Corporate Tax

Why Amazon and Jeff Bezos assist a corporate tax charge hike

Jeff Bezos, CEO of Amazon, speaks at the Washington, DC Economic Club (Washington, DC Business Club Photo / Gary Cameron)

Jeff Bezos surprised some critics and supporters of Amazon this week by advocating a federal corporation tax increase to fund President Biden’s infrastructure plan. It was a position that didn’t seem to keep up with the history of his company and the rest of the American corporation.

A message from Jeff Bezos. https://t.co/ZAcpnaRu6z pic.twitter.com/81AkgVyQke

– Amazon News (@amazonnews) April 6, 2021

The question arises: why are Bezos and Amazon breaking with their peers and supporting an increased corporate tax rate?

Amazon has become the emblem of American companies accumulating amazing profits and being criticized for how much they pay in taxes. Bezos’ statement in support of a corporate tax hike this week seems to undermine that reputation.

His position also sets him apart from the rest of the corporate elite. The Business Roundtable, a powerful CEO association of which Bezos is a member, was quick to criticize Biden’s plan and warn of a tax hike that could hurt American competitiveness.

There are several reasons Amazon supports the increased tax rate. In short, Amazon doesn’t operate like any other company.

Amazon needs infrastructure

The most obvious reason Bezos supports a tax hike to pay for the infrastructure is because Amazon, more than any other large tech company, needs infrastructure.

Accessible roads and bridges and a functioning post office are critical to delivering on Amazon’s promise to deliver packages to customers on time. Much of rural America with no broadband connection is also untapped markets for Amazon. If more people can easily access Amazon.com, more people will be able to buy Amazon products.

An Amazon trailer on I-5 near Orland, California, a few miles from the company’s planned delivery location in the rural community. (Photo by Chris Kaufman for GeekWire.)

Biden’s American employment plan would spend more than $ 2 trillion on repairing bridges, ports, airports, and transit systems. It is committed to bringing high-speed broadband to every American and investing in research and development and training for technology professions.

These programs could be great benefits for Amazon, but they aren’t cheap. Biden’s plan to finance the infrastructure package calls for a 7% increase in the corporate tax rate to 28%. As part of the 2017 tax overhaul, the tax rate was reduced from 35% to 21%. The proposal also aims to close tax loopholes and deter American companies from shifting profits overseas to reduce their tax obligations.

It’s not just about income tax

Margaret O’Mara, Professor at the University of Washington. (Your photo)

Since its earliest days on Amazon, the company has kept its federal tax burden low by reinvesting profits back into the company and using the research and development tax credit, among other things.

For years, Amazon has reported little or no profits. Today, while Amazon is making a profit, it is nowhere near as high as many other tech companies. This means that a small increase in the corporate tax rate may not have a material impact on Amazon.

“If you look at the taxes Amazon pays and doesn’t pay, and other tech companies, it’s not just the corporate tax rate,” said Margaret O’Mara, a historian at the University of Washington and author of The Code: Silicon Valley and Remaking from America. “Especially in the case of Amazon, the other outsourcing in the tax code, especially the R&D credit, are just as important, if not more important.”

Jay Carney, Amazon’s head of politics and communications, tweeted last week:

If the R&D tax credit is a “loophole,” this is certainly a highly intentional Congress. The R&D tax credit has existed since 1981, was renewed 15 times with the support of both parties and made permanent in 2015 in a law signed by President Obama.

– Jay Carney (@JayCarney) March 31, 2021

“Amazon” has become an acronym for multinational corporations avoiding paying their fair share of taxes, including the current and former president, among politicians across the aisle.

When Biden announced plans last week to curb corporate tax avoidance to pay his $ 2 trillion infrastructure bill, he picked Amazon by name.

“A firefighter, a teacher who pays 22%, [and] Amazon and 90 other big companies don’t pay federal taxes, ”Biden said. “I’ll put an end to this.”

According to multiple outside reports and corporate finance analyzes, Amazon earned Biden’s Wrath by paying $ 0 in federal income tax for two years. That record changed in 2019 when Amazon paid $ 162 million in federal income tax on total sales of $ 280.5 billion.

In February, Amazon announced that its 2020 tax contributions included a federal tax expense of approximately $ 1.7 billion. The company had sales of $ 386 billion and earnings before taxes of $ 24.1 billion last year. This was fueled by a pandemic increase as customers relied on his online shopping and cloud computing services.

Political brownie points

Underlining Amazon’s support for the tax hike is an increasingly hostile political climate. Amazon has been a handy punching bag for politicians across the aisle for years, but criticism has increased since the Democrats took control of Congress and the White House.

Amazon is under public and government control over a variety of issues, including antitrust concerns and the working conditions of its worst-paid employees.

Amazon’s declining popularity in Washington DC was fully evident in the past few weeks as prominent politicians from around the world, including Biden, plunged into the battle to unionize Amazon’s warehouse workers in Bessemer, Ala. A sizeable majority of camp workers voted against union formation on Friday.

Bezos’ willingness to accept a higher tax liability to pay for popular infrastructure programs could be an attempt to gain favor with the Biden administration and customers during a difficult time for the company.

“We support the Biden administration’s focus on bold investments in American infrastructure,” Bezos wrote in his statement this week. “Both Democrats and Republicans have supported infrastructure in the past, and it is the right time to work together to make that happen.”

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