TODAY:

The real cost of Amazon.

Amazon had a good Thanksgiving weekend. And Jeff Bezos — already the richest man in the world — is even better off as a result. He’s now estimated to be worth a cool $100 billion. With a “b”.


Last year, Amazon paid 13% tax (federal, state and foreign combined). That’s half the average rate for the Standard & Poors 500 (26.9%). It’s also well below the 20% rate Trump promises will unlock jobs and growth.

But apparently it’s still too much.

There are now 238 cities battling to host Amazon’s second headquarters (HQ2). And they’re sparing no expense to hook the biggest fish in the pond.

Chicago has offered to give the company the $1.32 billion Amazon workers cough up in payroll taxes. That’s right: the employees would pay their taxes… to Jeff Bezos, and not the city’s schools, roads and first responders.

Fresno will put 85% of the taxes paid by Amazon into a special fund which will be controlled by… Amazon. (NB: Technically, the fund will be run by a board consisting half of Amazon executives and half city officials.) The money is to be spent on improvements in the area around HQ2.

The rest of the city is stuffed.

The only thing that’s new here is just how low would-be host cities are willing to go. “Incentives” have been around for decades, but it’s only in recent years that the amounts have gone insane.

Connecticut is making a $200 million down payment on what could be a $2 billion payout to Foxconn, the company famous for making iPhones in Chinese factory complexes that have anti-suicide nets outside the dorm windows. If the company delivers on its promise to hire 10,000 workers — and its record in this area is spotty — that’s $200,000 per job.

That’s a lot of money to pay for some pretty bad gigs. The UK’s Sun newspaper recently did an expose of the new Amazon warehouse there. Warehouse workers are expected to pick up and process an item every 9 seconds. Failure to do so results in dismissal.

Moreover many of these jobs have no future. Take a look at this video showing how highly automated Amazon warehouses are becoming.

So why do cities shoot themselves in the foot? For bragging rights. Fear of losing to another city. For the short-term bump that might get them re-elected. For the vain hope the deal will turn out to be good for the citizenry.

For the same reasons they pay hundreds of millions of dollars to build a football stadium that gets used 8 times a year.

The reality is the deck is stacked in favor of big companies. They can afford huge tax divisions (GE had 1,000 people working just on this) to minimize their liability. And they’ve got leverage over the locales where they operate.

Small businesses, however, have to pay their own way. And that makes it even harder to compete with the Amazons of the world.

If the GOP was serious about fixing the tax code, if the Dems were serious about the corporate wealth gap, this is where they’d focus.

But they won’t.

They’re too busy ordering stuff on Amazon.🔷


(Cover: Flickr / Scott Lewis - An Amazon warehouse.)


Author image
A Tokyo-based executive, author and inveterate traveller with an unshakeable conviction that the secret to happiness is eating well.
Tokyo, Japan. Website

About us | Our Writers | Disclaimer | Terms & Conditions | Privacy Policy | Submissions | Code of Conduct


No part of this publication may be reproduced or used without the express permission of the publisher.