This is a very misleading statement that I see thrown around a lot. Either it's done in bad faith, or it's ignorant of how corporate taxes work (and why).
If you don't earn a profit, there's nothing to tax. Amazon has been (to the credit of their extremely patient investors) funneling their revenue back into growing the company instead of giving it to investors and the government.
Amazon could jack up its prices, stop hiring, cut wages, lay off tens of thousands of workers, slash investments that grow the company, and they would realize a tidy profit. Now they are paying corporate taxes. I guess that would make populist politicians and pundits happy?
So when people disagree with you, they are either malicious or stupid? There's 0% chance that you're wrong, even though you're in the minority of everyone who looks at this and thinks, "Wow, Amazon should pay more in taxes"?
> If you don't earn a profit, there's nothing to tax. Amazon has been (to the credit of their extremely patient investors) funneling their revenue back into growing the company instead of giving it to investors and the government.
No, they haven't. They have been turning a profit. If you reinvest your money in your company, it doesn't show up in your income statement as profit.
The reason Amazon doesn't pay taxes is because of friendly tax law. Part of the proposal from the left in the US is to tax Amazon based on the numbers in their actual financial statements, instead of playing lots of games with depreciation, stock compensation, and carry-forward losses.
So your argument here is somewhat orthogonal to the actual discussion, which is how to tax corporations, not whether corporations are acting within the law. We already know that what they're doing is legal, we just don't want it to be legal anymore.
If you want to uphold the principle that Jeff Bezos should pay more taxes than Grandma, don’t tax Jeff Bezos and Grandma’s pension fund at the same rate. That’s what corporate taxes effectively do.
Source: i do this.
This seems really basic in that society already has a way for Amazon to pay. And we’ve had it for decades.
It’s curious to hear statements like this that make me think there’s some problem to be solved.
Do you think capital gains should be higher? Do you want to shift the method of taxation from personal income taxes to somewhere else?
When the rules were set up this wasn't the intention, and there might have to be changes. To be fair to Amazon, their problems are not as serious as many other companies which make it look like they make zero profit in some countries by "paying" themselves in another.
My understanding is that capital gains taxes are intended to grow capital with the goal of a larger payout in the future as capital is reinvested. It’s purposely not intended to be a real-time tax on gains because future taxes will be greater.
For example, if there’s $100 in profit today and it’s paid out as a dividend then that’s $15 in tax revenue. But if that $100 is invested in the company, it compounds at some rate (say 5% although this varies by company and Amazon is much more efficient) so in 10 years that $100 becomes $162 (1.05^10*100) and if cashed out then as dividend results in $24.3 in tax revenue.
Theoretically if you think the government can invest and get a return greater than within individual companies then capital gains doesn’t make sense, but that’s an argument for economists.
But wanted to share that the goal of capital gains is to maximize tax revenue through efficient incentives.
Of course, it might be they could spend more efficiently, but if all purchases move online, and online companies manage to avoid paying tax to most governments, these basic utilities are in trouble.
But I suppose that’s where you can try convince governments to do away with capital gains and tax very differently. I don’t think you’ll find any countries that do this or do it efficiently. The growth of capital is really important to long term improvement, and even pretty “socialist” countries like the Scandinavian nations encourage capital growth through their tax policy.
I think the difference is that the value for Amazon is focused on one company while the value for society is spread across 7 billion people.
In my mind, without 'society', there would be no police, no hospitals, no public education, no roads. In my mind, these are all part of what we get by being in a society. Amazon is welcome to try to function in countries with no functioning government, but I suspect they would have limited success.
But I think that the main benefit of society is that it provides an environment that allows members to contribute and make it better. So while society provides safety, etc people and companies add to it with additional value. This value gets taxed (to support society) and the remaining value builds and compounds.
So at a macro level any persisting organization contributes more to society than they gain or society would crumble. By definition the growth in society is driven by people making it better. And people work on stuff like corporations.
On the micro level, it’s hard to figure out the exact net contribution from individual persons and companies, but Amazon is obviously a huge company paying out returns and the second order effects from how they’ve driven e-commerce, cloud, and logistics make me think they’ve helped many others beyond just customers and shareholders.
That being said, maybe taxes should be changed. But they are currently paying everything required of them and monetarily generate lots of revenue for government (eg, corporate income taxes, sales tax, property tax, tariffs, capita gains paid by shareholders, and income tax paid by employees, etc)
The only benefits they can really profit from are things no one else can get, which generally only amount to corruption for anything I can think of. I'm sure there's some, of course.
There's value in the stock, but that's taxed as stockholders sell and realize the capital gains.
I understand you have a link with the word "profits." WaPo is misusing the term. Profits are revenues after expenses and the numbers in that graph are not taking certain expenses into account. When the expenses are taken into account the profit drops to zero.
Specifically, one of the big expenses deducted before calculating tax was liquidation of employee stock options. And guess what? Instead of being taxed at the corporate income tax rate those options were taxed as individual income for the employees who exercised them -- an even higher rate!
In your example the gains were in fact taxed. The tax was just applied in a different place than where you're happening to look.
> WaPo is misusing the term. Profits are revenues after expenses and the numbers in that graph are not taking certain expenses into account.
"Profit" is not a defined term. It's shorthand for something else, usually gross profit, operating profit, or net income.
For 2018, AMZN had gross profit of $93B, operating profit of $12B, and net income of $11.6B. The WaPo numbers in the graph use one of the latter two figures, so the graph is absolutely correct. It is NOT revenue in the graph, and their profits have absolutely gone up.
Do you honestly think an edited and widely read paper like WaPo is going to make an incredibly basic accounting mistake in their business section?
> In your example the gains were in fact taxed.
No, they weren't. Most of Amazon's shares are not held by employees. Taxing employees is not solving the core issue that everyone is upset about, which is that Amazon (taken either as an entity or as its owners, most of whom are not employees) is paying close to 0% taxes. Period. That's it.
No one is arguing whether the activity surrounding Amazon generates tax revenue. That's outside the scope of the argument.
And in this case, we are discussing profit as is relevant to the tax code. There is no need to be adversarial considering you've just said you agree with me.
> No, they weren't.
Yes, they were.
> Most of Amazon's shares are not held by employees.
This is irrelevant as capital gains are necessarily taxed.
> which is that Amazon (taken either as an entity or as its owners, most of whom are not employees) is paying close to 0% taxes. Period. That's it.
And this is just wrong.
> That's outside the scope of the argument.
It appears it would be most accurate to say that your argument hinges on a particular narrow definition of terms and scope of analysis.
I don't think we need to discuss this further. Your point has been made, such that it is.
It should, but it doesn't.
Amazon is a classic example. Despite being the beneficiaries of many types of corporate welfare (including paying some full-time employees so poorly that they had to be on welfare), Amazon has paid $0 in tax a few times.
In fact, there is no meaningful relationship between Amazon's profits and taxes. Their profits go up, and sometimes their taxes actually go down[1].
1. https://www.washingtonpost.com/resizer/fWL3rv40cvsIPAqSvf1wz...