Maryland’s Local Governments Shouldn’t Put Themselves on the Clearance Rack for Amazon

October 3, 2017 by Christopher Meyer in Blog, Budget and Tax, Economic Opportunity

Amazon’s increasing dominance of the retail sector has helped squeeze traditional retailers and local businesses, prompting many to offer deep discounts before ultimately closing their doors. Maryland cities and counties should avoid the same fate as they bid for the e-commerce giant’s new headquarters. Three Maryland counties plus Baltimore City have now joined dozens of other local governments across the country in the contest to lure Amazon. They should resist the temptation to give away millions in special tax breaks, which would damage Maryland’s ability to make essential public investments and would ultimately weaken our economy.

Photo of Amazon shipping facility

Image source: Scott Lewis, flickr (Creative Commons)

More than 100 local governments across the country have declared their intention to vie for Amazon’s second headquarters since the company announced its location search earlier this month. Baltimore City was the first in Maryland to do so, with Gov. Hogan’s endorsement. Prince George’s, Howard, and Montgomery counties soon followed suit. Amazon has made clear that it expects local governments to offer “incentives”—special tax breaks—as part of their sales pitch. Maryland officials would be wise to decline, for a number of reasons.

First, Amazon already enjoys more than enough special treatment in Maryland. Baltimore City gave the company one of the biggest tax breaks of any U.S. locale for its waterfront warehouse in 2015—even though a local hub is the only way Amazon can make the fast-turnaround deliveries at the heart of its current business model. Baltimore County is reported to be following a similar path. Rather than give out more tax breaks, we should make sure Amazon pays its fair share for all future facilities the company opens in the state.

Second, Maryland already has most of the advantages that will really make a difference in Amazon’s choice. When businesses decide where to locate their headquarters or any other facility, they pay close attention to business basics—things like a skilled workforce and access to reliable transportation networks. Tax breaks are a less important factor for the simple reason that state and local taxes aren’t a major cost component for most companies. Amazon’s announcement included a long list of attributes the company is looking for, and Maryland is a natural match. The majority of the state—including all four jurisdictions angling for Amazon’s favor—is within the Baltimore–Washington metropolitan area, the fourth-largest region in the United States. The state is home to elite universities and is one of the country’s best-educated states. While Amazon’s shareholders may appreciate tax sweeteners, Maryland’s strong fundamentals will ultimately make a bigger difference.

Finally, corporate tax breaks will only weaken the foundation of Maryland’s long-term prosperity. State and local revenues pay for the investments that make our economy strong—things like schools, roads, and health care. Investments like these will be all the more necessary if Amazon settles down in Maryland, since more jobs also mean more residents in need of housing, more cars on our roads, and more students in our schools. Businesses rely on these shared investments, so they should pay their fair share to make them possible.

Fortunately, local officials have options to avoid making a bad deal with Amazon. Most crucially, they should talk to one another. Since Amazon has made its criteria public, there is nothing to stop contenders from working together to ensure the company pays its fair share wherever it locates. Through skilled negotiation and recognition of their existing strengths, local governments in Maryland and elsewhere can make the new Amazon headquarters work for both the company and their communities.