Legislation that is now making its way through Frankfort would provide massive tax breaks to companies that set up data centers in Kentucky. While the state needs to think through new ways to spur economic growth, the bill would wreak financial havoc on the state’s residents. Rather than funneling taxpayer dollars into Big Tech companies as local communities struggle with an unprecedented economic crisis, Kentucky must now consider a smarter approach to its spending.
In order to qualify for the incentives, companies must agree to create at least 20 permanent jobs — a miniscule investment for firms that saw tremendous profits in 2020. Amazon Web Services ended the year with more than $13.5 billion in annual operating profits. Taxpayers should not be picking up Big Tech’s tab — especially one that will cost the budget $15 million a year.
In 2020, Kentucky grappled with rising unemployment much like other states across the country did. Now as our nation continues to fight the pandemic and the economic challenges that come with it, we must prepare for a daunting road ahead. While the recent tax collections were a welcome sign of economic recovery, lawmakers still need to find innovative ways to get back on track.
As Kentucky begins to rebuild, it needs proven revenue generators that create high-paying jobs for all residents. However, lawmakers must look towards generators that will not worsen the challenges facing small businesses, with the number of Kentucky small businesses decreasing by 31% compared to January 2020 — and many still teetering on the brink of closing. These businesses are the backbone of the state’s economy, and every effort must be made to support them in the face of an unprecedented crisis.
Instead, Kentucky should start on the path to a stronger 2021 by opposing any future lucrative economic development incentives it is considering awarding to large companies, particularly those that have seen their coffers swell as a result of the pandemic.
Amazon, which has seen its business go gangbusters since the start of the pandemic, is case in point. In recent years, Kentucky has offered Amazon 21 subsidies, totaling at least $111 million. These incentives — built on promises of future job creation and sustained economic growth — have become a massive drain on the state budget.
Yet time and time again, Amazon has failed to live up to its lofty job creation goals, proving that it is not committed to generating long-term growth for the communities it calls home. While Amazon touts its hiring numbers as justification for these subsidies, experts have found that Amazon fulfillment centers consistently fail to create net job growth, as they cut into other local competitors and ultimately result in job losses in other industries.
In order to best protect the interests of taxpayers statewide, lawmakers must rethink offering these kinds of subsidies. The current economic conditions faced by Kentucky and other states across the nation emphasize the urgent need for proven revenue generators. Subsidizing companies that are solely focused on their own bottom lines — and not the financial security of Kentucky families — is a surefire way to drain the budget down the road.
While spurring job growth remains a top fiscal priority, the state must instead pursue policies that avoid any unnecessary cost to small businesses and taxpayers in the process. This year, the stakes are just too high for lawmakers to suggest otherwise.
ROBERT B. ENGEL is the chief spokesperson for the Free & Fair Markets Initiative, a nonprofit watchdog group committed to promoting a fair, modern marketplace that works for all Americans.