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A populist backlash against wealth inequality has been growing across the United States. From the Occupy Wall Street movement to the election of U.S. President Donald Trump, Americans are increasingly angry that the wealthy elite have gamed the system.
With that in mind, it's no wonder that news that Amazon.com Inc. (NASDAQ: AMZN) – a corporation that earned $11.2 billion in profits in 2018 – paid $0 in taxes for the second straight year struck a giant chord with the public.
But before anyone passes judgement, we need to dig down to the facts.
And at first blush, it's even worse than the news. Amazon actually got a $129 million federal tax rebate, dropping its net tax rate below zero. Buried in the fine print, Amazon's tax disclosure claimed various unspecified "tax credits," as well as a certain break for executive stock options.
According to the Institute on Taxation and Economic Policy (ITEP), Amazon was the beneficiary of the 2017 tax cut legislation that dropped corporate tax rates from 35% to 21%.
But even so, 0% is not 21%.
As with every corporation and individual taxpayer, the goal is to pay as little in taxes as possible. The tax code is so bloated and convoluted that there are loopholes galore, providing deductions and exemptions, losses and write-offs, and countless other paths toward legal tax avoidance.
Amazon is no stranger to fighting for lower taxes. From special tax breaks in Seattle to breaks in New York, where its attempt to build a second headquarters just fell through, Amazon's mission is to provide service to its customers and pay as little as possible to Uncle Sam.
Part of the reason Amazon was able to grow from Jeff Bezos' garage to becoming one of the biggest companies in the world was by avoiding state and local sales taxes. The resulting lower net price to the customer gave it a competitive advantage over brick-and-mortar stores.
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But just because Amazon is able to successfully play the system to limit its tax burden doesn't mean it isn't generating tax revenue.
From sales taxes in some states to job creation in its facilities and support for businesses that do pay taxes, there is public benefit to having Amazon around.
As usual, the scandal surrounding Amazon's taxes is being drummed up by politicians who created the tax structure in the first place…