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Amazon Is Thriving Thanks to Taxpayer Dollars
The tech giant has received more than $1 billion in tax breaks. The government is also funding food stamps for many of its workers.
January 9, 2018
As Amazon builds up its distribution network, it’s hit on a trick long practiced by the likes of Walmart: using the federal government to help pay its workers. A new study by Policy Matters Ohio found that more than 700 Amazon employees receive food stamps, or more than 10 percent of the tech giant’s 6,000-strong workforce in the state. Some of those recipients may be part-time help, but the fact that they need federal aid to survive suggests that they would be happy to work more. “Why is this giant, successful company offering such limited pay and hours of work that many of its workers need help buying food?” asked Zach Schiller, research director at Policy Matters.
Amazon ranks nineteenth among Ohio businesses in number of employees on food stamps, behind Walmart, McDonald’s, and Kroger. But Amazon is only the fifty-third-largest employer in Ohio, suggesting a higher rate of employees on food stamps than its counterparts. More important, Amazon has obtained at least $123 million in state tax incentives to place warehouse and data center locations in Ohio. This reflects a perverse form of double-dipping: Amazon gets a bounty to create jobs in Ohio, and then a good chunk of the jobs are so low-paying that workers have to seek federal assistance, providing a second subsidy for the e-commerce giant.
Cities and states are offering Amazon eye-popping tax subsidies to win its second headquarters. But smaller, existing tax incentives have already made Amazon the leading recipient of so-called “economic development” subsidies in the country. According to Good Jobs First, a non-profit that tracks state tax breaks, since 2000 Amazon has received $1.115 billion in 129 communities in the U.S., rocketing past the previous leader in this category: Walmart.
This was the result of a concerted strategy by Amazon. In 2012, the company hired Michael Grella, a specialist in economic development tax credits. The company created an entire team just to seek out these subsidies, in a continuation of its strategy to work the tax code to its advantage—first by not collecting sales tax and offering an effective discount on every product, and more recently to lower the cost of building new shipping facilities.
If a city or state shells out millions of dollars to attract Amazon, the least it can do is ensure that the resulting jobs lift people out of poverty. When Ohio gave Amazon $17 million for two distribution centers in Licking County, Amazon promised to hire at least 2,000 employees with a payroll of $60 million. That comes out to $30,000 per worker, barely above the $26,208 poverty line. Amazon subsequently hired many more employees than that baseline, but payroll has remained so low that a healthy number have to turn to food stamps, as the Policy Matters Ohio report shows.
The famously grueling jobs in Amazon warehouses have also created strains on local services. Bloomberg reported in October that emergency responders visit the Amazon warehouse in Licking County at least once a day to attend to an injured worker. Local residents have to fund those forays because Amazon pays no property tax in Licking County under their subsidy deal. Voters approved a $6.5 million property tax levy in November to keep the Fire Department operational.
The largesse bestowed on Amazon in Ohio is incredible. A deal for three Amazon data centers netted Amazon a 15-year exemption on property and sales taxes worth $77 million, a $4 million offset to payroll costs, and $1.4 million in cash, and only committed the company to 1,000 full-time jobs. A sorting facility in Twinsburg, Ohio, would only have ten full-time jobs, with the rest part-time or seasonal. No matter: Twinsburg gave a partial property tax exemption worth $600,000. Another warehouse opening in Euclid, outside of Cleveland, has yet to yield details on what the state kicked in.
Most of these deals go through a privatized economic development agency called JobsOhio, which doesn’t require as much transparency as a public agency about what taxpayers are getting for their money. JobsOhio continues to defend the Amazon deals as good for the state, claiming that full-time warehouse workers receive 30 percent higher compensation than the national retail worker average. That figure doesn’t bear out compared to independent data reports from the Bureau of Labor Statistics, which puts Amazon wages 15 percent below the average wage in 11 metro areas, at only $11.96 an hour, a number roughly equivalent to the average retail wage.
Amazon CEO Jeff Bezos has a net worth of about $100 billion. Take that down to $99.5 billion and nobody working at any Amazon facility in America would need assistance to eat. But this is as much a problem with state and local governments who feel the need to give a fantastically wealthy corporation incentives to build facilities that are critical to its business model.
Amazon’s model of two-day or even same-day delivery of tens of thousands of products through its Prime service demands a large footprint across the country. If Amazon wants to live up to its shipping promises, they need to build warehouses virtually everywhere, beyond the roughly 140 fulfillment centers in operation today. “It requires at least one and sometimes multiple facilities in or near every major consumer market in the U.S.,” notes Good Jobs First in a report on Amazon subsidies.
So it’s not clear why any state or local government would pay Amazon to build something it already must build. Communities seeking jobs may feel the need to compete with neighbors to attract an Amazon warehouse. But to be as convenient as the neighborhood store, Amazon has to physically exist in the neighborhood. Any city with decent roads and a lot of Prime members will eventually become a candidate for a warehouse; they don’t need to top it off with a corporate handout.
If taxpayer dollars do keep flowing, governments have a duty to impose stringent standards for the number of jobs and the level of salaries and benefits that will result—and threaten to claw back the subsidies if those parameters are not met.
Economic development incentives don’t create jobs as much as they shift them around, pitting communities against one another for who can pony up the most corporate welfare. Companies rely on desperation in these communities, knowing they can win valuable incentives just by dangling a few low-wage jobs. But why aren’t they demanding that companies, in exchange for job-creation tax incentives, pay those new workers a livable wage?