In a recent Salt Lake Tribune commentary, Paul Rafelson speculated that Amazon “may be dangling investments” in Utah as part of a backdoor deal with state leaders to hold off antitrust enforcement.
He pointed to the huge break in property taxes Amazon received to build in Utah and alleged that Amazon price-gouged consumers during the pandemic to support this claim. However, to solve these problems, Rafelson didn’t propose solutions to curb tax incentives or stop price gouging.
He proposed curbing Amazon’s position by giving the attorney general greater antitrust authority instead.
Rafelson’s goal is to promote small businesses and protect consumers, but his solution misses the mark. At best, antitrust action would end up adding to the already complex web of regulations that disproportionately harm small businesses.
However, to Rafelson’s credit, he was right to call out the huge tax incentives Utah awarded Amazon. The general scheme of these tax incentives offers big corporations a break on property taxes over a few years — the kind of property taxes that fund schools and infrastructure. Then the lost property taxes that would ordinarily go to schools and infrastructure are made up for by taxing ordinary Utah taxpayers. This is a poor strategy for sustainable economic growth.
State officials shouldn’t be choosing winners and losers. Moving forward, Utah should level the economic playing field by treating all businesses, regardless of their size, equally.
According to the Governor’s Office of Economic Opportunity (GOEO), Amazon and Amazon Web Services (AWS) together received just over $8.1 million in tax subsidies. That’s $1.1 million higher than Rafelson’s estimate. But Amazon isn’t the only big company to receive an economic incentive, and it certainly isn’t the first.
According to the GOEO, in 2014, Oracle — the Austin-based cloud services company — was awarded over $2.8 million in tax incentives over a term of 10 years. In 2019, a Tyson Foods subsidiary headquartered in South Dakota was awarded over $5 million in tax subsidies over 10 years. Carvana, the popular “online-only used-car retailer” headquartered in Arizona, was recently awarded over $750,000 in tax incentives over seven years. At a local level, companies like Meta are negotiating mega-deals with localities that will reportedly yield hundreds of millions in property tax benefits for decades.
These are only a handful of the economic incentive packages that allow non-resident companies to skirt local property taxes for years. Meanwhile, as Libertas Institute has written about extensively, localities and everyday citizens carry the infrastructure costs to support these corporate transplants and their employees.
Worse still, the locations offering the most incentives also happen to be the most desirable. As Rafelson correctly notes, many of these incentivized investments are for Salt Lake, Utah and Weber Counties. According to the 2020 census, Utah’s population grew by 18.4 percent — the most of any state in the nation. Much of that growth is in — you guessed it — Salt Lake, Utah and Weber Counties. Salt Lake County alone makes up for roughly one-third of Utah’s entire population while taking up only 1 percent of the state’s vast territory.
The question state leaders should ask is: Who holds the most leverage when it comes to attracting big corporations? From a logistical standpoint, the concentrated population in Salt Lake County alone is a good reason to believe Utah holds all the cards. Sweetening the deal further with tax incentives that hurt Utahns and their small businesses is imprudent at best.
For Utah lawmakers interested in making a difference for small businesses and consumers, the answer looking forward is simple: Stop offering tax subsidies to big corporations. Use the money instead to invest in infrastructure and schools without also tapping taxpayers for the extra funds.
Rethinking tax subsidies is not an exciting solution, especially to practicing attorneys like Rafelson, but it carries the benefit of wasting far less taxpayer money on attorney’s fees and decades-long litigation.
It’s not a flashy silver bullet, but it is a stone in the sling of small businesses as they take on Goliath.
Caden Rosenbaum is the tech and innovation policy analyst at Libertas Institute, a think tank in Lehi.