What Does Amazon HQ2 Mean for Taxpayers?

Scoot over, Amazon’s moving in.

One of the biggest headlines for the e-commerce and cloud-computing titan has been its dramatic, prolonged selection process for a location for its HQ2. Amazon may already operate in hundreds of countries, but its expansion of its headquarters beyond Seattle was inevitable for a trillion-dollar company.

One of the most controversial elements of the Amazon HQ2 Decision was the municipal jockeying for the chance to host the HQ2. But, in mid-November, Amazon finally made its choice(s): New York City and Northern Virginia. Since we’ve had a little time for analysis to roll out on their decision, we wanted to collect that in one place to help you understand what the decision may mean for you.

We’ll go over why some folks have been up in arms about the HQ2 competition, the tax packages offered to Amazon by the winning cities, some of Amazon HQ2’s impacts on the cities so far, and what Amazon will mean for taxpayers.

Why All the Controversy?

Historically, corporate entities utilize tax breaks and other subsidies to make relocation less costly. You see this most publically with professional sports teams, who typically get most—or all—of their new stadiums paid for by the cities in which they reside. The Rams didn’t move back to LA just for the weather!

The argument for these kinds of civic perks is pretty straightforward: Large corporate entities bring jobs, people, and can boost the economy. For a person choosing between Columbus and Cleveland, a NFL team might actually make a difference in where they land.

However, large corporate entities bring the bad, as well: raised rents, inflated housing prices, and increases in homelessness, to name a few. And all the while, the corporate harbinger won’t be contributing to education or public works projects that may need help down the line.

While Amazon HQ2 probably won’t get the tax incentives from both of its new homes, let’s take a second and look at what’s on the table.

The Offers

Together, New York and Virginia put over $2 billion on the table in tax credits, rebates, and other incentives to woo the tech giant.

New York City

For New York’s part, officials promised Amazon $1.525 billion in incentives, excluding the to-be-determined costs of assistance with infrastructure upgrades, job-training programs, and help securing a helipad. Of course, Jeff Bezos would appreciate that last part!

Northern Virginia

Virginia’s incentive package was definitely smaller than New York’s. Virginia offered $573 million, primarily in cash grants, along with $250 million to help Virginia Tech build a new campus near the new Amazon location that would offer tech-oriented degrees. Oh, and a helipad.

Neither of these offers was the largest Amazon received, which supports experts who claim that incentives like the ones offered for the Amazon HQ2 are rarely the biggest motivators for companies to move to an area. For example, Amazon cited New York’s massive talent pool as a major factor for its decision.

But, the money’s already on the table. Some New York officials are wondering if they got a raw deal since Amazon chose to split the new locations, but in any case, the cities will start to see the impacts of the trillion-dollar company’s presence more and more over the next few years. So what does that mean for taxpayers?

Amazon HQ2’s Impact on Taxpayers

The biggest threat to taxpayers is not so much on a direct, immediate tax. But the impact of a major company like Amazon opening doors in your area can have consequences that can be felt by everyone.

Housing prices don’t affect citizens from a tax perspective, but let’s dig deeper. For example, New York City’s subways are notorious for their delays and other issues, a topic that came up quite a bit during the primary gubernatorial race between Gov. Andrew Cuomo and Cynthia Nixon.

The system badly needs repair, but what happens if you were to add 25,000 travelers to it? Well, delays could worsen and public transportation near the new Amazon location could essentially break down.

That doesn’t necessarily equate to a direct, immediate tax hike for New Yorkers, but it does equate to substantial growing pains for infrastructure projects, education, and other public services. Big changes like those could squeeze state and local government budgets, which may eventually find new ways to refill their accounts. And yes, a range of creative taxes could be on the table.

The Bottom Line

Corporate tax incentives are a hotly divided issue for a lot of reasons, but are just part of the larger rebalancing that comes when large companies move to town. And there are a million factors at play within the Amazon HQ2 decision! We’ve already seen spikes in housing prices, but over the next several years, residents in Northern Virginia and Queens will need to adjust.

One thing residents can certainly hope for is that the good intentions behind the Amazon HQ2 bids will remain for as long as it takes to adjust to having Amazon as a new neighbor.

Leave Comments

Free eBook

Tax Settlement Options

Download Now
Having a tax debt is stressful. We can help.