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 coal mine. They’re really doing what a lot
of politicians wish more companies would do. Amazon is a huge company, but you
know just how huge it really is. We start with amazing Amazon somewhere
CEO Jeff Bezos is smiling. It’s one of only two U.S. 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 one hundred
million prime subscribers globally. And if you put those prime subscribers in
one country, it would be the 14th largest on the planet. 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
$129 million tax rebate. So how do they do it? First, there is 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 challenged significant
free cash flow. One of the things I like about 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 customer. This started early on with Bezos using
the strategy to get big fast helping Amazon eclipse its once arch
rival, Barnes & 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.” Amazon has invested so much revenue
in itself over the years that sometimes it didn’t even
make a profit. And when that happened, it could carry
forward losses to write off on future tax bills. In 2018, those carryforward losses eligible
for federal write off amounted to $627 million. Then there’s massive federal tax credits,
which the company reports are primarily related to research and
development from its A.I assisted logistics network to its
suite 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. The big problem the 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 going to do anyway. Because when you’re a company as
successful, as profitable, as cash rich as Amazon is, you make investments when you
have the money to do them and when you see the
need for those investments. In 2018, Amazon had about one point
four 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. Amazon rewards its employees, especially
its executives, with stock based compensation, and Amazon stock has
been rising fairly substantially 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. The company is then allowed to write
off the value of that stock and suddenly the tax breaks can be huge. Amazon deducted about one point one
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 once 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 S.E.C. filings, but could lowering
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 sort of a
global economy where economic activity is 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. Want them to 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 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 in business and investment that would make up for the
lost revenue when we lowered our tax rates from 35 to 21. So yeah, it’s an issue
because we need the money. As of 2017, the U.S. has corporate tax revenue as a share
of the larger economy was lower than most other peer 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
paying 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 rules 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 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 announced it’s 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, a mayor, saying
the $3 billion dollars in tax incentives they gave Amazon for an expected 27.5 billion in tax revenue would pay off big for New Yorkers. That is the highest rate of return for an economic incentive program that this 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! 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
a state who’s willing to hand out 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 change 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 for 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?

100 comments

  1. Report the News CNBC not lead the viewer to a conclusion. You didn't even show a competitive thought to your video and they ones you did have never ran a successful business in their lives. Minus Trump.

  2. I love how the whole idea of lowering taxes for corporations stems from "wanting them to have more resources, build themselves faster, develop faster" by having more money. Kinda crazy when you think that those companies that end up paying the least because of further tax breaks for development or whatever, need the money the least as well. I mean come on let's be real, could Amazon pay their higher-ups 10k less a year (considering they make millions already) and pay all their taxes without it "hurting the development of the company" whatsoever. It's just such bs and it's like the formalities of today prevent us from using any common sense. I'm not even American, but maybe thank fk for not being because it seems like there people are the blindest to corporate greed. Feels almost encouraged.

  3. Bezos can become an Earth Saviour by funding a Green New Deal for the Amazon basin in exchange for making gadzillion$ off the good name of that beleaguered forest basin

  4. If money and success it brings motivates the rich, why do I get motivated to work with the lack of money? Why not motivate me with more money? It is because if I get more money, I will stop working, and that is true, but if the rich get more money they will work harder? I don't know, I work very hard for fear of not having enough money.

  5. Well, 95% of liberal voters didn't pay taxes..ever. So I think it balances out in terms of fairness. Once libs start getting off of welfare and start working, then we'll listen to your complaints about "the rich" and "high taxes"

  6. The Federal government must put a minimum corporate income tax rate of at least ten percent annually, period. Stop the slick maneuvering, and make everyone pay their fair share.

  7. I am not seeing the problem here. We want companies to reinvest their profits. That contributes to the economy instead of paying out shareholders. Then you turn around and complain when taxable income and subsequently, taxes are too low? Investments and taxable income have an inverse relationship to each other. Pick your poison.

  8. Isn't 20% corporate tax in Germany and they are the powerhouse of Europe? Where 35% tax rate got us, Making China Great Again? Why should we make harder for our companies to operate? Why people confuse corporate taxes with personal taxes? We should lower corporate tax and increase personal income tax. If Amazon pays 0% tax and unemployment is 3.5% then it's win-win situation. If Amazon and other corps tax is 35% and unemployment is 7-9+%, we lose jobs, family, kids to drugs and crime, no one wins!

    PS: Why not start with all millionaires paying 7.5% of income on social security, remove the cap, and then start with other taxes? Why they have cap on social security when there is no cap on profits???? Oh yes, they invented "fair share" paying less than 1% on social security while middle class pays 7.5%.

  9. Pay everyone and write every box off like you paid for single and not bulk…is this supposed to be little known knowledge or is everyone out here still trying to sell weed…

  10. Why are me letting jeff bezos have more than 100 billion usd? Take 100 billion from him and share it to the poor, And let him keep 100 million.

  11. Ppl are so dumb🤦‍♂️ first off amazon wasnt paying taxes well before the tax bill. That is a blatant biased political attack and unfounded.

  12. I get the left needs to feel victimized when a company like Amazon has created so many good paying jobs for Americans. The wsj a non liberal media outlet has said,

    "A closer look at the internet giant’s tax disclosures over several years paints a more complicated picture: Amazon has paid income taxes somewhere, albeit at a low rate, likely helped by deductions and incentives related to investment, research and employee compensation."

    Why does the left hate success so much? How many jobs are created when this new generation is getting degrees in lesbian dance theater and gender studies and expecting CEO type pay out of college?

  13. Fueling the class warfare engine. It's always fun to watch the uneducated and partially educated lefties come out against job creation. I guess that's because they might actually have to work. OMG what a horrible idea.

  14. Mostly due to Amazon, the United States Postal Service has been reducing its contribution to the national debt by nearly 2 billion per year…. This video is a shill to keep the federal government large, and free-market business small. It's all about control folks.

  15. How about we lower government spending if the government is "strapped for cash"? No? You're gonna keep spending the money you don't have? O-okay then…

  16. Corporations don’t pay taxes. Their employees do.
    Excerpt from article: A Congressional Research Service paper uses different assumptions and claims that it is mostly capital, the shareholders in lower returns, who carry the burden.

    But do note the one point upon which everyone is agreed: whoever is paying the tax it’s not the company. We’ve known this since 1899 and Edwin Seligman’s “The Shifting And Incidence Of Taxation”.

    This is of course a hugely important point. For example, all those who say that “companies should pay more tax” are simply being ignorant. Companies do not pay tax, cannot pay tax, and thus to call for them to pay more is just displaying that ignorance.

    https://www.forbes.com/sites/timworstall/2011/09/22/corporations-do-not-pay-taxes-they-cant-theyre-not-people/#22f4e4f76222

    https://www.metafilter.com/67993/Corporations-dont-pay-taxes-People-do

    https://www.alec.org/article/businesses-dont-pay-taxes-people-do/

  17. "Great" tax system, I pay 40% tax on my hard earned middle class income – the bold guy earning billions pays nothing. Just WOW. The folks who allowed all these tax exemptions for corporations deserve jail time.

  18. This is an amazing example of why we need to vote and pay attention to what is going on in politics. Research your candidates

  19. No where in this 0% tax jargan have I heard about Apples stockpile of cash. I did hear that they spent so much money back in the company that they didn't make a profit. I also heard that they give their employees stock and make them owners. State taxes, local taxes, and international taxes. Politicians licking their lips.

  20. Absolutely sickening and disgraceful. The smaller companies don't have the resources to exploit these same loopholes, not that they should anyway. In the end everything will be owned and ran by a handful of conglomerates.

  21. rich dont pay taxes period! they know the truth about the world! taxes are voluntary theres no law says pay taxes! period! your bosses are just idiots and make you ! open own business and pay nothing! your president trump has never paid a tax in his life! follow example of your leaders!

  22. I love New Yorkers but not the cost of NYC rent. NYC is already too expensive. I don't blame New Yorkers for protesting. That would make a horrible place to live even worse. The people of NYC deserve better.

  23. I'll vote for ANY candidate that will force companies like Amazon to pay their share of taxes. And if they in turn try to raise prices, PLACE HEFTY FINES on them. Don't care what party, democrat or republican, you do this, you got my vote.

  24. I'd rather Amazon use my money than the US government. I choose to use Amazon. If I could, I'd choose not to use the government.

  25. The level of ignorance in the comments here is staggering… For those of you with low IQs let me simplify the video for you. They want you to believe that Amazon not building a HQ in New York was a victory for the little guy, WRONG. The State and City of New York lost almost 28 billion in future tax revenue because people were protesting a 3 billion dollar tax break. That means that the City and State lost almost 25 billion they could have used for infrastructure, education, and all the other socialist programs they campaign on. Amazon and other large companies like them bring jobs, and huge amounts of local tax revenue for cities and states. They even stated they paid almost 4 billion in corporate tax.

    Federal income tax is not even supposed to exist, for any of us. It was created during the Civil War (which ironically was also about taxation..) as a way to fund the military. At the time the government was running out of money, and Americans were told it was their patriotic duty to contribute by supporting the 16th amendment. Americans at the time were also told it would be a flat tax of only 3%, that lie was later changed to a graduating scale once support was achieved.

    It was supposed to be repealed when the war ended. That was until they saw how much income tax generates however, and here we are now. We need to be more concerned with what our tax dollars are spent on, rather than how much everyone else is paying. This is just another way of distracting you from the fact that we as citizens have lost control of our country. We have returned to what we left in Europe, taxation without representation.

  26. amazon going to new york

    Progressives: NO GO AWAY WE DONT WANT TO BE PAID AND BE PROUD TO HAVE A JOB

    Amazon: cool no doubt stay poor idiots we out

  27. Luxembourg is in the EU so why is it a Tax haven ie. Amazon and many more, Answer: Jean-Claude Juncker Prime Minister of Luxembourg from 1995 to 2013, and was also the Minister for Finances from 1989 to 2009. Says it all.

  28. Amazon makes its $ legally and doesn't take from anyone. It employs thousands and provides a desired service. You should stop counting other peoples money and worrying about there tax bill. Start asking why Americas debt is so damn large. Start asking where our gov is spending the trillions in tax $ EVERY year. Ask why we can send multi billions in aid to other countries but we take .5 billion and rebuild Detroit. You're angry at people and companies for trying to keep the $ they worked hard to make. You should mad at American politicians for allowing gov to remain out of control. Cant solve that problem with tax $. Give a fool a million $ he'll spend like crazy and be broke next year(the fool is usa gov). So stop listening to This bull$!#÷ . Taxes are not the problem and more tax $ will not fix the problem. Ihavespoken

  29. I don't know about the rest of you, but this video inspired me to hire an accountant. Amazon, thank you for shining so bright.

  30. Leona Helmsley said it for all,when she said taxes are for the little people,and not a hell of a lot has changed in all the years since she said it.

  31. Even if there is "New technological investment" it is still privately own company property which corporate entities can monopolize and manipulate the price. It needs to be Nationalize to some point.

  32. Anyone can pay $0 in taxes, you just have to learn how to do it legally using loans. There's more risks involved but it can be done.

  33. Has anyone ever seen Amazon's financial statements?? 😂 fun fact: EVERYONE PAYS TAXES OTHERWISE IRS WILL SUE AND THE RECORDS WOULD BE PUBLIC FOR US TO SEE

  34. Good, I’ll rather have Amazon keep their money and invest it to increase their amazing service. They are working for the consumer, government doesn’t know how to invest wisely

  35. Not enough cognitive diversity here, USA slowly skewing into tribalism. Interviewing radicals such as Alexandria Cortez is a sign of the times. If you are interviewing her, than there will be a counter platform interviewing the most radical right winger and libertarians you can think of. This is dangerous

  36. Yeah, just imagine how many of us regular folk could start up our own companies….if we paid ZERO dollars in taxes…..and could pump that extra revenue into ourselves……

  37. The issue is not that the government collects to little in taxes. The issue is that the government over spends year after year. Cut the spending first, then cut the taxes. Individuals will always spend their money better than the politicians will.

  38. Gotta love the writing of this video…"Amazon paid an effective rate of 3% over 10 years. That's far below actual tax rate."

    But didn't you say they had losses for 8 years and they are able to carry forward tax credits for those losses? That might be a significant contributor to their low tax rate. The framing of the facts in this video is so disingenuous.

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