Amazon decided to split up its proposed “HQ2” facility between New York and Northern Virginia, promising about 25,000 jobs for each. New York politicians chased Amazon out of their New York plan.
The payments that Amazon will get for their Northern Virginia headquarters (in addition to tax reductions) are many and varied, coming from all levels of government. Arlington, Virginia will direct a portion of its hotel tax to Amazon.
Arlington’s payments would come from an expected increase in taxes on stays in hotels, motels and other lodgings, which the county expects to grow significantly once Amazon arrives. Fifteen percent of any increase in those taxes would go to Amazon, the agreement says, provided that the company meets specific targets for how much office space it occupies.
Amazon is assumed to be responsible for some of the increase in revenue and gets to ‘eat what it kills.’ Taxes on visitors are always dangerous. They make trips more costly, discourage visits, but visitors don’t vote. That makes them seem ‘free’ to voters.
(HT: Marginal Revolution)
It’s too bad that Arlington/Virginia didn’t pull a New York and tell Amazon to go pound sand when facing Amazon’s demand for being further subsidized by taxpayers.
Hey, be a sport. Jeff Beezlebubos, the world’s richest man (145b at last count) needs the cash. It’s fr the kids. Wealth redistribution is all the rage. Anyone who knows anything about the Commonthieves of Virginia will know that they tax anything that moves – and doesn’t.
Alexa, go take a hike.
I have been living in New York city for a long time. I have never liked the fact that big businesses in New York get a break from taxes and regulatory burdens through insider deals while everyone else gets whacked by oppressive taxes and regulation. To me, it has always stunk of crony capitalism. The New York Amazon deal stunk to high heaven. It sounds like the Arlington, Virginia deal is even worse.
Before anyone rags on Amazon — oops, too late — note that, contrary to what the headline implies, Amazon gets a percentage of the INCREASE it creates in visitor tax.
The net additional taxes are a boon to the state, which could be used to help the poor. It’s very clear that the socialist whiners hate corporations more than they love the needy.
I’m no fan of Bezos, but am bewildered so many folks have a problem with incentives.
Amazon is a public company with the ticker symbol AMZN. If you own a mutual fund, index fund, private retirement account, or a state retirement account, most likely you have invested in AMZN. Bezos has a duty to his stockholders to make the best deal possible. Most of us have a stake in AMZN, direct or indirect. If the government is handing out tax breaks/regulatory breaks/money, Amazon should take it. To paraphrase another famous man, you cannot blame a company for operating in its own best interests.
Yes, we in DC are terrified that people will stop visiting because of higher hotel taxes in Arlington. Please. Discourages visitors? People who are going to visit DC are going to visit DC. And Arlington has a large number of the metro accessible, airport shuttle hotels in the area. So I don’t see a problem. Why tax residents when you can tax visitors? I travel a lot. I don’t like paying taxes when I travel but I’ve never said wow here’s this amazing place I want to go but those taxes are just too high.
It will be all Amazon employees staying there.
Like does anyone go there on vacation???
Rob calls it incentives and I call it payoff or bribe. The mafia asks for payoffs for protection. Protection of jobs is the Amazon way. Not much difference.
@Emily. Exactly. I couldn’t agree more.
@Dana-Yes, people who want to visit Washington, D.C. stay there. Arlington is one Metro stop from D.C.
Two additional thoughts:
(1) Suppose business B is competing with Amazon. Amazon gets a tax break, B does not. B is going to be at a disadvantage when competing with Amazon.
(2) If the Amazon deal makes sense for Arlington (or New York), why doesn’t Arlington (or New York) clone the deal and offer the same deal to everyone.
Items (1) and (2) is what makes it unfair.
@Rob. Amazon-one of (the?) richest and most powerful companies in the world, had 11 billion in profits last year. They paid ZERO federal taxes. Meanwhile, the middle-class does not pay nothing in taxes, far from it. Corporate welfare doesn’t work. It just ends up being almost blackmail by huge corporations. Look what the professional sports team do-oh, build us a brand new stadium or we’ll jump ship….
@other just saying,
If another company agreed to bring 25k high paying jobs ($150k+) to Arlington, I’m sure they would get a similar package. Just not many companies with that ability. Really, only 5-10 in USA.
Also, Gary’s article is kinda clickbait and poorly explained. This is a great deal for Arlington. The County gets a big share of the tax benefit in form of office occupancy taxes (key point – Amazon is going to occupy a huge amount of office space that is currently empty due to past two BRACs killing Crystal City) while the Commonwealth pays the vast majority of the incentives.
As an Arlington home owner, after much research, I am thrilled with the deal. It’s not nearly as good a deal for Virginians living outside Arlington.
Also corporate welfare is bad, yeah agree. But this is where we are in America today.
@Dan. My point is, if you gave 100 smaller companies a tax break plus a % of increased hotel taxes, you might get just as many jobs. Of course, it is impossible to know. My argument is a little stronger in New York city, because I am not sure 100 smaller companies would want to move to Arlington. Personally, I would rather move to Cleveland.
I don’t understand why whoring ourselves out for the lowest rate to woo a group is acceptable in this country. If it was Mississippi trying to get them then I get it BUT when Rich(er) cities step over themselves it’s embarassing and more importantly it creates a bad standard. Go give your 5 year old a new iPhone and tell me they’re happy driving a used Honda Civic when they get their license.
This article is misleading. There is no increase OF the hotel tax rate, it stays as it is. The city just expects more visitors once Amazon moves in, probably from business visitors. Amazon will get 15% of the hotel tax revenue from any increased tax revenue generated by the additional visitors.
An example. Say the city earns average $500k from hotel taxes a year now. The tax rate does not change. After Amazon moves in, more business visitors arrive and hotel tax revenue goes up to $600k. Amazon would get $15K while the city gets $585K. Win for Amazon and win for the city. Cost the city NOTHING! This is NOT corporate welfare as 85% of an increase is better than 100% of nothing. It is not dangerous, it is not nefarious, it is not stealing from the city or taxpayers or the poor. New York has stupidly chosen to keep 100% of nothing.
Thank you for coming to Las Vegas. You’re paying for the majority of our new $2 bill football stadium.
Same/same. Maybe I can order Prime Now delivered to my seat.
I have some background knowledge in planning (developments), land use, and taxes from working in local government. This is what I see; “incentives” to draw companies to an area like payments in lieu of taxes or tax abatements are total bullshit. This is why….the ratables chase ( anything besides housing that the government can tax, stores, corporations, commercial buildings) is self defeating. Local governments woo companies to offset property taxes (homeowners), at least, in theory. By giving away builders’ candy (tax abatements of any nature) you are cutting your own tax throat. The company comes in, brings their employees which creates a higher demand for housing. Housing prices go up in a false bubble, and the homeowners pay more taxes because their house is worth more. The roads, infrastructure, police, fire depts., all need more improvements because of the extra stress on them. More people means more school kids & higher education costs. Who pays for that? The homeowners, whose taxes were supposed to go down from the wonderful corporation, but since the tax abatement they got means that they pay little to nothing, in reality the homeowner pays more. When that abatement ends and the town says pay up, they say, well, maybe a little, because we can pack up and go to somewhere else, and they will. Then the town’s artificially high real estate bubble pops, and houses are worth less. But the homeowners’ taxes don’t go down, and they get left with the mess afterwards.