Amazon wins record US tax breaks to expand delivery network

Amazon has won a record amount of tax breaks this year as local officials try to lure the online shopping giant to expand its one-day or same-day delivery networks in their areas.

According to data from Good Jobs First, an economic development watchdog based in Washington DC, Amazon has so far secured about $650m in sweeteners from local and state governments in 2021, a mixture of grants, tax exemptions and other incentives. This was likely to be a conservative estimate, the group said, because of the secrecy around some of the deals.

With three months still to go, 2021 already has the largest yearly tally since Good Jobs First began collecting the data in 2000, excluding incentives for non-logistics projects, such as filmmaking and office development, and the more than $750m package Amazon was awarded in 2019 to build its “second” headquarters in Arlington, Virginia.

The bumper deals for Amazon’s delivery network come as local authorities grapple with rebuilding their economies and job markets in the wake of the coronavirus pandemic, a crisis that has seen Amazon’s profits soar because of its pivotal role in distributing goods during lockdown and beyond.

“I was hopeful public officials would step back and say: ‘We’re in such a difficult situation, we have to stop subsidising very wealthy companies’,” said Kasia Tarczynska, research analyst at Good Jobs First. “Unfortunately, it’s the opposite.”

“Amazon should stop asking for any kind of incentives,” she added.

Amazon has defended the practice, pointing to its record of job creation and saying that in many cases it was taking up offers that were on the table for any business, not just Amazon.

“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,” Amazon said. “In 2020 alone, Amazon invested $150bn in the US, opened more than 100 sites and created more than 400,000 jobs across more than 40 states.”

The company also referred to statements from the Progressive Policy Institute (PPI) describing Amazon as its top “investment hero”. Like several other large companies, Amazon is a donor to PPI. The think-tank would not disclose how much it had received from the company, but said its research was based on “published financial data and [used] a clearly-documented methodology”.

Including breaks relating to corporate offices, Whole Foods grocery stores, Zappos warehouses, the company’s movie and television productions and even a fashion studio in New York City, Amazon has received “at least” $4.1bn in incentives since 2000, Good Jobs First has calculated. Secrecy makes a precise tally difficult. In some cases, tax breaks are voted on prior to it being confirmed that the beneficiary will be Amazon and in other cases dollar amounts are never disclosed.

The ecommerce giant is aggressively adding warehouses as it seeks to cut delivery times in more markets across the US. The company’s capital expenditure has rocketed from $16.8bn in 2019 to $40.1bn in 2020. As of the end of this year’s second quarter, Amazon said capex had reached $26.4bn.

Meanwhile, the company has petitioned local officials for incentives, often via third party development companies.

In one recent application filing in Monroe County, New York, Amazon and its partner threatened to walk away if demands were not met, saying “economic uncertainty caused by the current pandemic” meant that without incentives the “cost of developing and operating at this site would likely exceed the benefits”.

The county’s economic development agency was split on whether Amazon’s threat was credible. “We’ve got a metro area population of a million,” said board member Jay Popli. “It’s not New York City, but it is sizeable. I didn’t feel they were going to ignore this market.”

In one recent deal, Amazon acknowledged to the Financial Times that it would proceed with plans for Fort Wayne, Indiana, even after local officials denied it an additional tax incentive of $7.3m on top of an already approved deal.

In Monroe County, it was eventually agreed that Amazon would be awarded $150m in tax subsidies over 15 years. Part of the justification for the deal was a clause that demanded only local workers from nine nearby counties were hired for the construction project. Amazon agreed to this provision, only to later push for a waiver, saying it was not possible if it was to meet its schedule for opening the facility — a schedule it had refused to share prior to the incentive being granted, said Popli.

“It was just not a good-faith effort,” Popli said, adding that local contractors had complained of being given infeasible deadlines to submit bids to do the work. “To grant a waiver when a company hasn’t given our local community a fair shake just did not sit right with me.”

Amazon declined to comment on the deal in Monroe County.

Evidence is mixed on whether or not the incentive deals are good value for money for the counties that offer them. One 2018 study from the Economic Policy Institute concluded that a new Amazon fulfilment centre typically increased warehouse jobs by roughly 30 per cent, but tended to attract staff from other employers, resulting in no net new jobs overall.

For local politicians there was considerable personal incentive, said Nathan Jensen, a professor in the department of government at the University of Texas-Austin. “You can go to a ribbon-cutting ceremony and say: ‘I did bring Amazon here’,” he said.

Jensen’s research found that constituents give politicians more credit for jobs coming to a town when an incentive deal had been made versus when a company arrived without any visible coaxing.

But that perception may change as more local opposition — often focused on Amazon’s workplace safety record — begins to emerge. In particular, local chapters of the Teamsters Union are mobilising to challenge incentive deals that they say displace other logistics jobs that pay more.

“There’s a higher risk to having these jobs,” said Randy Korgan, who runs the Teamsters’ organising efforts against Amazon, noting the company’s elevated rates of injury. New jobs should not be seen as de facto good, Korgan added.

“There has to be criteria that absolutely establishes what a good job is. Are they long-term jobs where people are going to be able to buy homes, or people are going to be able to contribute to the local economy?”

At a recent congressional hearing, committee members were told the average wage for a union-backed delivery driver in New Jersey working for UPS was $38.35 an hour. The current starting hourly wage for Amazon drivers in the area is $19.25, according to job listings, although a $3,000 signing-on bonus is on the table as a result of nationwide worker shortages.