Amazon has decided to split its headquarters between Long Island City, New York, and Arlington, Virginia, where lawmakers provided tax-based incentives to lure the company and its billion-dollar investments.
The e-commerce giant said it will invest $2.5 billion and create 25,000 jobs in each city, expecting to generate $10 billion in tax revenue for New York and $3.2 billion in revenue in Virginia over the span of 20 years.
Here’s a look at what was offered in return:
Long Island City, New York
Amazon will receive performance-based incentives from New York state worth $1.525 billion, the company said, which means it won’t receive the money unless it fulfills its promise to create 25,000 new jobs.
Of that $1.525 billion, it will receive a refundable tax credit worth as much as $1.2 billion over 10 years for the salaries it will pay workers. That equals about $48,000 for each of the 25,000 jobs it creates – of which the tech giant claims the average wage will be over $150,000.
Amazon also received $325 million based on the square footage of the facility it will occupy over the next decade.
All of these incentives will be awarded over the course of a decade, so long as the company meets hiring objectives.
Additionally, Amazon said it will apply for other New York State tax incentives – like property tax breaks – provided to businesses.
Gov. Andrew Cuomo of New York said he was proud to have “attracted one of the largest, most competitive economic development investments in U.S. history.”
Virginia and Arlington will offer Amazon $573 million in direct performance-based incentives, including a workforce cash grant of as much as $550 million. That equals about $22,000 to the company for each job created over the next 12 years – so long as it fulfills its promise to create the 25,000 positions.
Amazon will also receive a cash grant worth $23 million over 15 years based on growth of an existing tax on travelers when they rent hotel rooms.
The community will invest $195 million in local infrastructure, Amazon said.
“Virginia put together a proposal for Amazon that we believe represents a new model of economic development for the 21st century, and I’m excited to say that our innovative approach was successful,” Gov. Ralph Northam of Virginia said on Tuesday.
While both cities will no doubt reap the benefits of having the highly valued e-commerce giant located there, it could come at the expense of other local small businesses.
Amazon will create stiff hiring competition in both areas, which could hurt smaller technology companies, according to Chris Edwards, director of tax policy studies at Cato and editor of www.DownsizingGovernment.org.
Edwards also noted that favoring large, well-known companies with tax breaks may not be the best long-term economic objective.
“Politicians focus on the giant oak companies such as Amazon, but it is more important for regional economies to germinate a forest of small and growing firms,” he said. “Ten firms of 1,000 workers probably creates more stability and long-term growth potential for a city than one big firm with 10,000 workers.”