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Jeff Bezos has approved higher corporate tax rates.  But it won’t cost him dear


Hardly any other business executive has come out in favor of Biden’s plan. But it’s a relatively easy plan for Bezos to take: His company pays nowhere near the current 21% corporate tax rate, let alone the 28% rate Biden is offering.
According to documents filed by the companies, Amazon’s federal tax bill was $ 1.7 billion in 2020. That doesn’t mean its actual payments have reached that much – but that tax figure of $ 1.7 billion. however, only represented about 7% of the pre-tax income of the $ 24.2 billion it declared to investors. So Amazon only paid about a third of the 21% rate.
One of the only other executives to approve higher corporate tax rates is Lyft co-founder and chairman John Zimmer. But with Lyft (LYFT) still losing money, his company will pay no corporate taxes in the years to come.
Amazon (AMZN) does nothing illegal, incorrect or unusual. Few companies pay 21% of their reported pre-tax profits in corporate income tax. This is because there are many ways to reduce the amount of taxable income subject to that tax rate.

“They care a lot less about the rate and more about their ability to continue reducing their taxable income,” said Matt Gardner, senior researcher at the Institute on Taxation and Economic Policy (ITEP), a non-partisan think tank. “Of all the things the Biden administration might try to push through, raising the corporate tax rate might be the one that hurts them the least.”

And that’s why those who advocate increasing the amount businesses pay say it’s important that any tax laws passed by Congress do more than just change the corporate tax rate. It should increase the amount of income subject to tax relative to the amount tax-sheltered.

“Raising the tax rate would be a tragically incomplete way to address this,” Gardner said.

Biden wants to raise the corporate tax rate to pay for his $ 2 trillion infrastructure legislation. Bezos recently said it was the right time for a major infrastructure investment and that Amazon was “in favor of raising the corporate tax rate” to help pay for it.
Amazon paid no federal income taxes as recently as 2018, making it a favorite target for those, including Biden, who have argued that rich, profitable businesses are not paying their fair share.
ITEP’s analysis shows that 55 large companies paid no taxes for 2020, including Nike (NKE) and FedEx (FDX). He said 26 companies have paid no taxes since the Trump tax law came into effect in 2018.

The ITEP analysis also shows that the average effective corporate tax rate paid by profitable Fortune 500 companies was only 11.3% in 2018, the year Trump adopted the 21% rule. And the Congressional Joint Committee on Taxation found that U.S. multinational corporations were paying even less than that on average: 7.8%.

“This beating on Amazon is a bit of a stretch compared to what other companies are doing,” said Martin Sullivan, chief economist at Tax Analysts, a non-partisan, non-profit publisher of news and commentary on the law. tax. “Other companies are transferring a lot more income to tax havens abroad. To me, they are on the verge of goodies.”

The continued criticism is probably what prompted Bezos to support higher rates, Gardner said.

“This indicates that they are not completely deaf to the political situation,” he said.

Amazon defends its tax bill

Amazon’s lower federal tax bill is due to a number of tax breaks, none of which are disclosed by the company.

Probably the most significant disruption has been Amazon’s ability to immediately reduce its taxable income from much of its capital spending. He also likely got breaks for his hiring, depending on the number of his new workers from disadvantaged backgrounds. It added 500,000 workers worldwide in 2020 by expanding its network of distribution centers.

And tax breaks for research and development spending and money spent on green energy projects have likely helped Amazon as well, experts say.

The company says the reduction in its tax bill is due to provisions in the tax code that are good for the country and the economy.

“Our investments have grown the economy by $ 315 billion over the past decade, while we have created nearly a million jobs in the United States,” the company said. “US tax laws were designed to encourage exactly what Amazon is doing to advance the US economy.”

Jeff Bezos has approved higher corporate tax rates.  But it won’t cost him dear

Biden’s plan proposes to reduce some of the ways companies reduce their taxable income, although many of the breaks that likely provided Amazon with significant savings would not be at risk.

As part of the administration’s plans, Amazon’s taxes could see the biggest increase from the proposal to impose a 15% minimum tax on the amount the company declares in pre-tax income. This could have more than doubled Amazon’s tax bill to $ 3.6 billion. There is also a separate provision to impose a minimum tax on foreign business income.

Experts say that regardless of the impact on Amazon, the proposed minimum tax on overall pre-tax income would not be the main source of additional tax revenue like other provisions of Biden’s plan.

“Raising the statutory rate and closing loopholes that encourage profit shifting overseas is where you get the most bang for your buck,” said Frank Clemente, executive director of Americans for the tax fairness, a group that campaigns for greater corporate taxation. collections.

But Gardner said a minimum tax on pre-tax reported income is important because it promotes a sense of fairness and prevents businesses from escaping higher taxes by sheltering all of their income.

“It should be obvious that 21% of nothing is about the same as 28% of nothing,” Gardner said.

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