Amazon’s announcement this week that it has split its new headquarters into two locations – one in Long Island and the other in Arlington, VA – highlights the rampant bidding war states are engaging in. State governments are willing to throw billions of taxpayers dollars to one of the already richest corporations in the world:
Amazon will receive performance-based incentives from New York state worth $1.525 billion, the company said, which means it won’t receive the money unless it fulfills its promise to create 25,000 new jobs.
Of that $1.525 billion, it will receive a refundable tax credit worth as much as $1.2 billion over 10 years for the salaries it will pay workers. That equals about $48,000 for each of the 25,000 jobs it creates – of which the tech giant claims the average wage will be over $150,000…
Virginia and Arlington will offer Amazon $573 million in direct performance-based incentives, including a workforce cash grant of as much as $550 million
Arguably, part of the reason these states had to offer such generous tax breaks and handouts is because of their state corporate income tax: 6.5% in New York and 6% in Virginia.
Such targeted corporate welfare of course places more control over the economy into the hands of politicians, and encourages greater political patronage and corruption.
One great way to significantly reduce the corrupting influence of the corporate welfare game and to create a more fair playing field for businesses is to eliminate the state corporate income tax. North Carolina’s corporate tax is scheduled to fall to 2.5% in 2019 – the lowest rate of any state imposing one. The state corporate income tax has been found to be the most destructive for job and economic growth, produces less than 5% of all state tax revenue, and comes with significant compliance costs on businesses.
Next year, legislators should consider axing NC’s corporate tax to create a more business friendly, and corruption unfriendly, climate.