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Would Workers Really Be Paying Amazon to Locate in Illinois?

John Powers 29 November 2017 No Comment

The (multiple shark jumping) Chicago Reader and Ben Joravsky,  have started a big story at Chicago’s Amazon Bid, claiming that

Say Amazon hires someone at $100,000 to program computers at HQ2. Normally that employee would pay $4,950 to the state for things like road repaving, policing, education, and so forth. With the current tax rate of 4.95 percent, the hipster essentially pays up to $4,950 to his boss at Amazon.

It was picked up nationally and internationally, where The Independent (UK) breathlessly tell us

Amazon HQ2: Chicago offers tech giant $1.32bn of its worker’s income taxes to host its new headquarters

This is disingenuous at best.  There is no scenario where Amazon employees would send money to the State which would then be returned to Amazon.  Crain’s gets closer to the process, noting that the Amazon offer is the Edge package, which has been used for many years in Illinois.

when the Edge program resurfaced earlier this year, the tax credit for net new employees in the state would be 50 percent of their payroll tax plus up to 10 percent for training costs. The 50 percent figure jumps to 75 percent if the facility involved is in an economically depressed area. The credit for retained employees generally is 25 percent (plus the 10 percent for training).

The fallacy from the Chicago Reader (and many others) is that employees somehow write a check to the State, and that any employees money is rightfully obliged to the State of Illinois.  They don’t and it isn’t.  Employers write Payroll Tax Checks (or transfers) to the State.   Waiving the Payroll Tax, or a portion of the Payroll Tax takes nothing whatsoever directly from employees.


One can argue about the long term effect of not collecting any portion of the tax levies, but it is simply not the case that “workers are, in effect, paying taxes to their boss”.


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