States have justified these breaks by promising scores of jobs and sweeping economic development, just as they are doing now in telling residents that unprecedented corporate welfare for the tech giant’s planned second headquarters, HQ2, would be well worth it.
But the costs of this so-called economic development in Seattle, for example, have been enormous. Rents have gone through the roof and rates of homelessnesshave surged. In the 25 states where Amazon has opened fulfillment warehouses, promised job gains have not come to fruition — warehouse jobs increased, of course, after Amazon moved into town, but those gains were canceled out by losses to other local industries, such as retail.
Amazon long avoided collecting sales tax, which allowed the tech giant to sustain its unbeatable prices and crush competitors. Soaring revenues enabled the company to invest in a nationwide distribution network of warehouses, “sortation centers” and logistics facilities — without which there would be no Prime as we know it. Year after year, states missed out on billions in tax revenue. In 2016 alone, the sales tax loophole for online retailers cost states more than $17 billion.
Today, it might seem as though Amazon’s tax-dodging days are over, since the tech giant is finally collecting sales tax on items it sells directly to consumers, but it still claims an online marketplace exemption on third-party transactions, invoking the myth that it is merely an online mall.
In the past two years, Washington and Pennsylvania closed the loophole by passing marketplace tax collection laws. But Amazon retains its duty-free status in 43 states. South Carolinians can attest to the expensive damage to state coffers of cutting a deal with Amazon to allow the company to remain duty-free.
Amazon continues to add insult to injury by soliciting the offer of enormous tax breaks and other economic incentives from the cities vying to become the home of HQ2.
It is simply undeniable that the success of Prime has been fueled by a serious breach of the public trust, orchestrated by Amazon and enabled by state governments around the country. In some cases, states took money out of our pockets via subsidies and gave blank checks to Amazon. In other instances, they allowed Amazon to benefit at the expense of our local business economies by granting the tech giant an exemption from sales tax collection.
That is the real story of how Prime surpassed 100 million members, and it shows why the taxpayer-built service should be accessible to all without membership fees.