Tax incentives, large corporations and real estate markets

Our article about the impact Amazon has had on the Seattle real estate market has prompted a number of questions. On the surface we can see the enormous benefits Amazon has brought to the Seattle economy but how has this benefited Amazon and Amazon shareholders?

Tax incentives

Is it fair to suggest that companies such as Amazon which has invested an enormous amount of money, time and effort into its Seattle headquarters should receive some appreciation from the local authorities? The more traditional form of local authority appreciation comes in the shape of tax incentives or part funding of a company’s expansion plans by the local authority itself. This may take in cold hard cash or perhaps the transfer of land which the company could use to expand its operations.

Tax incentives
Tax incentives, large corporations and real estate markets

We live in a world where “you scratch my back and I will scratch yours” is a common attitude amongst both local authorities and large corporations. So, not only do the likes of Amazon invest an enormous amount of money on their expansion plans but a large percentage of the wages they pay their employees will find their way into the local real estate market/local economy. Let’s remember that large corporations pay an array of different taxes/contributions on their employee’s wages so perhaps they are entitled to some form of tax rebate when expanding?

Real estate

Demand for rental property has gone sky high in Seattle so much so that the local real estate market is currently seen as one of the “hottest in the US”. So, while Amazon as a company has had a major impact upon the local real estate market it does not receive any fiscal benefit directly or indirectly. When you bear in mind the number of property valuations which have benefited from sky high demand in Seattle (and the cumulative wealth Amazon has added), again, surely there is an argument for “giving something back” to the likes of Amazon in this instance?

While Amazon is a perfect example of a large corporations influence on the local real estate market, it is also worth noting the company has placed a ceiling on expansion plans after 2022. There may be a counter argument to suggest that a halt in further expansion in Seattle does not warrant additional tax incentives but let us look a little deeper. Amazon has put the Seattle real estate market on the map, Amazon has attracted many different companies to the region and the economy today is reliant on Amazon to a certain extent – and is almost unrecognisable to that before Amazon arrived.

Battle for investment

Again Amazon is a perfect example of a corporation wielding power with the local economy. We know that Amazon has placed a ceiling on expansion in Seattle after 2022 but it has also announced plans to build a new headquarters to sit beside the Seattle operation which will be of “equal size”.

If you were a local authority in the US surely you would look to use tax incentives to attract this investment? The local authorities only need to look at the impact in Seattle to see the potential short, medium and long-term benefits such an investment would bring. In reality state/local authorities across the US would be foolish not to incentivise the likes of Amazon to choose them as their next head office location. The potential long term pay back levels could be astronomical!

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