Taxpayer Backlash Coming Over Billions In Amazon Subsidies

Taxpayer subsidies given to the retail and tech giant Amazon may spur a backlash against corporate welfare, according to media pundits.

The company is back in the news after changing its mind and telling New York politicians that they can keep up to $3 billion in subsidies and tax breaks they promised the firm if it would locate another headquarters in New York City. Also, Amazon didn’t pay any federal income taxes on profits of $11.2 billion in 2018, according to a report from the Institute for Taxation and Economic Policy.

The report claims that federal income tax credits and exemptions allowed the company to get a federal tax rebate of $129 million in 2018. ITEP claims that 2018 is the second consecutive year in which Amazon hasn’t paid any federal income taxes.

The ITEP report stated, “During the previous five years, Amazon reported U.S. profits of $8.2 billion and paid an effective federal income tax rate of just 11.4 percent. This means the company was able to shelter more than two-thirds of its profits from tax during that five-year period.”

In an article titled, “Will backlash against Amazon’s NYC tax breaks kill other deals?” CNN reported that critics said the fallout could change the prospects for corporate welfare deals throughout the country. “They say it’s the beginning of the end of state and local governments showering companies with billions of dollars in tax breaks and other incentives,” CNN wrote.

Michigan politicians participated in the Amazon HQ2 sweepstakes in 2018, reportedly offering tax breaks and subsidies worth up to $4 billion. The company wasn’t interested in constructing a Detroit facility, but it has accepted other taxpayer handouts from Michigan.

Michigan Capitol Confidential reported in June 2018 and previously:

• The Michigan Economic Development Corporation awarded Amazon a $4 million grant in May 2018 for a 100-acre distribution center in Gaines Township.
• The state agency in charge of giving corporate subsidies approved a $4.5 million grant for Amazon in September 2017 in return for the company building a distribution center in Shelby Township.
• In June 2017, the MEDC approved a $5 million grant for Amazon for a distribution center in Romulus.
• The MEDC approved a $7.5 million business subsidy in December 2016 for another distribution center in Livonia.

In 2018 Amazon made a high-profile announcement that prompted officials in many states and hundreds of cities to pitch subsidy deals aimed at attracting two new headquarters for the company. Amazon chose New York City and Arlington, Virginia, for the two sites, but it recently backed out of the New York deal.

Soon after Amazon canceled its deal in New York, one Michigan politician went on Facebook to pitch his city.

“Amazon is canceling New York City as a destination, so why not Warren?” Warren Mayor Jim Fouts posted on his Facebook account.

Fouts did not speculate in the Feb. 14 post how many state taxpayer dollars Michigan officials would have to deliver to bring the company to Michigan.

In January, Amazon became the most valuable company in the country, with a market capitalization (the value of all its stock) of $789.2 billion, according to MarketWatch. In recent months, the spot has been held by Apple and Microsoft, as well.

In 2017 Michigan politicians approved two large corporate and developer subsidy deals. One will transfer $1 billion from state taxpayers to developers over 20 years, with most of it likely going to Detroit developer Dan Gilbert. Another bill passed by the Legislature proposed giving Foxconn, a Taiwan-based company that builds iPhones, up to $200 million. That money instead will go to other corporations because Foxconn chose to locate a new plant in Wisconsin, another deal that has canceled, but may have been renewed in recent weeks.