For the second year in a row, online retail giant Amazon racked up profits in the billions of dollars – and paid zero corporate income tax.
Who knew that a two-day delivery service would be so enormously popular? In 2017, Amazon reported $5.6 billion of profit to its shareholders. The following year that amount doubled to $11.2 billion.
The Trump administration’s 2018 Tax Cuts and Jobs Act (TCJA) put Amazon in the 21% federal tax bracket – reduced from 35% in prior years. But clever accounting and legal corporate tax breaks have lowered the highly profitable company’s taxable income enough to avoid paying any tax at all.
That’s right: Amazon’s annual federal income tax for both 2017 and 2018 came to $0.
In fact, Amazon’s accountants used a federal income tax rebate to wangle $129 million out of the IRS. The company’s resultant tax rate works out to -1% (they got one percent of their profits handed to them from taxpayer revenues collected by the Internal Revenue Service).
Amazon’s income tax disclosure document cites a number of unspecified “tax credits” and an executive stock options tax break that allowed the rich company to get paid to rake in huge returns.
Steve Wamhoff is Director of Federal Tax Policy for the Institute on Taxation and Economic Policy (ITEP). After reading his organization’s report on Amazon’s tax status, he observed:
“It’s hard to know exactly what they’re doing. In their public documents they don’t lay out their tax strategy. So it’s unclear exactly which breaks [the company is taking advantage of]. They vaguely say tax credits.”
Many successful businesses take advantage of legal tax loopholes that reduce by half or more federal and state income taxes on their profits – even though President Trump promised that his new tax law would close abusive loopholes and stop pandering to special interest groups, including Amazon.
Did you know that the national debt in the United States is now over $22 trillion?
Wamhoff pointed out that Trump’s federal tax bill fails to provide Treasury funding to offset the almost-inconceivable shortfall from persons in the best position to do so – enormously profitable companies:
“The corporate tax revenue was a big loser. We aren’t going to see corporations suddenly paying more. We see that in the case of Amazon.”
But wait, there’s more.
In its pursuit of federal relocation subsidies for a new “HQ2” headquarters, Amazon also sealed “two lucrative packages of local tax breaks for not one but two new HQ2 locations, in New York and Virginia as well as breaks for an operations center in Nashville, Tenn.”
It took the Virginia House a mere nine minutes to debate the merits of granting Amazon up to $750 million in subsidies over 15 years as an incentive to build a headquarters facility in Arington.
Virginia House members voted 83 to 16 to approve the tax advantaging, which critics call unfair tax relief.
Two Virginia delegates objected that the packages would attract 25,000 or more new, well-paid Amazon workers to the area and raise housing costs.
Virginia Senator Frank M. Ruff, Jr. (R-Mecklenburg) sponsored the bill. He justified giving Amazon this enormous boon since the state is projected to receive tax revenues several times more than granted to the cyber-retailer.
Tennessee also approved Amazon’s plans to install a smaller facility there.
But New Yorkers are not happy about giving America’s richest man Jeff Bezos – who owns not only Amazon but The Washington Post newspaper as well – enormous subsidies in exchange for a few thousand new jobs and some valuable real estate.
As of early February 2019, Amazon has faced strong opposition from New York lawmakers:
“In the past two weeks, the state Senate nominated an outspoken Amazon critic to a state board where he could potentially veto the deal, and City Council members for the second time aggressively challenged company executives at a hearing where activists booed and unfurled anti-Amazon banners.”
U.S. congressional members are not talking much about they why’s and wherefore’s of Amazon obscenely favorable corporate tax situation. Perhaps their companies are using the same loopholes, exemptions, and subsidies to zero-out their federal taxes?
Likewise, Amazon’s official statement on the tax matter sounds like it came straight from their Legal Department:
“Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years.”
Amazon is not the only highly profitable corporation to hire bean counters who know how to game the U.S. tax code. Netflix reported its largest gains ever and skirted paying any federal or state income taxes.
ITEP reported that many U.S. corporations pay far less than their 35% federal income tax rate on domestic profits.
Forbes put a slightly different spin on the Amazon tax scandal and justified the Trump tax breaks as incentives for the international retailer’s expansion operations – which will, presumably, generate even more corporate profits:
“Amazon largely pays no corporate tax precisely because it reinvests those profits into its operations. Under a scenario where Amazon had no corporate tax breaks, it would disincentive the company from reinvesting and thus creating greater opportunity for the businesses and cities in which it operates.”
Forbes wisely advised focusing on changing the U.S. tax code rather than boo-hooing about all the tax breaks the rich elite are receiving. It’s time to get to work.