Amazon’s Surprising HQ2 Choice: Long Island City
The race is on! Amazon’s search for a location for its second headquarters has chosen an unlikely front-runner: Long Island City in Queens. Despite New York City’s high state and local taxes, Amazon is nearing a deal to set up shop there.
A Break from Corporate Trends
This decision defies the trend in corporate America to choose locations with cheap real estate and low taxes. For instance, Google and Apple have recently opened branches in cities like Austin, Denver, and Portland, where both costs and taxes are lower than in California. New York City, in contrast, has some of the highest income and corporate taxes in the country. Rates range from 4% to 8.82%, with higher brackets reaching up to 12.7%. Although tax services in NYC can help mitigate these costs, it seems counterintuitive for a company to select such an expensive location.
Compensation for High Living Costs
“At the metro level, if they’re going to wind up in D.C. and New York instead of Atlanta or Dallas, they’re not going for a low-cost, low-tax, laissez faire environment,” said Jenny Schuetz, a fellow at the Brookings Institution’s Metropolitan Policy Program. Dallas sees state and local income tax rates at zero.
Fortunately, Amazon claims it will compensate workers for the increased living rate, providing an average annual compensation of more than $100,000 (which places them well above the average New Yorker).
Amazon’s Capacity to Handle Costs
If any company can manage New York City’s exorbitant living costs, it’s Amazon. With an annual revenue of $178 billion, Amazon can easily cover both its employees’ living costs and the city’s high taxes, including the NYC franchise tax. Their substantial revenue also allows them to benefit from specialized tax services in NYC, which address the unique tax laws and regulations that require expert accounting.
