Last week a seven-member appointed board met for a few minutes and committed to expending $40 million in Kentucky taxes over the next decade.
Their action — to provide tax incentives to internet marketer Amazon for an air hub at the Cincinnati airport in Norther Kentucky — was roundly praised by Gov. Matt Bevin and many others dazzled by the big numbers thrown out: average pay, including benefits, of $26 an hour, almost $1.5 billion in promised investment and 2,700 new jobs.
The trouble with the Amazon deal is that it is really impossible to tell what we’re getting for that $40 million.
Technically called tax expenditures, giveaways like that approved for Amazon now account for more money than Kentucky collects in taxes each year. Unlike the thorough vetting Kentucky’s two-year spending plan gets every other year from the General Assembly, decisions about not collecting taxes to incentivise business receive very little scrutiny and certainly are not reviewed every two years.
The Kentucky Economic Development Finance Authority board’s decision last week, according to public information, was based on a two-page document that included one paragraph of explanation and a couple of pretty bare-bones financial tables. The minutes are not yet available but the special meeting lasted less than a quarter of an hour.
This much we can tell: the hub’s targeted full-time employment in the first year is 100, growing to 600 in year 10. While the average pay will be $26 an hour with benefits, that includes managers and other professionals. Lower-wage hourly workers, likely the bulk of the employees, are more likely to make $12 to $15 an hour — about $25,000 to $31,200 a year. The part-time seasonal workers who could push the number up to 2,700 will make even less.
There was a lot of discussion about the quality of jobs Amazon delivers after former President Barack Obama talked about creating new jobs for the middle class at one of the company’s warehouses in Chattanooga, Tenn in 2013. Time magazine questioned Obama’s choice of locations, writing “new jobs like those found in Amazon fulfillment centers aren’t an antidote to the weak recovery; they are a symptom of it.” In 2015 Reuters examined the jobs that Amazon was creating across the country, often in places that had provided generous tax breaks. Many of those jobs paid about $11 an hour, less than comparable positions at Walmart distribution centers, and Reuters outlined examples of poor working conditions at some Amazon locations.
The Northern Kentucky deal is only the latest in a string of incentives given Amazon by Kentucky taxpayers since it opened its first warehouse in Campbellsville in 1999.
As a candidate in 2015 Matt Bevin criticized these deals — projected to amount to $12.6 billion this year — saying the state simply couldn’t afford them. “The idea of sending your dollars out to incent people to do certain things is not the right answer,” he said. As governor last year Bevin vetoed some tax giveaways passed during the legislative session, citing the need for greater fiscal discipline.
There may be some role for tax incentives in building a stronger Kentucky economy. But the public deserves a much fuller, more transparent account of how they will play that role than we got in the Amazon deal. The General Assembly and Bevin must take a closer look at how KEDFA vets these tax giveaways.