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Amazon's Rate Racket
Why Amazon really supports an increase in the federal corporate tax rate.
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The Biden Administration has proposed covering the cost of its big new infrastructure plan via an increase in the federal corporate income tax rate. The 2017 Republican tax cut lowered the top corporate rate from 35 percent to 21 percent, and Biden has proposed bumping it back up to 28 percent.
That proposed increase has, inevitably, earned the administration ire from Republicans and Democratic Sen. Joe Manchin, even though a 28 percent rate would still leave the top corporate tax rate lower than it has been every year since 1941, save for the last few.
But one perhaps surprising entity endorsed a corporate tax increase: Amazon.
"We support the Biden Administration’s focus on making bold investments in American infrastructure," said CEO Jeff Bezos. "We recognize this investment will require concessions from all sides — both on the specifics of what’s included as well as how it gets paid for (we’re supportive of a rise in the corporate tax rate)."
There’s much less than meets the eye, though, to Amazon’s support. It’s mostly a PR move aimed at distracting all of us from the way in which Amazon actually extracts money from local communities.
Amazon, quite famously, pays very little in federal corporate income taxes. In 2018, it paid nothing. In 2019, it paid 1 percent. Last year, that jumped up to 9.4 percent on $20 billion in pandemic-driven profits. Those are all far below the rate that is actually on the books, due to Amazon’s use of a series of credits and a giant tax break for stock options.
There’s no guarantee, then, that changing the top rate from 21 percent to 28 percent will affect Amazon in any real way. As Matthew Gardner of the Institute on Taxation and Economic Policy put it, “It should be obvious that 21 percent of nothing is pretty much the same as 28 percent of nothing."
Plus, as GeekWire’s Monica Nickelsburg noted, Amazon benefits from improved infrastructure, since it’s on that infrastructure that all its packages ride. Trading new roads and bridges for a press statement about a corporate tax increase it may not even have to pay is a really good deal for Amazon. It gets to look reasonable and curry favor for the day when the Biden Administration does something it actively opposes.
For more insight into how Amazon acts when a tax increase is on the table that it might actually have to pay, we have to shift from looking at Washington, D.C., to Washington State, and specifically the 2018 proposal to implement a head tax in Seattle on large businesses.
That tax — levied on a per employee basis for corporations making more than $20 million a year — would have cost Amazon about $12 million annually, a drop in its very large bucket. But after initially signaling it would support the tax, the revenue from which Seattle planned to spend on programs to ameliorate homelessness, Amazon went all out to oppose it nearly the second it became law. It spent tens of thousands of dollars on a corporate front group that was fighting the tax, and threatened, as so many corporations do, to leave Seattle should the tax stay on the books.
Ultimately, the pressure worked, and the Seattle council repealed the head tax.
Add that episode to Amazon’s relentless pursuit of tax subsidies at the state and local level, both for its HQ2 and its distribution and warehousing network, and you see that where the rubber really hits the road, Amazon does not want to chip in to the communities in which it does business. All told, Amazon is closing in on $4 billion in state and local subsidies received.
Amazon’s public support of a federal corporate tax increase, while it continues to fight tooth and nail against being taxed at the local level, reminds me a lot of it’s behavior around that famed “second headquarters.” Amazon received some $750 million in state and local subsidies from Virginia for HQ2, and then turned around and donated a fraction of that amount to affordable housing programs and local schools.
It came out way ahead, yet still received lots of positive press for essentially giving taxpayers back pennies on the dollars, to be put toward programs aimed at addressing problems Amazon’s very presence made worse. Some of the donations were even linked to added regulatory benefits for Amazon.
It’s a racket, is what I’m saying. From its very inception, Amazon has used local tax law to gain an advantage, building its initial book business around the fact that, at the time, sales taxes were only levied in the state in which a corporation was based. That enabled it to undercut local sellers across the country. Its actions around taxes are always strategic.
Amazon, notably, did not endorse other Biden efforts to raise corporate taxes, such as a minimum corporate tax, that might end up costing it some real money. But it did get a lot of headlines noting that it supports a tax increase — which was really the point all along.
UPDATE: Good news from New York: The bill to decouple the state from the federal Opportunity Zone program that I highlighted a few weeks ago is in the state budget and becoming law! This is a huge win for New York taxpayers and the advocates and lawmakers who worked to make it happen.
ONE MORE THING: Tax breaks for data centers are a big scam, so it was good to see Kentucky Democratic Gov. Andy Beshear veto a new one the state legislature recently approved, amidst a sea of other corporate giveaways. Beshear doesn’t seem opposed to data center subsidies in general, but let’s take wins on this where we can get them.
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— Pat Garofalo