amazon has a reputation for pushing hard for municipal money.
An investigation from Chicago public radio station WBEZ last year concluded that Amazon secured more than $700 million worth of incentives in the Chicago suburbs, concealing its identity in negotiations and pitting suburbs “against each other to secure the most favorable deal.”
Amazon’s expansion in New York state has also been fraught. Labor leaders and politicians have criticized the company for reneging on commitments to hire local labor — a common condition of receiving tax breaks.
In 2019, Amazon secured a deal to build a distribution center outside Syracuse. In exchange for $70 million in tax breaks, one of the commitments it made was to hire locally for construction. Two years later, the retailer successfully pushed to lower the local hiring requirement. It repeated the process in future years. A warehouse in Montgomery that received about $21 million in incentives and one outside of Rochester that secured $134 million were each given waivers to hire fewer local workers than initially promised.
Amazon did not immediately respond to a query from CBS MoneyWatch about its expansion strategy in Illinois or its reasons for renegotiating labor agreements.
Are tax breaks needed?
Proponents of tax breaks often argue that they’re necessary to persuade big companies to locate in economically depressed areas. But critics are increasingly questioning whether these breaks actually influence companies’ location choices. Most economic research shows that site-specific incentives have a negligible effect at best. The vast majority of companies receiving an economic incentive — between 75% and 98% — would have located in that spot without it, a review by the Upjohn Institute found.
Amazon has been expanding its footprint at a breakneck pace since last summer, when coronavirus-related disruptions boosted its coffers while straining its already considerable delivery network. So far this year, the company has opened 250 new warehouses, a spokesperson told CBS News last month. That’s roughly one facility each day of the year.
It has also gone on a hiring spree, boosting its headcount to about 750,000 hourly workers. With a total workforce of about 950.000, Amazon is now the second-largest private employer in the country, trailing only Walmart, with 1.6 million workers in America.