Amazon HQ2 could be split, and questions arise about tax incentives

Amazon is reportedly planning to split its second
headquarters between two locations rather than picking one
city.
Cliff
Owen/AP

• Amazon is
  reportedly planning to split its second headquarters, HQ2,
  between two locations: Long Island City in New York and the
  Crystal City area of Arlington, Virginia, according to
  The New York Times.
• Some people are speculating as to whether Amazon
  will be able to double up on some of the proposed financial
  incentives if it is split between two
  headquarters. 
• At least one expert says it’s not yet clear what will
  happen on that front, as the process has largely been conducted
  in secret. 

On Monday,
The Wall Street Journal reported that Amazon is planning to
split its second headquarters between two locations rather than
picking one city.

Almost instantly, people began to speculate on social media
whether this news would mean that Amazon will be able to double
up on the tax breaks and financial incentives offered by many of
the
20 finalists.

Later on Monday, The
New York Times reported that HQ2 would be split between
Long Island City, a neighborhood in Queens, New York, and the
Crystal City area of Arlington, Virginia.

Neither location has officially disclosed what kind of financial
incentives they would offer Amazon, if any. New York is only
rumored to be offering incentives
that could include hundreds of millions of dollars in
subsidies.

This means that there is no way of knowing whether Amazon
would benefit from being in two cities from a tax
perspective.

“Unfortunately, because this process has been done almost
entirely in secret, we have no way of
knowing,” Michael D. Farren, a research fellow at the
Mercatus Center at George Mason University, told Business
Insider.

Only four of the 20 finalists including cities Newark, New
Jersey; and Columbus, Ohio; have actually announced what economic
incentives they will offer. The remaining have stayed mum on the
topic. 

But even for those that have been more transparent, it’s not
clear whether the terms would be the same if Amazon does split
its new headquarters across two cities. An Amazon spokesperson
did not return Business Insider’s request for comment. 

Read more: 
Amazon
is reportedly revisiting HQ2 contenders as it prepares to make
its decision — here’s who’s left in the running

If the subsidies are awarded based upon incremental investment in
the area, such as the number of jobs or amount of spending on new
capital assets, Amazon may not be able to double dip, Farren
said.

“We don’t know the structure of how the subsidy is going to be
provided,” he said. 

Farren said that it’s unlikely
that Amazon’s decision would be determined by tax breaks
anyway. 

“What is driving Amazon’s decision is the business-related
factors that affected their underlying productivity and
profitability — and the number one piece of that is a skilled
workforce,” he said. “These things matter much more to Amazon’s
earnings than those short-term subsidies.”

“If all you have is flour, then no amount of icing is going to
save the cake.”

Read more about Amazon’s HQ2: