Amazon recently announced the winners of its year-long, “The Bachelor”-style search for the location of its second headquarters, known as HQ2. City and state governments were tripping over themselves to lure Amazon and its mega-billionaire CEO, Jeff Bezos, with sweetheart development deals. In the end, it was New York City and Arlington, Virginia, that walked away with the grand prize, two new Amazon office complexes and 50,000 promised jobs.
As part of the deal with New York alone, Amazon will receive an estimated $2.8 billion in tax breaks and other business incentives. That’s the equivalent of New York taxpayers paying Amazon $112,000 for each of the 25,000 jobs the tech giant has promised to create at its Long Island City headquarters. (New York offered twice as much in incentives as Virginia did.)
The logic of offering up such huge incentives to companies like Amazon is that it’s a long-term investment in a city’s economic future. According to Gov. Andrew Cuomo of New York, the state will collect $27.5 billion in new tax revenue over the next 25 years thanks to the Amazon deal. Cuomo’s calculations assume that Amazon will directly create 40,000 jobs in New York (not the promised 25,000), and that local and state businesses will hire an additional 67,000 workers to service Amazon and its employees, known as the job-creation “ripple effect.”
But plenty of commentators question the rosy figures pitched by politicians and are alarmed at the growing trend of huge corporations pitting state versus state to subsidize their expansions or relocations. The question is whether the very public and well-publicized Amazon HQ2 auction will signal a shift in the way states and cities think about the economic benefits of such sweetheart development deals, or will it simply embolden the next wealthy corporation to demand even more?