New Amazon seats: public subsidies spark criticism

While New York and the suburbs of Washington savor the fact of having obtained the establishment of two new seats of Amazon, the debate rages in the United States on billions of dollars of incentives offered by these communities to attract the giant of online commerce.

Long Island District in New York and Crystal City in Virginia, on the edge of the US capital, are the lucky winners of a month-long competition to attract two megastites where Amazon promises to create a total of 50,000 jobs, with 5 billion US dollars of investments to the key.

But this windfall does not impress detractors, who warn that the amount of tax incentives and state investments ($ 3 billion for New York and $ 2.5 billion for Virginia) could erase the economic benefits brought by the company. .

It is common in the United States for a group seeking a location to seek incentives. According to a report by the Brookings Institution, about $ 90 billion is offered every year to businesses by states and local governments.

Michael Farren, an expert in business relocation at George Mason University in Virginia, believes that these incentives rarely make a difference in group decisions.

"Offshoring decisions of companies are based on factors that have a deeper impact on the company's profits, such as the availability of a skilled workforce," he explains.

He notes that Amazon could have obtained even greater tax benefits if he had crossed the Potomac River to settle in Maryland, north of Washington, where he was offered more than $ 8 billion, or in Newark near New York, which put $ 7 billion on the table.

"Profit company"

Such financial support arouses criticism from those who say that Amazon does not need to be a "profitable enterprise".

"One of the richest companies in history should not get taxpayer support while too many New York families are struggling to make ends meet," the Democratic senator in New York protested. York Kirsten Gillibrand.

On the right too, the subsidies granted to Amazon have moved. "Arrangements like Amazon or other big groups are pure cronyism. It is appalling! "Wrote the conservative economist Véronique de Rugy in the National Review.

For Mr. Farren, these subsidies distort the economy. According to him, cities should focus on improving education and infrastructure rather than the manna provided by a company to make places to live and work attractive.

But Tom Stringer, of BDO's real estate consulting firm, says that heartbroken people can not read the fine print. According to him, contracts are structured as "payment programs as and when".

"If Amazon does not deliver [promised terms], it does not benefit financially. Taxpayers are pretty well protected, "he told AFP.

Nevertheless, the issue of these public subsidies has become a major concern, not only about Amazon, but also in the case of Foxconn, a Taiwan-based electronics company, Apple's subcontractor in particular, which has promised to build a factory in Wisconsin.

The transaction with Foxconn provides subsidies of $ 3 billion - up to $ 4 billion - to create 13,000 jobs. This amounts to a grant of more than $ 200,000 per job created, compared to about $ 20,000 per job for Amazon.

The Foxconn deal, announced by President Donald Trump, contained "very unusual" elements, contrasting with those of Amazon, said Stringer.

Wisconsin Governor Scott Walker, who negotiated the deal with Foxconn, was not re-elected this month due to worries over rising costs and a possible drop in jobs created .

Other major groups have begun to recognize the problems posed by the tradition of public subsidies.

Walt Disney Co. has sent a letter this year to the city of Anaheim, California, calling for an end to tax breaks on the grounds that they have created an "acrimonious climate".

Fiscal incentives, however, remain "of paramount importance" to attract business and stimulate economic development, real estate expert Tom Stringer assures. "It's mocking the world to say they do not make a difference."

But communities need to be "tough on negotiations so that both parties benefit from these agreements," concludes Darrell West, head of governance studies at the Brookings Institution.