December 9, 2014
Amazon invades New York, gets millions in tax breaks
by Nick Davies
As you might have heard, Amazon is opening up shop in New York City, with an office/warehouse (where customers can pick up purchases made online) at a space across the street from the Empire State Building. Now, Freeman Klopott reports for Bloomberg, the company is getting a multi-million dollar tax break from the state.
Vornado Realty Trust approved a 17-year lease agreement for Amazon’s new base in New York (at 7 West 34th Street) last month, reportedly giving Amazon the whole midtown building. Now that they’re moving in, Klopott writes, they’re going to benefit from a New York State program that offers tax incentives to companies that do business here—to wit, some $5 million in return for creating 500 jobs for New Yorkers.
President of Empire State Development Kenneth Adams said in a statement to the press, “We are proud to have attracted Amazon’s latest expansion and are excited about the 500 new jobs their move will create. We look forward to building on our partnership and wish them continued success in the Empire State.”
It seems rather counterintuitive for a huge company like Amazon to be getting such huge incentives, as Ben Fischer writes for the New York Business Journal. He points out that traditionally, these tax breaks are given to businesses “holding a uniquely important position in a local economy,” which “need help to grow or adapt.” In other words: not Amazon. Fischer points to Startup New York as an example of a program that provides incentives to new businesses, and which specifically excludes retail and wholesale businesses from participating.
Under Governor Andrew Cuomo, though, the Excelsior Jobs Program has gone in a different direction, “to keep an outsized share of already-successful companies’ growth here, companies that certainly don’t ‘need’ it.” It makes sense for the state, Fischer points out, because without such incentives, big businesses have the flexibility to pick and choose another base of operations with cheaper real estate and lower taxes than New York City.
Other companies—such as CBS, Vice Media, and Etsy—have recently benefitted from the tax breaks, and after the Etsy announcement, James Parrott, chief economist of the Fiscal Policy Institute, spoke to Crain’s New York Business, wondering what these deals say to smaller businesses. He told Crain’s: “One has to wonder what taxpayers, particularly those who own small businesses, think about the state giving $5 million to a prosperous company that has already signed a big, new lease and touts the fact that it ‘can only exist in Brooklyn.’ I think it breeds cynicism that government doesn’t know what business it is in.”
As of the Bloomberg report on Friday, an Amazon spokesperson had not responded to requests for comment.
Nick Davies was a publicist at Melville House.