If you sink all of your profits into expansion, then on the books you made zero profit. If you made zero profit, you pay zero taxes. This is a common tactic with farmers. They use this year's returns to buy next year's supplies. If amazon stopped growing and suddenly reaped their profits, there would be a big tax bill to go with it.
It applies to at least: MSDOS, Windows, Office and most of its products, Internet Explorer, SQL Server
In fact it was so well known that's how things worked, it was a saying that they only finally got things right by version three.
MS-NET, LAN Manager and MS/IBM joint effort with OS/2 LAN Server were all inferior to Netware. MS battled decades against Novell with inferior products and shady market practices eating their profits. Finally Novell was taken down and crumbled when networking became a core system component in PC operating systems.
Throwing money against to superior product from smaller competitor until you can eat their lunch is proven tactic.
That seems... reasonable.
Amazon's reference point is Wal-Mart. They are in ever expanding price cutting small margin business.
Another good comparison in Microsoft in 80's and 90's. MS dominated over IBM, Apple and others several decades with sup-par product everybody hated by attacking and destroying potential competitors, not by improving products.
Bezos knows what he is doing.