The American Booksellers Association recently contacted booksellers in cities and states that had submitted bids for Amazon’s second corporate headquarters and encouraged them to urge their lawmakers to allocate the money they were planning to use as subsidies and incentives to Amazon to support local communities and their independent businesses. When Amazon began its search for a second headquarters in September 2017, 238 candidate cities and states submitted proposals, including offers of financial and other incentives, vying for the company’s “HQ2.”
The e-mail sent by ABA asked booksellers to write to their lawmakers in light of their proposals and Amazon’s HQ2 decision. The e-mail noted: “Now that Amazon has chosen Virginia for HQ2, we hope you will urge your state lawmakers to use the resources they had earmarked for the online giant to areas where they can do the most good: infrastructure, first responders, schools, and local businesses” in booksellers’ communities.
In order to facilitate the process, ABA created a template letter for booksellers. The letter tells booksellers’ lawmakers that Amazon’s decision to decline their proposal was “the best possible outcome.”
“As misguided as their attempts to lure Amazon were, the states’ and communities’ leaders that offered billions in tax packages to Amazon claimed they were doing so to help their communities,” said David Grogan, director of advocacy and public policy for ABA. “If these leaders really do wish to help their communities, then Amazon’s refusal opens up a tremendous opportunity for these lawmakers and officials to actually do the right thing. Studies show clearly that independent businesses are the economic drivers of the community, so we believe lawmakers and local officials now have an opportunity to put those subsidies and incentives where they can actually benefit communities.”
In November 2018, Amazon announced that it had concluded its search and that it would split its second headquarters between Long Island City, Queens, and Crystal City, Virginia. The company had said it would divide operations evenly between the two chosen sites, with more than 25,000 employees in each city. In response to opposition from lawmakers and community members, however, Amazon cancelled its plans to establish the Long Island City headquarters in February. On March 16, the Arlington County Board voted unanimously to approve a $23 million incentives package for Amazon to establish its second corporate headquarters in Arlington, Virginia. This vote followed Virginia’s approval of an incentives package worth up to $750 million for Amazon, passed by the Virginia General Assembly in January and signed by Governor Northam in February.
Amazon decided to leave New York when residents and lawmakers criticized the incentives package that New York offered to Amazon. Some elected officials and others are now arguing that, unlike tax subsidies, tax incentives do not burden communities, and, as such, losing Amazon was an economic blow to New York State and Long Island City.
ABA’s Grogan disputed this contention: “Both subsidies and incentives are damaging to communities when they are provided to massive corporations and retailers to lure them to various locales. The value of a tax incentive is based on the premise that the company receiving the tax write-off will create such an economic boom for the community and the state that it will offset any loss in tax revenue. And this just does not happen. In the end, these subsidies hurt communities and local businesses.”
Figures from the Institute on Taxation and Economic Policy (ITEP) back this up. ITEP notes that “state and local tax incentives come at an enormous cost. While a comprehensive accounting of these programs is impossible, the best available estimates suggest that states and localities are devoting some $50 billion to tax incentives every year. Unfortunately, despite the enormous expenditures being made on these programs, the evidence suggests that tax incentives are of little benefit to the states and localities that offer them, and that they are actually a drag on national economic growth.”
ITEP also notes that, in the case of retail, up to 90 percent of the apparent direct benefits of tax incentives are offset by losses among the subsidized retailer’s local competitors: “States constantly run the risk of harming existing businesses within their borders when they attempt to give some companies a competitive edge through the use of tax incentives. Local tax incentives are particularly troublesome in this regard, as job or investment growth that one locality might consider ‘new’ is often simply ‘poached’ from another locality in the same state.”
Amazon and the bidding governments have argued that the tax incentives it has accepted from Virginia and that it was offered from New York State are not subsidies as they are performance-based. However, ITEP argues that such incentives for corporations are harmful nonetheless because such incentives are “rarely the deciding factor in whether a business chooses to hire or invest within a state’s borders.” And, according to ITEP, even in cases in which tax incentives were the deciding factor in a business’ decision to hire or invest, “it is impossible to design a tax incentive so that its benefits remain entirely in-state.” For example, if the company hires non-residents, current residents may not reap any benefit from tax incentives while bringing in out-of-state workers may increase pressure on the state’s infrastructure and government services.
And, of particular relevance to in-state retailers, ITEP additionally points out that “states constantly run the risk of harming existing businesses within their borders when they attempt to give some companies a competitive edge through the use of tax incentives.”
Booksellers are encouraged to adapt the template letter to reflect their own views and concerns.