What price should Mass. pay to lure Amazon?
Forget the 21-foot Saguaro cactus from southern Arizona businesses or the silly Alexa video from the mayor of Washington, D.C.
Beacon Hill policymakers and insiders agree they don’t need gimmicks to lure Amazon’s new headquarters when Massachusetts can emphasize the state’s strong education, technology, and innovation infrastructure.
But that’s where the consensus ends.
The economic pragmatists, Democrats and Republicans alike, say it’s worth rolling out a green carpet of economic enticements to secure the transformational economic opportunity that Amazon — and its pledge of up to 50,000 new jobs and $5 billion in capital investment — promises.
The progressive purists say the state should eschew so-called corporate welfare, and that one of the world’s largest retailers ought to take the state just as it is.
And then there are those cautiously open to sweetening the deal for Amazon, but deeply worried about the state’s taxpayers getting hosed.
They don’t want to be seen as scuttling a once-in-a-lifetime opportunity for a massive influx of jobs and investment. But being a rube dazzled into backing up a Brink’s truck of taxpayer dollars for Amazon is a look they want to avoid, too.
Aides to Governor Charlie Baker expect the state’s Amazon proposal to contain some financial incentives, just like Massachusetts has offered to many companies promising lots of high-quality jobs. And, under current law, the Republican has flexibility to offer Amazon tens of millions of dollars in grants and tax credits. (By way of comparison, the state snagged the relocation of GE’s headquarters with the help of $125 million in assistance for the company’s new Boston campus.)
But the broad sweep of Amazon’s proposed second headquarters — HQ2 in the Seattle-based company’s argot — will likely demand an even bigger economic package, experts say. And that means the Democratic-controlled Legislature will probably have to get on board, because the governor is limited in the grants and incentives he can give to businesses each year.
In an interview, House Speaker Robert A. DeLeo was very enthusiastic about the idea of Amazon coming to Massachusetts, and referenced several passages from the company’s request for proposal by heart. He said our state is exactly what they are looking for.
But “beyond just meeting the requirements set forth in the RFP, there’s going to have to be some other enticements probably that are going to have to be discussed,” the Winthrop Democrat said. While Baker and his team have some flexibility to offer tax credits and grants, DeLeo said “something of this magnitude may require legislative involvement as well.”
That may be where things get tricky.
“I’d rather see the Legislature and the governor focused on combating income inequality than giving another large government handout to a company that does not need it,” said state Senator James B. Eldridge, an Acton Democrat and one of the chamber’s most liberal members. “I don’t think the state should be offering any incentives to Amazon.”
Senator Patricia D. Jehlen, a Somerville Democrat and stalwart progressive, was equally blunt.
“I think a wise investment policy for them would be to look at which place would offer the biggest long-term advantages,” she said, “not for which place will offer them the largest bribe.”
State Representative Marjorie C. Decker, a Cambridge Democrat, said she could imagine real pluses from Amazon coming to town. But, she added, “my inclination is we should be very very careful about what we offer. I’m not inclined to think that the benefits to the state would offset huge tax breaks for them. And I’m cynical about how Amazon has approached this: it feels like they’ve set up a dog fight.”
Asked about the sweep of economic enticement he would be comfortable with, Senate President Stanley C. Rosenberg, who leads a chamber seen as more liberal than the House, was circumspect.
“Given how big the corporation is, I don’t think their needs are probably expansive,” the Amherst Democrat said. “Much of what they need, Massachusetts has. And it has nothing to do with creating a pile of incentives. It doesn’t mean that there can’t be any, but let’s start with the understanding of what the Commonwealth has to offer.”
So how big an enticement might the state be offering?
Timothy J. Bartik, a senior economist at the independent W.E. Upjohn Institute for Employment Research, said state and local incentives average about 3 percent of wages annually, according to data collected from 2001 through 2015.
What does that 3 percent actually mean? He did some back-of-the-napkin math.
Amazon has said the jobs at its new HQ will average compensation of at least $100,000. So that would mean local and state incentives like tax breaks of at least $3,000 per job per year if the state were to be in line with the national average.
Multiply that by the up to 50,000 new full-time jobs it is promising and that equals $150,000,000 per year in economic incentives “which would be quite a subsidy,” he said.
Of course, it would take Amazon many years to ramp up to that many jobs, if they ever get to that level. But it offers a ballpark estimate of the big investment a state might be expected to offer up.
Business interests say the pluses of luring the online retailer are manifold.
Amazon would have a positive impact on the state’s reputation that would draw other companies, create a huge influx of new tax dollars from all the new employees, and lead to secondary and tertiary jobs among vendors, said John Regan of the Associated Industries of Massachusetts. All that “should be factored into the conversation about what you need to be able to do to help Amazon make a favorable decision when it comes to Massachusetts.”
But among progressive thought-leaders and union officials, there is already profound concern about a gilded Amazon invitation.
“I’m not so sure it makes sense to give tax incentives to enhance the decline of regular retail jobs,” said Massachusetts AFL-CIO President Steven A. Tolman, expressing worry about Amazon’s impact on local establishments.
“If a company needed help with a piece of infrastructure or job-training. . . . I’m all for that kind of thing,” said former governor Michael S. Dukakis. “But this business of offering huge tax breaks to these kind of companies has become a racket. Frankly if I were governor, I wouldn’t have anything to do with it. I don’t think this state needs to play this game.”
But, according to interviews with several insiders, the state almost certainly will “play the game” — after all, you can’t win if you don’t play.