How Amazon Paid $0 Federal Income Tax in 2018
How Amazon Paid $0 Federal Income Tax in 2018
Amazon is a very sophisticated tax player.
Amazon is very much the canary in the coalmine.
They're really doing what a lot of politicians wish more companies would do.
Amazon is a huge company, but do you know just how huge it really is.
You start with amazing Amazon somewhere CEO Jeff Bezos is smiling.
"我們從Amazon的CEO說起， 不知道正在那裡笑著的Jeff Bezos"。
It's one of only two US companies to ever reach a trillion dollar valuation.
No one in history has become as rich as quickly.
It's made Jeff Bezos the richest man in the world.
That is 100 million Prime subscribers globally.
And if you put those prime subscribers in one country, it would be the 14th largest on the planet.
But that massive company paid no federal income tax on more than 11 billion in profits in 2018.
And somehow they actually got a one $129 million dollar tax rebate.
So how do they do it?
CNBC Explores - Amazon’s low federal income tax bill
CNBC探索 - 亞馬遜的低廉聯邦所得稅
The tax cuts and Jobs Act is passed.
First, there's the tax bill.
President Trump's signature tax legislation lowered the corporate tax rate from 35 to 21 percent.
Corporations are literally going wild over this.
That immediately slashed Amazon's potential tax burden.
Then there's Amazon savvy use of revenue.
Amazon plows large portions of revenue back into itself to cultivate long term growth.
Amazon has actually been selfs funding for several years now.
The company generate significant free cash flow.
One of things I like Amazon is it’s a company that doesn’t really kind of rest on their laurels and is constantly trying to innovate, constantly trying to heed the needs of the customers.
This started early on with Bezos using the strategy to get big fast helping Amazon eclipse its once arch rival, Barnes and Noble.
Since then, it's helped Amazon gobble up countless other retail markets as well, embark on lucrative ventures like Amazon Web Services, and even become a Hollywood studio with shows like “The Marvelous Mrs. Maisel” and “Jack Ryan.”
從那時起，這個策略幫助亞馬遜吞噬了無數其他零售市場，開始了像亞馬遜網絡服務這樣的利潤豐厚的企業，甚至成立一個好萊塢工作室，其中包括“The Mavelel Mrs. Maisel”和“Jack Ryan”等節目。
Amazon has invested so much revenue in itself over the years that sometimes it didn't even make a profit.
8 years of losses since 1997 Amazon IPO
And when that happened it could carry forward losses to write-off on future tax bills.
In 2018, those carry forward losses eligible for federal write-off amounted to $627 million dollars.
Then there's massive federal tax credits, which the company reports are primarily related to research and development from its AI assisted logistics network to it's sweet of consumer electronics products, Amazon has poured tens of billions of dollars into research and development over the years.
But that's not the only tax credit Amazon qualifies for.
The big one last year was the expensing that is allowed for investments in plants and equipment and buildings and things of that sort.
Trump's tax cuts and Jobs Act supercharged this credit, a perk that Amazon has cashed in on.
The idea behind the expanded credit?
James Pethokoukis(Economic Policy Analyst American Enterprise Institute)
Is the big problem for U.S. economy is that it has not been as productive recently as in the past.
And so one solution which would help sort of companies everywhere is if they invested more in machinery and training to make their workers more productive.
But not everybody buys into this reasoning.
The tax breaks Amazon is getting, they're being rewarded for what they were gonna do anyway.
Matthew Gardner(Senior Fellow, Institute on Taxtation and Economic Policy)
Because when you're a company as successful as profitable, as cash-rich, as Amazon is, you make investments have the money to do them and when you see the need for those investments.
In 2018, Amazon had about 1.4 billion dollars in total available tax credits.
Finally, there's the company's use of stock based employee compensation.
Basically this allows Amazon to pay employees using stock, and then take the value of that stock off their tax bill.
Steven M.Rosenthal(Senior Fellow Tax Policy Center)
Amazon rewards its employees, especially its executives, with stock based compensation, and Amazon stock has been rising fairly substantial for many years.
And so the size of that stock based compensation is now very large and affords Amazon a large write-off.
Some say the federal government ends up making just as much in the long run from stock based compensation because the stock is taxed when it's sold.
But others have concerns because of the major difference between the value of the stock when it's offered to employees versus the value when it's written off.
They give executives the right to purchase a certain number of shares of stock at a set price.
The price of the stock goes way up.
Matthew Gardner(Senior Fellow, Institute on Taxtation and Economic Policy)
The company is then allowed to write off the value of that stock and suddenly the tax breaks can be huge.
$1.1 billion - 2018 stock-base compemsation
(11億美元 - 2018年股票薪酬)
Amazon deducted about 1.1 billion dollars from its tax liability using this method in 2018.
So that's how Amazon secures such a small federal income tax bill.
But before we get ahead of ourselves, we should probably remember that Amazon does pay certain taxes like state taxes, local taxes, other federal taxes and international taxes.
In a statement to CNBC, an Amazon spokesperson said, “Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years…”
The company also touted its investments and job creation in the U.S.
But according to data compiled by the Institute on taxation and economic policy, Amazon had an effective federal tax rate of just 3 percent over 10 years.
That's far below the ones 35 percent corporate income tax rate in the United States and even the new 21 percent rate now.
And Amazon's story is not exactly unique.
Another disruptor Netflix and even a more traditional auto company General Motors both report expected net federal income tax benefits in their 2018 annual filings.
When we asked Netflix about it, the company highlighted the 131 million it paid in taxes total but wouldn't break out its federal bill.
It all seems to be part of a larger trend. over the past 70 years, we've seen a decline in corporate income tax revenue as a share of the larger economy.
And in the last decade, companies as diverse as Southwest and Goldman Sachs, just to name a few, have all had at least a year where they reported net tax benefits in their SEC filings, but could lower in America's corporate tax rate actually make it more competitive for companies to do business here?
I think what a lot of economists would say is that the corporate tax is a very bad tax.
One you have a sort of a global economy where economic activities everywhere you have other countries cutting their tax rates.
You want to sort of incentivize economic activity to be in your country.
What do you want these companies to do?
You want them to invest in new machinery, wants them invest in their workers, you want them to have more profits, which then they can use to invest more.
That's what you want corporations to do.
You don't want corporations necessarily be paying lots of taxes or if that's not what they're there for.
Others say it deprives the country of much-needed tax revenue without a lot of benefit.
We may yet succeed in this experiment of lowering our effective tax rates and our statutory tax rates to draw more business to the US.
But so far, we're not seeing the type of level of growth and business and investment that would make up for the lost revenue when we lowered our tax rates from 35 to 21.
So yeah, that's an issue because we need the money.
As of 2017, the US corporate tax revenue as a share of the larger economy was lower than most other pure nations ranking below Italy, South Korea and Mexico.
We're in a lot of trouble.
We're facing one trillion dollar deficits as far as the eye can see.
Ultimately, this means everyone else has to pick up the slack.
That two billion dollars Amazon is not pained will have to get paid by smaller businesses that don't have the wherewithal to lobby for tax breaks.
It'll get paid by middle-income families in the form of higher taxes in some way.
The reality is, this is how business has been done for years.
Corporations with savvy lobbyists on their payroll have found ways to convince politicians in both parties to leave loopholes in the tax code.
So I'm a tax lawyer and I drafted tax rolls for Congress for six years.
Multinationals have a very strong presence on the Hill.
When I was there, we would meet every week with companies and their their lobbyists.
And I think the interest is disproportionate.
I mean, every American including every American company, has a right to petition Congress and to share their concerns with Congress.
The trouble is, sometimes of those with the most resources have the loudest voice.
But business as usual may be changing, as average Americans have begun to wonder whether this bargain really benefits them.
it's a question that came front and center during Amazon's hunt for a second headquarters.
Amazon has made it official.
The online giant announces splitting its new headquarters into two locations.
Crystal City in Northern Virginia and Long Island City in Queens.
The company courted massive interest from hundreds of cities.
Amazon today saying they are bringing at least 25,000 jobs with an average salary of $150,000.
New York's governor ,and mayor saying the $3 billion dollars in tax incentives they gave Amazon for an expected twenty seven point five billion in tax revenue would pay off big for New Yorkers.
That is the highest rate of return for an economic incentive program that the state has ever offered.
This certainly consolidates New York City as a great international tech hub.
Despite positive polling on the deal, a groundswell of New Yorkers vehemently disagreeing.
“Whose city? Our city! Whose city? Our city!”
"誰的城市？" "我們的！" "誰的城市？" "我們的！"
We want to make sure that they know that this community is going to stand up and fight against this deal.
Any politician in this progressive city and our state whose role to hand up three billion dollars to Amazon, there should be a career ender right there. Period.
And soon, it all came crashing down.
Breaking news, Amazon canceling its controversial plans.
Now it will not build a headquarters in New York.
The world's biggest company just got sent packing thanks to an unfriendly welcome by New Yorkers.
Has the populist victory in the HQ to fight changed the game?
I mean it shows that everyday Americans can have more say in this country than the richest man in the world.
Will it ignite a grassroots movement demanding that loopholes be tightened and the effective tax rate be raised all the way up to the federal level?
We should not have a regressive tax system in which large profitable corporations like Amazon pay nothing in federal income taxes.
Or is it just a flash in the pan?
As even president Trump, a frequent critic of Amazon came to the deal’s defense?
Well, I think it's a loss to New York City.
And the $3 billion dollars wasn’t a check.
It was a form of taxes over a period of time that now they'll never see.
Only time will tell.
But one thing is for sure, it's quite normal for some corporations to pay no income tax to the federal government.
Is that a normal you're satisfied with?
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