“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.
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.”
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.