A Journal of People report
“Those wondering how many zeros Amazon, which is valued at nearly $800 billion, has to pay in federal taxes might be surprised to learn that its check to the IRS will read exactly $0.00”, wrote Fortune in a story on Amazon’s payment of Federal Income Tax (“Amazon Will Pay a Whopping $0 in Federal Taxes on $11.2 Billion Profits”, Laura Stampler, updated: February 15, 2019, originally published: February 14, 2019).
Bernie Sanders twitted: You know what Amazon paid in federal income taxes last year? Zero.
A report from the Institute on Taxation and Economic Policy (ITEP) said, Amazon would pay nothing in federal income taxes for the second year in a row.
According to the report by the ITEP, the e-tail/retail/tech/entertainment/everything giant will not have to pay a cent in federal taxes for the second year in a row.
The “credit” goes to the new Tax Cuts and Jobs Act (TCJA) for paying nothing in federal income taxes.
This tax-free break comes even though Amazon almost doubled its U.S. profits from $5.6 billion to $11.2 billion between 2017 and 2018.
To top it off, Amazon actually reported a $129 million 2018 federal income tax rebate—making its tax rate -1%.
Amazon’s federal tax responsibility is 21% (down from 35% in previous years). However, with the help of tax breaks, Amazon will not be paying a dime to the U.S. state although Amazon made more than $11 billion in profits in 2018.
“It’s hard to know exactly what they’re doing,” said Steve Wamhoff, ITEP’s Director of Federal Tax Policy. “In their public documents they don’t lay out their tax strategy. So it’s unclear exactly which breaks [the company is taking advantage of]. They vaguely say tax credits. One could think of many different ways a corporation could do this, like the depreciation breaks which were expanded under TCJA.”
Though Amazon might have taken advantage of new breaks and loopholes available under TCJA, this is not the first year that Amazon has avoided paying federal tax. The company reported $5.6 billion in U.S. profits in 2017 and paid $0 last year as well.
“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,” an Amazon spokesperson said in a statement.
According to Wamhoff, the company’s apparently nonexistent tax bill highlights that there have always been issues with corporate tax liability.
“The thing we would need to know is would they have had positive corporate income tax liability were it not for TCJA?” Wamhoff asked. “Maybe. It’s hard to tell.”
Source: ITEP analysis of SEC filings
Revelations about Amazon’s tax liability come despite President Trump’s very public criticisms of Amazon and Bezos for not paying enough tax. The president had promised his new tax law would end special interest breaks and close loopholes, but it is clear that is not the case, says Wamhoff.
“This is another situation where the rhetoric from President Trump is completely divorced from what he does and what his policies do,” explained Wamhoff. “The part about cutting corporate tax rate was true. And they eliminated some corporate tax rates but not all.”
He added: “The corporate tax revenue was a big loser. We aren’t going to see corporations suddenly paying more. We see that in the case of Amazon.”
Declining tax revenue has only widened deficits, as national debt has ballooned up and over $22 trillion.
Amazon briefly touched $1 trillion in market cap on September 4, 2018. (Chart: Yahoo Finance)
Amazon not alone
TCJA had been criticized in large part due to the benefits it provided the wealthiest Americans and big corporations. Wamhoff says it is ironic that the corporate tax rate was slashed to 21% (from its previous 35%) because the effective corporate tax rate under previous tax law was 21%, after accounting for tax breaks and loopholes.
Therefore, Wamhoff says, we’ll likely see the effective tax rate fall even lower.
However, if anyone thinks that Amazon is alone, they would be wrong. Last week, Netflix also did not pay American federal or state income taxes according to a separate ITEP report, despite posting record profits. Netflix has disputed those findings, while ITEP claims that the $131 million paid by Netflix is taxes on foreign income.
And, historically Wamhoff says, this story is nothing new. Several corporations have avoided paying federal income tax throughout the years, he says.
“These companies have been consistently profitable,” he explained. “And they should really be paying taxes.”
Amazon makes money in a lot of ways. (Graphic: David Foster/Yahoo Finance)
But even though Trump previously blasted Amazon for its limited state taxes — a single presidential tweet caused the company’s shares to fall by 9% — ITEP notes that its non-existent federal tax payment is a result of the Trump Administration’s corporation-friendly tax cuts. The think tank writes that the 2017 Tax Cuts and Jobs Act not only decreased corporate tax rates from 35% to 21%, but it also didn’t close “a slew of tax loopholes that allow profitable companies to routinely avoid paying federal and state income taxes on almost half of their profits.”
According to The Week, Amazon ended up paying an 11.4% federal income tax rate between 2011 and 2016, which is a contrast to the -1% rate this year.
Amazon has a history of avoiding various sales taxes and made headlines last summer after successfully convincing Seattle Mayor Jenny Durkan to repeal a tax that would have helped the city’s homeless population.
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