By Robert B. Engel
Amazon’s Prime Day is often lauded as offering some of the best deals of the year in online shopping, but a closer look at the stream of corporate welfare that has helped fuel the rapid growth of Amazon’s flagship subscription service reveals that Prime is a raw deal for consumers and taxpayers alike. California lawmakers must think long and hard before giving another penny to the third-richest company in the world.
Analysts say the true value of the Prime package, which includes music and video streaming, books, clothing, food, and, of course, expedited shipping service, is over $780 per year. But members still only pay $119 for their Prime subscription. This seemingly-unbeatable deal for consumers only begins to make sense in light of the fact that Amazon has built its business model with a big assist from government hand-outs. In fact, Amazon has received $12 million in subsidies from California taxpayers since 2000.
California is far from the only victim of Amazon’s lobbying scheme. In total, the company’s far reaching lobbying efforts have resulted in $1.5 billion in subsidies from taxpayers. From 2000 to 2017, Amazon spent least $9.8 million on state lobbying — $2 million in California alone — while making over $6 million in campaign contributions. According to Amazon’s own reports, it spent almost $14 million on state and local “government relations efforts” between 2013 and 2017. As Amazon grows, it continues to ramp up its influence-peddling: over the last five years, Amazon has lobbied more government entities than any other tech company.
Meanwhile, local communities and small businesses have borne the cost of Amazon’s strong-arm tactics. Taxpayers have lost out on more than $700 million in sales tax revenue, money that could have been used to ease crowding in schools, modernize crumbling infrastructure, or expand access to healthcare services. Amazon’s refusal to pay its fair share has decimated good-paying jobs and small businesses, who are forced to try and compete with the tech behemoth. Amazon often promises economic development and new jobs at its warehouses and fulfillment centers in return for taxpayer assistance. But the company pays its employees an average salary of less than $29,000 annually, and data clearly shows that private-sector employment fails to increase after Amazon moves in.
Making matters worse, when small businesses resort to selling their wares on Amazon’s e-commerce site, they face exorbitant fees that make it impossible for them to compete with major brands. Third-party merchants have complained for years that Amazon uses consumer and sale trend data to manipulate and drive down prices. While the tech giant vaunts itself as a company that supports small businesses and growth, the economic turmoil each Amazon expansion and acquisition leaves in its wake tells a very different story.
Amazon continues to demand unprecedented amounts of corporate welfare from Los Angeles for its second headquarters, often called HQ2. But as California’s state and city public officials weigh their priorities, Prime Day should serve as a resounding wake-up call. Taxpayers are tired of giving up their hard-earned money to the third-richest company in the world, helping to subsidize Amazon Prime and the record profits the subscription service helps generate. Last year, Amazon reported $177 billion in revenue, more than enough to build a second headquarters on their own dime.
The moment has come for California lawmakers to stand up to Amazon and their army of lobbyists, prioritize our local communities, and finally say enough is enough.
Robert B. Engel is the chief spokesperson of the Free & Fair Markets Initiative, a nonprofit coalition focused on supporting a modern, fair marketplace that serves the best interests of small businesses, local communities and everyday Americans.
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