Amazon Incentives: How Much Is Too Much?

As Amazon continues its search for a second headquarters somewhere in North America, the Los Angeles Times Editorial Board advises local and state governments to conduct a thorough economic analysis and get binding commitments before making final agreements with the retailer.

The Times reports that many local and state officials assume that the economic benefits of landing Amazon’s second headquarters, tentatively called HQ2, will surpass the costs of providing aggressive incentives. However, only a few states require an analysis of whether the incentives and benefits they provided to lure large corporations turn out to be cost effective in the long run.

The article cites a report from The Pew Charitable Trusts that confirms only 10 states have “well-designed plans to regularly evaluate tax incentives, experience in producing quality evaluations that rigorously measure economic impact, and a process for informing policy choices.”

The Times points to Washington as a state that saw firsthand that providing a large corporation with financial incentives may not be as lucrative as first thought. In 2013, Washington granted $8 billion in tax cuts to its aerospace industry, including Boeing, to incentivize the industry to remain in the state and hire more workers. Since receiving some of those tax breaks, Boeing has reduced its workforce by 15 percent and state lawmakers are currently attempting to pass laws that would tie tax breaks to job creation.

The Times reports that Amazon is looking for several financial incentives from areas vying for HQ2, including tax credits, relocation grants, workforce grants and fee reductions to compensate for the price of building the new campus as well as ongoing operational costs.

Meanwhile, small business owners across the country wonder if local and state governments should focus on helping their communities’ small businesses prosper.

Speaking to Minneapolis’s Fox affiliate, toy store owner Dan Marshall says he wishes local governments put the same effort they’re putting in to luring Amazon to ensure small businesses have the resources they need.

“I think all small businesses want a level playing field with the giant corporations like Amazon and we want government at all levels to consider what they can do to help small businesses establish themselves, to grow and survive and continue to hire thousands of employees,” Marshall says.

Other small business owners share his opinion.

“We want to see the same level of energy, and actually more energy that goes into responding to a RFP that Amazon puts out, to one that comes from people like us, small business owners … who are creating jobs, who know our neighbors and are vital parts of our communities,” restaurant owner Danny Schwartzmann says.

Competition among cities and states to land Amazon’s second headquarters has been fierce. Amazon says that approximately 50,000 jobs will come to the region that lands HQ2, but the Times reports that cities and states are “going to embarrassing lengths to woo” Amazon.

Elected officials across the country are uploading videos touting their communities’ distinct advantages in an attempt to catch Amazon’s eye, reports the New York Times. Business leaders in Tucson, Arizona, sent a 21-foot-tall cactus to Amazon’s chief executive Jeff Bezos. In Tulsa, Oklahoma, the city’s mayor has converted his office’s largest conference room to a hub for 50 volunteers to pore over videos of Bezos, tracking his likes and dislikes to give the city a competitive edge.

Amazon is expected to announce the location of their second headquarters early next year.