Maryland lawmakers expressed unease Wednesday about the $5 billion cost of Gov. Larry Hogan’s package to lure Amazon.com’s second headquarters to Montgomery County, even as the administration unveiled a new study saying the project would add nearly $8 billion a year to state paychecks.
The biggest part of the governor’s plan — a bill offering about $3 billion in tax credits and exemptions — got its first formal hearings in Annapolis at meetings of the House Ways and Means and Senate Budget and Taxation committees.
Hogan (R) has not provided details about the other main element of the plan, which calls for $2 billion in transportation upgrades.
The Hogan administration sought to preempt criticism of the proposed incentives by releasing an economic impact report before the hearings. It said the Amazon project over time would boost wages in the state by $7.7 billion annually and increase total economic activity by $17 billion. (Amazon chief executive Jeffrey P. Bezos owns The Washington Post.)
The study, by the Sage Policy Group, also said the Amazon project would generate $483 million in state taxes each year. At that rate, it would roughly cover the cost of Hogan’s $5 billion incentives package in less than 11 years.
Nonetheless, legislators at the House hearing voiced concern about a price tag they described as unprecedented in Maryland.
“It’s an eye-popping number,” said Del. Jason C. Buckel (R-Allegany), noting that the Ways and Means Committee often argues at length over whether to raise a tax credit by as little as $2 million.
Del. Frank S. Turner (D-Howard), vice chairman of the committee, asked whether Maryland could afford to promise a large sum to Amazon when the state’s education system is expected to seek a major infusion of cash next year.
“We’re going down two big roads at this point,” Turner said. “Are we on a collision course trying to take on both these big projects at the same time?”
Despite the wariness, legislators — who must approve the proposed tax incentives for them to be offered — were enthusiastic about the prospect of winning a nationwide contest for the Amazon project and up to 50,000 good-paying jobs. There was no criticism of the bill at the Senate committee hearing, and witnesses at both sessions called it a “once in a generation” economic development opportunity.
“From the construction phase, to when the headquarters is fully operational, Maryland would reap unprecedented benefits,” Hogan said in a written statement.
The governor’s incentive proposal aims to give Montgomery County an edge over 19 competitors, including the District and Northern Virginia, in persuading the Seattle-based online retail giant to locate its second headquarters in the White Flint area of North Bethesda.
It is the second-most-generous set of inducements that has become public. Only New Jersey’s, at $7 billion, is larger.
Maryland Commerce Secretary R. Michael Gill, the administration’s chief witness at the hearings, emphasized that none of the $3 billion in financial incentives would flow to Amazon until the company created jobs and met other criteria. That is not necessarily true of the $2 billion in transportation upgrades.
The biggest financial inducement — a 5.75 percent income-tax credit — is structured in a way so that the state does not have to put up any money in advance. Instead, for 10 years, it diverts back to Amazon a portion of an employee’s paycheck that would have gone to state income taxes.
“There is no tax credit without a job, so it pays for itself,” Gill said.
He predicted that the extra tax revenue that ultimately would flow to the state would benefit constituents of legislators representing jurisdictions far from Montgomery.
“If Montgomery County wins, every corner of the state of Maryland wins, and wins significantly,” Gill said.
Montgomery County Executive Isiah Leggett (D) also spoke in favor of the bill, giving the effort a bipartisan hue.
He engaged in some back-and-forth with Del. Jay Walker (D-Prince George’s), who asked whether the state was “overpaying for Amazon.” Walker warned that the proposed incentives were at a level that is “unheard of” in Maryland.
“I know that those numbers are large, but you have to look at the return, and that number is even larger,” Leggett said.
Many economists and other analysts are critical of large public subsidies to attract companies, saying they create self-defeating competitions among jurisdictions and reward the politically connected.
The Sage group’s economic analysis said the second headquarters would support 101,000 jobs — up to 50,000 Amazon employees and a roughly equal number of jobs created by economic activity generated by the company. It would spur business at the Port of Baltimore and Baltimore-Washington International Marshall Airport , the report said.
The Sage group is headed by Baltimore economist Anirban Basu, who also testified and is chair of the Maryland Economic Development Commission.
Del. Jimmy Tarlau (D-Prince George’s) asked Gill why the state should subsidize Amazon when the company doesn’t need public help to earn a profit.
“Aren’t we actually competing to see which state can give them more profit?” Tarlau asked.
Gill responded: “No, this is a tremendous opportunity. . . . The game today is, one has to compete. At the same time, you have to compete wisely.”