Maryland Lawmakers Question Massive Incentives Being Offered to Amazon

• March 1st 2018

by Nena Perry-Brown

Last month, word got out about the significant incentive package that Maryland had offered Amazon to entice the company to bring its second full-sized headquarters to the state. Yesterday, the state's Senate Budget and Taxation Committee as well as the House Ways and Means Committee held hearings on a bill that outlines $3 billion of the $5 billion in incentives being offered to Amazon.

The Promoting ext-Raordinary Innovation in Maryland’s Economy (PRIME) Act of 2018 contains a suite of tax cuts and credits that include a credit of 5.75 percent of wages per new qualifying job and an exemption from state sales and use taxes for construction materials or warehouse equipment. These offerings are coupled with claw-back provisions if Amazon fails to meet certain benchmarks. The remaining $2 billion in incentives not included in the bill would be geared toward implementing transportation improvements.

Members of both state committees seemed amenable to the Act (or at least to the idea of hosting Amazon in the state); however, while the Senate committee members asked a handful of softball questions, the conversation was more lively in the House.

The plan for the new headquarters hovered over the House hearing, even coming up during the discussion of a proposed bill that would lower the state corporate tax rate by 0.25 percent annually for a period of nine years to bring it in line with Virginia's rate of 6 percent.

"There are a lot of complaints that the governor is offering Amazon a huge revenue enhancement package to persuade them to locate their facility here in Maryland," testified Delegate Chris West. "We have to do that because our tax rate is so much higher than other states that Amazon might be looking at."

Once the conversation turned toward the PRIME Act specifically, the necessity of those "revenue enhancements" was still questioned by multiple committee members. Delegate Jay Walker walked down each of the incentive points and their monetary values one by one, arriving at a price tag of $7 billion-plus. "We're talking $2 billion for transportation, we're talking, basically $5.5 billion," Walker concluded. "Are there any other costs that we're not disclosing right now that we need to know about?"

"I know those numbers are large, but you have to look at the return, which is even larger," Montgomery County Executive Ike Leggett tesified in response.

"How far above and beyond did we go?" Walker asked, citing reports that Maryland's incentive package is second in dollar amount only to that of New Jersey. 

"I don't know what the other jurisdictions are offering," Leggett continued. "What I am confident in is that the package that we have, both from the state and from the county, is reasonable, and that it will pay off big-time in a way that, I think, will be startling to many people in this room."

The anticipated return on such an investment has been reinforced in recent days by a report by Sage Policy Group that enumerates what the potential benefits would be for the state. Sage CEO Anirban Basu, also of the Maryland Economic Development Commission, testified in favor of the Act. No one in either committee asked Basu to justify anything written in the report, but members did inquire as to whether WMATA needed to be shored up before the arrival of the headquarters, and how HQ2 would affect the existing quality of life of residents and the livelihood of the small and minority-owned business sector.

Maryland Commerce Secretary R. Michael Gill was on hand to represent the governor's office; he declined to respond when asked whether Amazon needs incentives in order to break even. However, when asked why Amazon needs tax credits, he stated that today's business climate is all about competition.

"What we put together was a great package. I believe we're going to get Amazon."

This article originally published at https://dc.urbanturf.com/articles/blog/general-assembly-of-maryland-disassembles-amazon-incentive-act/13626.