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Amazon HQ2

Tax Payers New Stock-less Investment

With Black Friday just passing and onward to Cyber Monday which will continue on to a holiday increased shopping period through the remainder of the year, Amazon is on a lot of people’s electronic screens and taking in their hard-earned dollars…. Dollars that were taxed on earnings. Unlike Amazon, who avoids paying federal taxes using a variety of tax credits and tax exemptions that are legal and built into the U.S. federal tax code. A big one for this past year was the ability to deduct stock-based compensation of executives. 

A look at the chart below shows what that compensation looks like:

Amazon Executive Salaries

Amazon Executive Salaries

While spending your taxed earned income on Amazon’s site, you may want to think about how VA and NY residents will continue to pay taxes on their earnings and property taxes and all taxes where applicable, but Amazon just got a sweet deal from NY and VA paid for by the tax payers. NY alone just handed out under $3 billion in subsidies to Amazon to operate its HQ2 in that state.

Incentivizing job creation is one rationale for the subsidies many cities offered up to Amazon before the two big winners, NY and VA, were announced but should this have been a part of the decision-making process in the first place?

Residents of NY and VA, which will now include an influx of relocated employees, will pay for the infrastructure, rising real estate prices and whatever rises in cost come into the supply and demand equation. 

Amazon will directly profit.

In NY, Amazon will receive $897 million from the city’s Relocation and Employment Assistance Program (REAP) and $386 million from the Industrial & Commercial Abatement Program (ICAP). It will receive an additional $505 million in a capital grant and $1.2 billion in credits if its job creation goals are met. That brings the total amount of public funds granted to $2.988 billion. In other words, the city and state (by way of you the taxpayers) will pay Amazon, with it's not so glowing labor relations, $48,000 per job.

Amazon is no small business trying to stay out of the red. In 2017, Amazon reported $5.6 billion of U.S. profits and didn't pay a dime of federal income taxes on it.

Choosing the city most strategically located to draw the most skilled workers, geographic proximity to its distribution hub, cost to operate, consideration by each city as to gentrification, infrastructure, housing and other demands an influx in population would bring are all within reasonable consideration for the proposed locations. Corporate welfare should not have been on the table. The irony of Amazon moving into a space neighboring a public housing project, aided by unnecessary corporate welfare while some of the populous screams for welfare cuts for the vulnerable poor and demonizes the residents of the projects, should not be lost.

The government does not generate a profit. It is a public servant. The money it just spent was paid by the citizenry in the form of taxes. Amazon does not need to be paid to create jobs. The jobs it creates are representative of a rise in demand for their products and services. The jobs it creates will contribute to bring more profit and more pay off to stock holders. This should not be supplemented by the working class.

Amazon has a successful business model. Let them make as much money as they can based on that model. Taking advantage of the lucrative subsidy and incentive offers to operate in the winning cities that made offers, allowing even more of profit with less cost, can be theoretically understood under the premise of the capitalistic model in which businesses exist to maximize profits. They are not evil. Amazon is just operating the way a business theoretically should. However, subsidies and tax breaks should not have been an option on the table. The average person cannot afford to start a business. Why should a highly profitable Amazon be paid outside of paying for products and services? We do not need to pay Amazon to create jobs, supply and demand for their goods and services creates jobs.

As you continue shopping for Cyber Monday deals and make more purchases into the upcoming holidays, remember the government just brokered a deal to make Amazon even more money. They decided you would pay for Amazon and its shareholders to become even more wealthy and Amazon doesn't have to pay for the improved infrastructure, increased demand for education and housing etc..., because you will—whether you can afford to or not. You won’t just be deciding to pay if you purchase their goods or services, you will be coerced to pay with your taxes.

Amazon, a publicly traded company, is invested in by stock holders…. Dear tax payers, you won’t be getting any stock, but you will be investing. 

What will your ROI be?