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Tue, 21 Jan 2020 21:01 GMT

Amazon Cancels New York HQ, Pays Minus 1% Income Tax in 2018

Science & Technology

Benjamin Schmidt

Fri, 15 Feb 2019 21:18 GMT

Amazon has cancelled its plan for a massive new corporate campus in New York City on Thursday, February 14, after facing an unexpectedly fierce backlash from lawmakers, union leaders and public activists, who argued that the new headquarters 25,000 high-paying jobs were not worth the more than $2 billion in government incentives the firm would receive.

The decision was a surprise turnaround by the company after a high-profile search for a second headquarters during 2018, which ended in a November announcement of two new sites: one in Long Island City, New York, and another in Virginia across the river from Washington, DC.

The cancellation was a blow to the efforts made by Governor Andrew M Cuomo and New York City Mayor Bill de Blasio, who supported the new headquarters in an effort to diversify the city’s economy with a larger technology presence.

Giving or taking

Local politicians, residents, and activists were dismayed by how much New York had agreed to give away to secure the deal. In addition to more than $2 billion in tax benefits and incentives, the plan involved an agreement to circumvent the city council to avoid future roadblocks and to build a helipad for Amazon’s CEO Jeff Bezos.

Initially, some had welcomed the announcement of the new Amazon campus. The New York business community, some unions, and some within the nearby public housing expressed optimism that the project would bring jobs, according to the New York Times. Two polls revealed the new headquarters had broad support around the city and state.

Others, including former New York mayor Michael Bloomberg, expressed reservations about the deal’s incentive package. Others lamented the decision by New York politicians to use public subsidies to entice wealthy companies, while failing to address rising costs of living that are gentrifying neighbourhoods and harming communities.

“A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward,” Amazon said in a statement on Thursday February 14th.

Tax-free Amazon

The image of a company living large at government expense was underlined further by a Thursday February 14 report published by the Institute on Taxation and Economic (ITEP) policy that showed that the tech giant would not be paying any federal taxes for the second year in a row. This result came even though the company nearly doubled its US profits from $5.6 billion to $11.2 billion between 2017 and 2018.

The think tank pinned the result on the corporate tax passed in 2017 that lowered corporate tax rates from 35% to 21% and failed to close “a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits.”

Indeed, Amazon reported that it received a tax rebate of $129 million in 2018, effectively giving it a tax rate of -1%. According to The Week, Amazon paid an 11.4% federal income tax rate between 2011 and 2016.

Amazon’s zero-tax payments have drawn criticism from both left-wing senator Bernie Sanders and president Donald Trump. “Amazon pays little or no taxes to state & local governments, use our Postal System as their Delivery Boy (causing tremendous loss to the US), and are putting many thousands of retailers out of business!” tweeted Trump on May 29, 2018.

Too little, too late

Two people with knowledge of the discussions inside the company told the New York Times that Amazon made its decision late Wednesday February 13th, after growing increasingly worried that the backlash in New York would continue and tarnish the company’s image beyond the city. One official stated that mayor de Blasio had tried to contact Jeff Bezos, Amazon’s chief executive before the decision, but Bezos did not speak with him or with governor Cuomo.

The decision was a big win for 29-year-old insurgent progressive Democrat politician Alexandria Ocasio-Cortez, member of Congress for New York, who won a surprise electoral victory last year in the same corner of Queens where Amazon had planned its site.

Galvanised by Ms Ocasio-Cortez’ success in Congress, many of her supporters mobilized to protest the Amazon headquarters deal, helping swing opinion in New York’s state legislature against the decision.

Ocasio-Cortez was jubilant on Twitter on Thursday February 14th, stating “today was the day a group of dedicated, everyday New Yorkers & their neighbours defeated Amazon’s corporate greed, its worker exploitation, and the power of the richest man in the world.”

Later Thursday February 14th, Ms Ocasio-Cortez posted another tweet, which has since been retweeted 54 thousand times, condemning Amazon for avoiding spending money on taxes or on investing in the community. “Amazon is paying $0 in taxes on $11+ billion in profit. $0 for schools. $0 for firefighters. $0 for infrastructure. $0 for research and healthcare. Why should corporations that contribute nothing to the pot be in a position to take billions from the public?”

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