Delaware can lead by ending corporate tax giveaways to Amazon

The News Journal | Opinion | by Rep. John Kowalko and Pat Garofalo

In 2011, Amazon received about $3.5 million in taxpayer subsidies to build a distribution center in New Castle. In 2020, it received another $4.5 million for a facility in Newport. In between, the state attempted to win Amazon’s “HQ2” facility – and while officials won’t confirm the dollar amount offered, Gov. John Carney said it was “a pretty big number — the largest number I’ve ever seen as it relates to economic development projects here in our state.”

Delaware isn’t alone, of course. Taxpayers across the country have contributed more than $4 billion to Amazon, according to the research organization Good Jobs First, mostly to help the online giant build out its warehousing and distribution network. And they’ve gotten very little for their money. Instead, this taxpayer largesse has simply allowed Amazon to build and entrench its monopoly power, harming local business and national competitors alike, as it seeks to insert itself into ever more facets of the American economy.

It’s time to stop the handouts. Not only should states and municipalities cease doling out subsidies to Amazon, but they should take additional steps to reduce its power and ensure local workers and businesses receive fair treatment. Doing so would make everyone better off, except perhaps those who work in Amazon’s executive suite.

Those who argue for more Amazon subsidies base their position on two interlocking claims: That the subsidies are necessary to bring new Amazon facilities into a particular community, and that new Amazon facilities create jobs and beneficial economic activity. Neither claim holds up to scrutiny.

First, Amazon clearly builds new facilities where there is a critical mass of Amazon Prime subscribers, disposable income, and easy access to transportation infrastructure such as highways and airports. And that makes perfect sense: Amazon uses its distribution network to reach customers, so it builds wherever that aim will be achieved most easily. That’s why it’s constructed several new warehouses without any subsidies or tax breaks at all, in states as diverse as Connecticut, New Mexico, Texas, and California. Delaware is well situated to have a thriving distribution and warehousing industry that stands on its own, free from taxpayer supports.

But even if Amazon were making specific location decisions based on subsidies local leaders would still need to be wary of doling them out, because of the precarious and abusive nature of many Amazon jobs, which are a far cry from the high-paying, unionized positions the American economy was once built on.

Delaware has specifically experienced this dynamic: The Amazon facility on the grounds of the former GM plant pays a rate far below what those former manufacturing positions paid. While Amazon touts its supposedly high wages, generally paying $15 an hour, it actually drags down wages in the warehousing and distribution sector, where pay is usually even higher.

And, of course, it’s well-documented that Amazon workers are heavily surveilled, down to the length of their bathroom breaks, and are injured at high rates, as the corporation’s push to get ever-more parcels out the door results in a punishing pace with which workers can’t be expected to keep up. As a result, turnover in Amazon facilities is extremely high, often reaching and eclipsing 100% a year.

That is not the sort of foundation upon which communities should be building their economies. Indeed, by granting tax breaks to Amazon, states and cities are not only subsidizing low-road jobs, but are also harming their own local businesses by offsetting their competitors’ costs with state funds. This looks even more foolhardy in light of the evidence that local businesses are more likely to keep jobs and wages in the community and become involved in the local culture in a way a massive multinational conglomerate simply never will.

Indeed, a serious effort to boost Delaware’s economy and respond to the ongoing challenges presented by the COVID-19 pandemic requires cutting any program that subsidizes large corporations like Amazon, and redirecting funds to the workers and small businesses who need them.

Delaware should join with other like-minded states to form an interstate compact against corporate tax giveaways, to ensure the race to the bottom ends. And it can end some of the pernicious secrecy practices that hide subsidy deals from public scrutiny, such as non-disclosure agreements and public records act restrictions.

But that’s not all. The state can implement a digital ad tax, like that adopted in Maryland, to ensure that corporations like Amazon that increasingly control the entire digital ad market both pay their fair share and have to bear the cost of some of the negative externalities created by today’s surveillance-based advertising models.

Delaware can also increase resources for antitrust enforcement at the state level, or even adopt what’s known as an “abuse of dominance” standard for state antitrust law. New York and California are debating a similar measure that would make it easier to protect workers and small businesses from the abusive tactics of dominant corporations.

At the very least, though, we need to stop paying Amazon to undermine our own local economy, and reinvest in the areas that bring true prosperity to our communities.

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