Thursday , January 28 2021

New seats in the Amazon: public subsidies provoke criticism



While New York and the suburbs of Washington enjoy two new offices in the Amazon, debate is boiling in the United States over the billions of dollars in incentives offered by these communities to lure the Amazon giant. business online.

The Long Island district of New York and Crystal City in Virginia on the border of the US capital are the lucky winners of a month-long contest to attract two mega sites where Amazon promises to create a total of 50,000 jobs . , with US $ 5 billion in investments (€ 4.4 billion).

But this manna does not impress detractors, who warn that the amount of tax incentives and state investments ($ 3 billion for New York and $ 2.5 billion for Virginia) could erase the economic benefits brought by the company. .

It is common in the United States that a group looking for a place is looking for incentives. According to a Brookings Institution report, about $ 90 billion is offered annually to businesses by state and local governments.

Michael Farren, a business relocation specialist at George Mason University in Virginia, believes that these incentives rarely make a difference in the group's decisions.

"Corporate offshoring decisions are based on factors that have a deeper impact on company profits, such as the availability of a skilled workforce," he says.

He notes that Amazon could have obtained even greater tax benefits if it had crossed the Potomac River to settle in Maryland, north of Washington, where it was offered more than $ 8 billion, or in Newark. near New York, which put $ 7 billion at the table.

– "Profit-making enterprise"

This financial support stirs criticism from those who say Amazon does not have to be a "profitable business."

"One of the richest companies in history should not get support from the taxpayer, while many New York families are struggling to survive," protested the New York Democrat. York Kirsten Gillibrand.

On the right also, the subsidies granted to the Amazon have changed. "Arrangements like that of Amazon or other large groups are totally supportive of apologetics, it's terrible!" Wrote the conservative economist Véronique de Rugy in the National Review.

For Farren, these subsidies distort the economy. According to him, cities should focus on improving education and infrastructure instead of the manna provided by a company to make places to live and work attractive.

But Tom Stringer of BDO's real estate consulting firm says people with a broken heart can not read the fine print. According to him, the contracts are structured as "payment programs as and when."

"If Amazon does not deliver (promised terms), it will not enjoy the financial benefits. The taxpayers are very well protected," he told AFP.

However, the issue of such public subsidies has become a major concern, not only on Amazon, but also on the case of Foxconn, a Taiwan-based electronics company, in particular Apple's subcontractor, which has pledged to build a factory in Wisconsin.

The Foxconn deal provides subsidies of $ 3 billion – up to $ 4 billion – to create 13,000 jobs. That equates to an allowance of more than $ 200,000 per job created, compared to about $ 20,000 per job at Amazon.

The Foxconn agreement, announced by President Donald Trump, contained "very unusual" elements, contrasting with those of Amazon, Stringer says.

Wisconsin Governor Scott Walker, who negotiated the deal with Foxconn, was not re-elected this month because of concerns about rising costs and a possible drop in jobs created. .

Other large groups have begun to recognize the problems posed by the tradition of public subsidies.

The Walt Disney Co. has sent a letter this year to the city of Anaheim, Calif., Calling for an end to tax benefits, claiming they have created a "bitter climate."

Tax incentives are, however, "of paramount importance" to attract business and boost economic development, says real estate expert Tom Stringer. "It's mocking the world to say they make no difference."

But communities need to be "tough in negotiations so that both parties benefit from these agreements," concludes Darrell West, head of governance studies at the Brookings Institution.


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