- Chicago, Illinois wants Amazon to build its second headquarters in the city.
- The city’s official bid states that Amazon would be able to keep $US1.32 billion of the personal income taxes paid by its workers annually.
- Critics of the proposal say that Amazon would profit from tax money that would normally go toward investment in civic services and infrastructure, like schools and roads.
In the battle over Amazon’s second headquarters, some North American cities are going to extreme lengths to make their bids more attractive to the company.
One of the more aggressive bids comes from Chicago, Illinois – a city that is prepared to let Amazon keep $US1.32 billion of the personal income taxes paid by its workers annually. According to The Chicago Reader, employees would still pay the full taxes; but instead of Illinois receiving the money to use for civic infrastructure, Amazon would get to pocket it.
The result is that Amazon workers would essentially pay taxes to their own company. The practice is known as personal income-tax diversion, according to a 2012 report from Good Jobs First (GJF), a research organisation critical of many corporate subsidies. It’s unclear how Amazon would spend the funds if it chooses to build HQ2 in Chicago.
According to GJF, a growing number of states are subsidizing large companies, including Walmart, Google, Target, Sears, and Boeing. In 2012, the organisation identified 22 personal income-tax incentive programs in 16 states that involve the diversion of about $US684 million in revenue each year. Six of these programs have launched since 2009. In return, local governments are promised an increase in jobs and economic prosperity.
The Illinois program, called the Economic Development for a Growing Economy (EDGE) Tax Credit, grants 100% of employee taxes to participating companies for up to 10 years. Indiana, Mississippi, and Missouri have similar programs.
Since EDGE was created in 2001, Illinois has given over $US1.4 billion in tax money to companies – which would make the Amazon HQ2 deal unprecedented in value. In 2016, the state approved 888 of the 1,144 EDGE applications it received. Amazon got $US400 million in EDGE credits, which will go toward expanding its fulfillment centres and hiring thousands of employees in the Illinois towns of Aurora, Joliet, and Monee.
In September, Illinois voted to extend EDGE through 2022. According to the Illinois Department of Commerce and Economic Opportunity, the program is “intended to help Illinois compete with other states for the location of job creation” projects. It could certainly come in handy for the HQ2 competition.
NOW WATCH: Briefing videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.