ABA Responds to News of Amazon HQ2

In response to Amazon’s announcement this week of its plans to locate new headquarters in Crystal City in Arlington, Virginia, and Long Island City in Queens, New York, the American Booksellers Association, in strongly worded letters to the governors of New York and Virginia, protested “providing massive subsidies of public funds and tax incentives” to one of the world’s largest corporations.

In letters to Virginia Governor Ralph Northam and New York Governor Andrew Cuomo, ABA CEO Oren Teicher wrote that “it is unconscionable that state tax dollars paid by [New Yorkers and Virginians] would be redirected to subsidize one of the world’s largest — and most profitable — companies, which, among other things, has a history of doing whatever it can to drive competitors out of business and to avoid paying its fair share of taxes.”

Teicher added that “it is simply bad public policy to direct public money away from infrastructure, first responders, and public schools,” which benefit all state citizens, “and, instead, to direct that money to a single international mega-corporation with a market capitalization that dwarfs virtually every other company.”

In its announcement, Amazon revealed that it will receive $1.525 billion in direct incentives from New York and says it will separately apply for other incentives, including New York City’s Industrial and Commercial Abatement Program and New York City’s Relocation and Employment Assistance program. Amazon will receive $550 million from the Commonwealth of Virginia for locating in Crystal City, plus an additional $23 million cash grant from Arlington over 15 years.

Teicher points out in his letter to Gov. Cuomo that in contrast to this massive expenditure of public monies, “other large companies recognize the inherent value of locating in New York State. For instance, Google has not applied for subsidies or tax incentives for its planned expansion in New York City, which ultimately could total about 20,000 employees, and has never applied for state subsidies or tax incentives for any of its New York properties.”

The decision to open headquarters in New York and Virginia concludes the highly publicized search for Amazon’s “HQ2,” which was first announced September 2017 and started with 238 candidate cities and states bidding against each other. The company plans to split operations evenly between the two sites, with more than 25,000 employees in each city. Amazon also announced that it has selected Nashville as the site of a new operations center, which it says will create more than 5,000 jobs.

Both the Crystal City and Long Island City locations are in close proximity to major city centers — Washington, D.C., and Manhattan — and are already home to the largest Amazon offices on the East Coast. As the Washington Post points out, the D.C. area location will allow Amazon executives to “cozy up to the federal government.” Amazon has an extensive business relationship with the federal government, and it spent $13 million on lobbying in 2017, a 15 percent increase over 2016, as reported by Fortune.

Critics of HQ2 have pointed to the opacity of the decision-making process prior to this week’s announcement. Amazon required that all cities in the running for HQ2 sign nondisclosure agreements, so information about the incentives being offered with public funds had been withheld from the public.

Critics also express concerns about the impact the new headquarters would have on the cities’ infrastructure. The Metropolitan Washington Council of Governments estimated that the D.C. region needed 235,000 more housing units by 2025 to keep pace with expected job growth, without factoring in the additional growth corresponding to HQ2.

New York City elected officials and residents have criticized the decision, as reported by Crain’s, and are concerned that the Cuomo administration will circumvent the regular planning process that would require approval from City Council by creating a general project plan (GPP) to rezone a 20-acre site on the Long Island City waterfront. In a joint statement, New York State Senator Michael N. Gianaris (D-NY 12) and New York City Councilor Jimmy Van Bramer (D-NYC 26) said, “We cannot support a giveaway of this magnitude, a process that circumvents community review through the use of a GPP or the inevitable stress on the infrastructure of a community already stretched to its limits.”

Read Teicher’s letter to Governor Cuomo in full here.

Read Teicher’s letter to Governor Northam in full here.

On behalf of independent bookstores in New York State, I am writing to express the American Booksellers Association’s strong opposition to providing massive subsidies of public funds and tax incentives to large mega-corporations to locate in New York State.

To say the least, we were particularly disheartened to learn of the magnitude of the subsidies New York will be giving Amazon to locate a new headquarters in Long Island City. According to its press statements, Amazon will receive $1.2 billion in refundable tax credits through a state-level economic development program and a cash grant of $325 million that’s tied to the construction of new buildings at the Long Island City location over the next 10 years.

In contrast, other large companies recognize the inherent value of locating in New York State. For instance, Google has not applied for subsidies or tax incentives for its planned expansion in New York City, which ultimately could total about 20,000 employees, and has never applied for state subsidies or tax incentives for any of its New York properties, according to the Wall Street Journal. 

It is unconscionable that state tax dollars paid by New Yorkers would be redirected to subsidize one of the world’s largest — and most profitable — companies, which, among other things, has a history of doing whatever it can to drive competitors out of business and to avoid paying its fair share of taxes. This kind of policy is bad for in-state businesses, it’s bad for the state’s economy — and it’s bad for New York communities of all sizes.

It is simply bad public policy to direct public money away from infrastructure, first responders, and public schools — which benefit all New Yorkers — and, instead, to direct that money to a single international mega-corporation with a market capitalization that dwarfs virtually every other company.

Amazon has proven itself a master at pitting states and communities against one another in an effort to get the best tax incentive package. Clearly, your administration has accepted the premise that a new headquarters for Amazon in Long Island City would be a boon to the economy and would bring jobs to New York. But studies show that providing huge tax incentives to profitable corporate titans is a bad proposition. Indeed, between Amazon’s third-party marketplace platform and its own retail business, the company is actually diminishing needed tax revenue and local jobs across the country.

The numbers speak for themselves.

As reported in the study Amazon and Empty Storefronts, commissioned by the American Booksellers Association and conducted by Civic Economics, in 2015 Amazon sold $3.9 billion worth of retail goods in New York. That is the equivalent of 2,722 retail storefronts or 9.4 million square feet of commercial space, which might have paid $47.8 million in property taxes. The end result was a total of more than $47.8 million in revenue lost to state and local governments. Overall, Amazon sales produced a net loss of more than 23,500 retail jobs in New York.

Amazon’s third-party marketplace, similar to eBay, hosts sellers from around the country. Though the sales mechanism is facilitated by Amazon, only a small portion of sellers collect and remit sales tax where it is due. This has resulted in lost sales tax revenue in communities across the country, including New York State. Far from being a boon to states, Amazon represents more of an economic black hole.

According to the Civic Economics study Prime Numbers: Amazon and American Communities, in 2016, Amazon and its third-party marketplace vendors sold $9.9 billion of retail goods in the state. These transactions resulted in 3,280 displaced shops, or 28.4 million square feet, and some $315 to $404 million in uncollected sales taxes.

For whatever pluses Amazon claims it will bring to New York State, those purported gains are far outweighed by costly tax incentives, job losses, and Amazon’s refusal to collect and remit sales tax for third-party marketplace sales into the state. Sadly, New York will find this out in the long run, and at the expense of its small businesses across the state, the true engines of sustainable economic growth.

Local businesses are the backbone of our state’s fiscal health. The news of such massive public subsidies to one of the world’s largest and most profitable corporations is contrary to the long-term interests of all New Yorkers.

Sincerely,

Oren Teicher, CEO
American Booksellers Association

Dear Governor Northam:

On behalf of independent bookstores in Virginia, I am writing to express the American Booksellers Association’s strong opposition to providing massive subsidies of public funds and tax incentives to large mega-corporations to locate in Virginia.

To say the least, we were particularly disheartened to learn of the magnitude of the subsidies Virginia will be giving Amazon to locate a new headquarters in Crystal City, Arlington. According to reports, Virginia is planning to provide Amazon with up to $550 million in tax breaks tied to the creation of 25,000 jobs, and the city of Arlington will provide a cash grant of $23 million over 15 years funded by an existing tax on hotel rooms.

It is unconscionable that state tax dollars paid by Virginians would be redirected to subsidize one of the world’s largest — and most profitable — companies, which, among other things, has a history of doing whatever it can to drive competitors out of business and to avoid paying its fair share of taxes. This kind of policy is bad for in-state businesses, it’s bad for the state’s economy — and it’s bad for Virginia communities of all sizes.

It is simply bad public policy to direct public money away from infrastructure, first responders, and public schools — which benefit all Virginians — and, instead, to direct that money to a single international mega-corporation with a market capitalization that dwarfs virtually every other company.

Amazon has proven itself a master at pitting states and communities against one another in an effort to get the best tax incentive package. Clearly, your administration has accepted the premise that a new headquarters for Amazon in Crystal City would be a boon to the economy and would bring jobs to Virginia. But studies show that providing huge tax incentives to profitable corporate titans is a bad proposition. Indeed, between Amazon’s third-party marketplace platform and its own retail business, the company is actually diminishing needed tax revenue and local jobs across the country.

The numbers speak for themselves.

As reported in the study Amazon and Empty Storefronts, commissioned by the American Booksellers Association and conducted by Civic Economics, in 2015 Amazon sold $1.6 billion worth of retail goods in Virginia. That is the equivalent of 1,102 retail storefronts, or 3.8 million square feet of commercial space, which might have paid $7.6 million in property taxes. The end result was a total of more than $7.6 million in revenue lost to state and local governments. Overall, even counting all the jobs in Amazon distribution centers, Amazon sales produced a net loss of more than 5,897 retail jobs in Virginia.

Amazon’s third-party marketplace, similar to eBay, hosts sellers from around the country. Though the sales mechanism is facilitated by Amazon, only a small portion of sellers collect and remit sales tax where it is due. This has resulted in lost sales tax revenue in communities across the country, including Virginia. Far from being a boon to states, Amazon represents more of an economic black hole.

According to the Civic Economics study Prime Numbers: Amazon and American Communities, in 2016, Amazon and its third-party marketplace vendors sold $3.8 billion of retail goods in the state. These transactions resulted in 1,240 displaced shops, or 10.7 million square feet, and some $79 to $101 million in uncollected sales taxes.

For whatever pluses Amazon claims it will bring to Virginia, those purported gains are far outweighed by costly tax incentives, job losses, and Amazon’s refusal to collect and remit sales tax for third-party marketplace sales into the state. Sadly, Virginia will find this out in the long run, and at the expense of its small businesses across the state, the true engines of sustainable economic growth.

Local businesses are the backbone of your state’s fiscal health. The news of such massive public subsidies to one of the world’s largest and most profitable corporations is contrary to the long-term interests of all Virginians.

Sincerely,

Oren Teicher, CEO
American Booksellers Association