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

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.”

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