The Amazon Effect: How taxpayers are funding the disruption of the U.S. economy

By Craig M. Douglas  –  Director, Editorial Research & Analysis

Amazon founder Jeff Bezos has built a net worth of roughly $85 billion with the sort of discipline and scale refined by corporate titans before him — Rockefeller, Ford and Gates among them — though no one has so efficiently tapped America’s collective impatience and love for a bargain. What Albuquerque’s favorite son is accomplishing, and the ruthless speed at which he is accomplishing it, is unprecedented.

He’s had lots of help along the way.

Americans have supported the Bezos surge in two distinct ways: by buying everything from dog food to diamonds on and by kicking in at least $1.24 billion in taxpayer-funded subsidies and incentives that have fueled the company’s growth across the country. That figure does not include hundreds-of-millions of dollars in additional breaks from deals to phase in state sales taxes, nor does it include dozens of hard-to-quantify tax abatements and land arrangements struck with a mosaic of towns, counties and school districts along the way.

Those subsidies, aggregated in a Business Journals analysis of public records and financial filings from across the United States, have helped support the expansion of Amazon’s sprawling network of more than 257 sorting and distribution centers, a 141 million-square-foot portfolio of facilities that house hundreds-of-thousands of workers in 33 states. The company has millions more square feet in Class A office space as well as a rapidly expanding portfolio of data centers managed by Amazon Web Services Inc., arguably its fastest-growing division and a
beneficiary of more than $229 million in known taxpayer subsidies.

Competition – and a degree of
desperation – have been key to Amazon’s well-honed strategy for maximizing taxpayer support. For example, the company has proven shrewd at pitting states and communities against one another by leveraging the allure of new jobs and the cachet that comes with landing a major technology company.

What Amazon delivers is usually something more mundane.

Cities throughout the country’s wilting industrial hubs have been particularly eager to step up to Amazon’s demands, even though the company’s quick-turn delivery model requires proximity to the one asset they all
possess: customers. But the incentives keep coming, totaling around $100 million in South Carolina, more than $127 million in Ohio, and millions more in the neighboring Rust Belt and Coal Country states of Pennsylvania, Michigan, Kentucky and Illinois.

Never mind that Amazon’s massive fulfillment centers are accelerating the company’s disruption of retail markets. Or that what it often provides in return for taxpayer subsidies are low-wage warehouse “functions” that, by the company’s own admission, are likely to be replaced by robots someday.

It’s all happening with the full-throated – and in some cases high-fiving – support of local officials.

Interviews by The Business Journals with dozens of public officials and reviews of documents received through public records requests have turned up little in the form of skepticism or concerns voiced by community leaders when Amazon comes to town. Few have asked whether subsidizing Amazon’s expansion is worth the cost, or how a company with around $30 billion in cash can possibly have a “need for funding,” as it was phrased in a recent subsidy application in Michigan.

Instead, The Business Journals found examples in which elected officials waived wage requirements to enable Amazon to qualify for a particular subsidy or incentive plan. Their rationale, repeated by local officials interviewed by The Business Journals: Any job is better than no job.

Those dynamics will be on full display in the weeks ahead, as the Seattle-based company seeks bids from U.S. cities to house “HQ2,” a proposed second North American headquarters expected to host up to 50,000 workers. Analysts suggest the winning bid will require billions of dollars in pledges of taxpayer support. Cities are lining up to throw a hat in the ring.

Few would wager that HQ2 represents an end game for the 53-year-old Bezos, or that his charges into e-commerce, rocket ships, groceries, publishing and political lobbying in Washington, D.C., will satisfy what appears to be an insatiable appetite for growth. The Bezos juggernaut has always been something of a work in progress, where the possibilities for new products and customers are endless.

It is a mastery for disruption that has spread to all corners of the U.S. economy and sent a shot across the bow of entire industries and regulators alike. What comes next could very well affirm, or suffocate, the notion of the American Dream.

Dallas Business Journal link can be found here
October 11, 2017

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