May 20, 2015 Last Updated 7:51 am

Amazon withdraws request for $1.2 million in tax breaks, though communities still find luring major corporations expensive

The cost to a community to attract major retailers is often millions in new road construction, tax breaks, other incentives to win against their neighboring towns

The town of Shakopee, Minnesota, southwest of Bloomington, wants to attract Amazon to build a 820,000-square-foot distribution center. The new facility is expected to create 1,000 full-time jobs according to claims from town officials, and yesterday the city council passed a $5.8 million tax-increment financing district to pay for road improvements around where the new distribution center site is to be built. Altogether, the town estimates that it will cost over $8 million to lure Amazon to a town of less than 40,000.

AmazonfulctrsBut Amazon, which had requested certain tax breaks, have withdrawn their request as costs for the improvements came in higher than expected.

“That they are withdrawing their request for TIF (tax increment financing) is a sign that they want to be a part of this community,” Mayor Brad Tabke told the Star-Tribune. “They don’t want to cause any political strife with folks.”

Unlike a retailer like Walmart which comes to town and usually forces local retailers out of business, Amazon is unlikely to adversely effect local retailers in the same way – certainly one of the sales points being made is that new jobs will help local businesses. Additionally, funding for road improvements often benefits the community as a whole (depending on what roads are being improved, of course).

Often Amazon building a facility in a state means it will also start collecting state sales taxes there, as well, but Minnesota is one of the states where Amazon already does this. In fact, once Amazon is in state, this might be one incentive to keep them there rather than building in a state where they currently do not collect sales tax. Amazon currently collects sales taxes in 24 states: Arizona, Illinois, Massachusetts, North Carolina, Virginia, California, Indiana, Minnesota, North Dakota, Washington, Connecticut, Kansas, Nevada, Pennsylvania, West Virginia, Florida, Kentucky, New Jersey, Tennessee, Wisconsin, Georgia, Maryland, New York and Texas.

Amazonfac-800The question Shakopee will now have to ask itself is if those full-time jobs really are what they want for their town. A somewhat controversial study released in 2014 claimed that Walmart costs tax payers “an estimated $6.2 billion in public assistance including food stamps, Medicaid and subsidized housing” due to the low wages it pays employees.”

But Amazon’s distribution facilitie, too, are the focus of complaints about low wages and poor working conditions. In Germany, workers at Amazon facilities went on strike last September, again around Christmas, and then again just last week as some workers demand the right to join a union.

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