A dubious tax break for Amazon
Ohio is giving Amazon.com a tax incentive worth $270,000 over six years for locating a new sorting center in Twinsburg. The retailer is expanding its distribution facilities all over the country – including two much larger warehouses in central Ohio – to be able to deliver products more quickly. According to outside reports, the company has opened numerous sorting centers, including one in Pittsburgh and another outside Detroit. It appears that the new Twinsburg center will serve the Cleveland market. If as a result the facility could not have been located outside the state of Ohio, the award of such an incentive by the Tax Credit Authority is unnecessary and inappropriate.
The project is expected to create the equivalent of 150 full-time jobs (10 full-time positions and 300 part-time ones, according to the Twinsburg Bulletin) and an annual payroll of $4.056 million, or average hourly pay of $13 an hour.
Under Ohio law, the job creation tax credit approved for Amazon must be “a major factor in the taxpayer’s decision to go forward with the project.”
Policy Matters Ohio asked the Ohio Development Services Agency, which oversees the tax credit program, to describe the geographic area the new center would serve and whether any of its regular shipments would be sent outside Ohio. We also asked why a state subsidy was needed if this facility was devoted to serving the Cleveland area (and therefore needed to be located in Ohio).
The agency did not provide information on where the shipments would go. It said the Tax Credit Authority “evaluates several factors including whether a project is competitive with other states or countries, return on investment, capital investment and job creation…” It said it would monitor job creation if Ohio is chosen for the project and an agreement is signed. “It’s up to the company how they operate and run their business,” the agency concluded. We similarly emailed the company to ask what geographic area the center would serve, and whether it was expected to serve any area outside of Ohio. As of today, we received no response.
A state tax credit that goes to a company that would have located in Ohio anyway is a diversion of funds that could instead have paid for valuable public services, be it allowing more students to attend college, ensuring that babies survive to their first birthdays, or dealing with the growing drug problem to name a few. The incentive is a small one compared to others Amazon has received for other, larger facilities it is locating in Ohio. But the state should ensure it is wisely spent. In this case, we can’t be sure this award was appropriate without more explanation.