Saw the story over the weekend where Amazon earned 11 billion dollars in 2018 on which they paid an effective tax rate of -1% ( they actually got a 129 million dollar refund). I immediately forwarded the story to my accountant with the admonition...Go Thou and do likewise! Depending on your political philosophy this bit of news either infuriates you or instills great admiration for the savvy of Jeff Bezos. As it happens I am firmly in both camps.
Do I admire Jeff Bezos and his team of tax lawyers and accountants for figuring out a legal way to use our Byzantine mess of a tax code to their favor? Am I in awe as to how they could figure out a way to combine a series of legal credits, rebates and loopholes to obliterate their tax bill? Sure I am. When I meet with my accountant every year, I have never once said to him, Ok, Carl, listen up...I’ve had a really good year but I’m very concerned about the deficit and debt in Washington, so this year I want you to arrange it so that i fall into the highest tax bracket available. This year, I want to pay more taxes than I’ve ever paid, ok? Actually, my charge to him is to earn the exorbitant fee he charges for his services by doing exactly the opposite. Each year he saves me far more in taxes than he charges for his service, so every year, I play along. However, after all of his accounting jujitsu I still pay lots of tax. He helps me to lower the effective rate, but he never eliminates it. Ending up paying 0% has never and will never be available to me. Actually, if it ever did happen, I would feel like a freeloader. There is, after all, a price to be paid for freedom, liberty and the pursuit of happiness.
Does the fact that Amazon pays 0% federal taxes infuriate me? You bet it does. Something tells me that every single one of the hundreds of businesses that they have put out of business via the process of creative destruction—-paid plenty in taxes. I hear all of the Amazon apologists argue about the millions and millions of dollars that Amazon invests all over the country, the construction projects that a burgeoning business spins off, the billions of stock options dolled out to their employees etc, etc. All of that is well and good. But, here’s the thing. I am one of those dinosaurs who still considers himself a champion of the free market. When I see the way cities and states all across the fruited plain have prostrated themselves at Amazon’s alter, all undercutting themselves trying to buy a headquarters, I recoil in disgust. Amazon has become an online retailer without equal and has generated an other worldly 29 billion dollars of profit as their reward. Why should taxpayers have to pay for for their headquarters building? This is exactly how I feel when I hear some football team owner threatening to leave the city unless the taxpayers build him a new stadium. WTF??
Of course, there is an easy fix to this problem, but neither side will even consider it...conservatives (are there any of you left?) because the current system empowers the well connected and rewards those with the most diabolical lobbyists...liberals because it isn’t sufficiently progressive (although, how progressive is a 0% tax rate for Amazon?)...and that is a flat tax, no deductions, no write offs, no fancy accountants. So instead of real tax reform, we chip at the edges of our 7000 page tax code every couple of years which only has the effect of making it even more complex and exploitable. Here’s a life lesson for all of you big government types...private sector accountants are always sharper, craftier and more effective than government accountants. Always have been...always will be. To level this playing field, you’re gonna have to put them out of business....flat tax.
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