The populist wing of the conservative movement and leftists share the same target, but for entirely different reasons. In the last few years, Amazon has been the trillion-dollar punching bag for a lot of folks on the right and the left. Democratic voters hate that Amazon ostensibly doesn’t pay taxes, offers low wages, and kills mom and pop shops. Republicans detest the online retail juggernaut because it is part of the Big Tech umbrella that censors voices that violate groupthink.
Who’s correct? There is a strong case to be made that the Jeff Bezos goliath participates in censorship. However, the argument that Amazon pays little to no taxes can easily be debunked – but do not tell that to Democrats, who always need to slam corporations to tickle the funny bone of anti-capitalist voters.
Now you can add former Vice President Joe Biden’s name to the long list of Democrats who parrot this myth.
The Amazon Technicolor Tax Bill
Biden – or, perhaps, someone from his campaign – recently took to Twitter to yell at the clouds. He tweeted the same nonsense that the likes of Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (I-VT) regularly spout about Amazon’s tax bill:
“I have nothing against Amazon, but no company pulling in billions of dollars of profits should pay a lower tax rate than firefighters and teachers. We need to reward work, not just wealth.”
He then cited an article from The New York Times titled “Profitable Giants Like Amazon Pay $0 in Corporate Taxes. Some Voters Are Sick of It.” The piece delved into how voters in swing states are not passionate about the tax issue like they are on health care and immigration, how Democratic candidates are invoking the fair share rhetoric to attract voters, and how many corporations are not paying corporate levies.
There is a lot to unravel in the misleading representations and outright omissions on the subject, particularly when it comes to Amazon.
Let’s ensure Sleepy Joe is awake for this one.
You Won’t Have Bezos to Kick Around Anymore
Amazon had a response to Biden: You won’t have us to kick around anymore. Unlike other businesses, the website shot right back:
“We’ve paid $2.6B in corporate taxes since 2016. We pay every penny we owe. Congress designed tax laws to encourage companies to reinvest in the American economy. We have. $200B in investments since 2011 & 300K US jobs. Assume VP Biden’s complaint is w/ the tax code, not Amazon.”
According to its financial statements, Amazon paid $1.18 billion in international, state, and local income taxes in 2018. In the previous year, Amazon doled out $1 billion in income levies. The company pays a lot in payroll taxes, and employees also fork over penalties on their wages.
Now, it is true that Amazon paid nothing in federal taxes and enjoyed a $129 million rebate last year, but that is because it took advantage of the 6,000 pages of the Internal Revenue Code that shows how you can use deductions, credits, and other incentives to lower your bill to the IRS. Put simply, Amazon has great accountants.
So, what does Amazon do to avoid handing over even more to a government that will just waste the money? Three things: research and development (credit), employee stock option (deduction), and investments in equipment, plants, and properties (credit).
While stock-based compensation for employees and allocating budgets to real estate and job creation can yield tremendous tax savings, the big kahuna for Amazon is R&D. In 2017, Amazon spent $22.6 billion on research and development; the next closest was Alphabet with $16.6 billion. A lot of what we enjoy that Amazon offers is born from R&D investment, from the Alexa spying device to its cloud computing services to its one-hour shipping feature.
For Biden to argue that this is not work is asinine. Does he think Amazon collects money from shoppers and transfers these revenues to a bank account? He might have a reasonable argument if this were happening, but this is not what is occurring. If it were not innovating and being incentivized, then it would be leading the corporate buyback movement, something Democrats keep prattling on about. Yet, Amazon has extended its streak of not reacquiring stock to seven years.
Indeed, Amazon is successful because it reinvests its billions in profits back into the company.
Stephanie Denning of Forbes Magazine raised an interesting point when dissecting this narrative:
“Raising a pitchfork to fight Amazon’s corporate tax breaks is fine if the argument is rooted in strong economic reasoning. The risk is that too often the data is pulled out of context, and inaccurate storylines circling that data gain momentum and undeservedly accelerate.”
You can’t fault the Democrats, though. They need as many sound bytes as possible; “Impeach Drumpf Now!” will not suffice in 2020.
Biden might be getting older, he is slurring his speech, campaigning far less than his opponents, pandering a bit more, and his memory could be fading. But it is hypocritical for Biden to slam Amazon when he was the number two man in an administration that was vocal in its support for these same credits and deductions Amazon took advantage of to invest in the U.S. economy and create jobs.
Breathing Through Loopholes
Perhaps the discussion can be compartmentalized into these two areas: The left believes capital belongs to the state, and the government would use billions of dollars more effectively than the free market.
Here is a number: $160 billion. That is how much Amazon has invested in the U.S. since 2011, putting that money into distribution networks and cloud computing infrastructure. The federal government spends that amount to service the debt, pay dead people Social Security benefits, and blow up bridges overseas. Would you trust some politician from NY or CA with that money or an entrepreneur? Everyone has seen their living standards improve one way or another because Bezos and Co. give the people what they want: cheap goods, fast delivery, and jobs.
Pundits, politicians, and the proletariat are always outraged by loopholes. And there is a libertarian point to be made that the government should not incentivize business or socially engineer the public to act in a certain manner by manipulating the tax code. That said, as the great Ludwig von Mises wrote, “Capitalism breathes through loopholes.” The endgame should be to abolish these penalties Until there is a consensus on scrapping legalized larceny altogether, leaving tax law alone allows the private sector to adapt to the environment and not invest in a team of accountants, lawyers, and lobbyists.
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