Amazon Tax Subsidies Are Inefficient Job Creators

For decades, state and local governments have lured big businesses to their communities with lucrative tax breaks in exchange for the promise of new jobs and economic activity. Amazon
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, one of the world’s most valuable companies, has been among the biggest beneficiaries of this practice — but a look at the data shows that massive taxpayer-financed subsidies for the tech giant in the name of job creation are woefully ineffective.

Governments have long been tantalized by the perceived benefits of Amazon moving into their neighborhoods. Between 2000 and 2022, Amazon has received more than $5 billion in subsidies as part of deals with communities to build fulfillment centers. The goal is understandable: Officials want to create jobs and grow local economies.

Unfortunately, as my colleague Matthew Winden and I found in a new study, the return on investment for Amazon subsidies is dismal. In fact, according to our analysis, governments spend $43,000 for a single job created via an Amazon fulfillment center subsidy — a job with average wage well less than that amount.

Simply put, if the goal is to create jobs, handing out tax breaks to Amazon is poor policy.

For our study, we obtained a data set from Good Jobs First containing relocation subsidies provided by governments to Amazon in the U.S. and used data on regional employment, wages, and economic activity to estimate the efficacy of the subsidies at creating jobs. By our calculation, $1 million in subsidies created 23 fulfillment center jobs in the initial year of the project.

Making matters worse, Amazon has been shedding fulfillment center jobs over the past year as it recalibrates its post-pandemic financial outlook. During the height of the pandemic, Amazon expanded its fulfillment center and transportation network to keep up with the e-commerce boom, but excess capacity post-pandemic has resulted in cuts to operating costs. As a result, Amazon has shuttered, canceled, and delayed the building of fulfillment centers — some in those same communities it took subsidies from — and eliminated local jobs in the process.

According to MWPVL International, a global supply chain and logistics firm that tracks changes to Amazon’s global distribution network, Amazon has closed, canceled, or delayed nearly 100 facilities across 30 states since 2022.

This is a big blow to communities like Shakopee, MN, where Amazon recently announced it would close its 850,000-square-foot, 680-employee fulfillment center. The facility opened in 2015 after the town of about 44,500 committed $5.7 million in roadway improvements in a deal with Amazon. While Amazon offered the facility’s workers the opportunity to transfer to different facilities in the area, the town will no longer realize the economic returns on its investment.

What’s clear is that government subsidies to specific companies have accomplished relatively little and are an inefficient way to create jobs. Counties and municipalities should instead pursue job growth by focusing on improving the business and social environment of their community rather than giving away millions in taxpayer money with no guarantee that the economic promises will ever be fully realized.