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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?


Lol here I thought big corps were paying (X%) amount of taxes and silly leftists wanted them to pay more. Although leftists are pretty damn silly, I guess they do need to pay more if the current laws are allowing them to loophole into paying zero.🤷‍♂️

This is literally sick, disgusting and pathetic to the definitions of the terms. One of the socialist propaganda networks that's helping to throw American values and processes into hell for political reasons is now attempting to convince the geo-engineered lemming humans that it's ok for the richest person on Earth to get hundreds of millions in tax dollars while paying no taxes while 40% of the populations literally starves every day.
Just because something is legal doesn't mean that it is is any way Moral.

For the record Hell is a very real place and you can't take money or connections with you when you die. Make your atonements now and never say that no one never told you.

It’s capitalism for the people and socialism for the corporations. Have you ever wondered why the people in the middle of nowhere (be it Iraq or the outskirts of the Arctic) have great internet, but people in the US are still held hostage by AT&T and the like paying huge amounts for internet that doesn’t even stream a video without buffering. The big corporations like AT&T… tried their best to install a dictator over the people of the US years ago….thought they would get General Smedley to go along with them and do the dirty work, but it didn’t work. They chose the wrong man. Now they just get everything free and the people need to shut up, go to work and pay for it all. Get used to it. They own 99% of your politicians. You aren’t in the club. Wait until they finish with your new you don’t need healthcare for profit system.

Jeff Bezos backing out of New York isn't the people showing power it's Jeff Bezos distingue humility. As humility can disarm people.

So what? I bet the government would have wasted it. Don't believe me? The reason has a $22 Trillion price tag on it, and growing.

Bazos did not write tax code, his Vice President, the Chief Financial Officer, knows how to read the tax code. Eliminate the Corporate tax. let American companies grow the economy. 500,000 Amazon employees pay a hell of a lot of taxes, over 300 billion in purchasing power alone.

They had zero taxes due to the IRS. So what! If it was done illegally that’s a different story. People need to educate themselves instead of having a victim hood mentality.

They don’t pay taxes cause they reinvest money back into their own businesses?!!🙃 every smart company does that or even a smart you tuber. lol what a joke.

As an Australian I am hoping Andrew Yang wins the 2020 election so that he can show our left wing politicians how to approach and dismantle our right wing conservative government that only serves wealthy corporations and themselves!

People are prevented from understanding the financial corruption by those who actually run the country starting with the Federal Reserve which dwarfs Amazon's profits and has no oversight by Congress.

I thought the rich would be taxed higher wages… what happened.?
Same thing with Walmart's, city land subsidies = Freeland for their stores to be built on. Not to mention these billionaires most likely live in huge mansions with lots of expensive real estate all over the world & can't give to the real needy families or unfortunate one's. These greedy rich arrogant people make me sick!😞

My spendings should be deducted from tax calculations because I am re-investing in myself. And this is good for the economy because people will be buying more stuff. Why is this logic only applied on corporations but not on every single person?

Paul Ryan trump and gop dream come true! Make my workers and individual family's pay the tax bill!
Gop Tax cut jobs act scam removed individual deductions and we now pay more!

Gop has always been bad at economic… they cut rich taxes and spend to much…
Fyi with this free tax to companies from gop … there are so many companies closing but no one is mentioning it on the news and it wont it the unemployment rate until 2020…. people a greater recession and food storage is coming!

I'm pretty sure those people that were against Amazon building in NY literally thought that they were going to write them a check for $3B to build there. And AOC is supposed to be good at economics and taxes. What a moron.

Tax rates should be competitive with foreign countries as should other expenses. The problem in the US is all the loop holes and offsets that benefit large corporations whilst leaving small companies paying the bill. A similar problem exists for individual taxes. Income earners pay income taxes which may be 50% at the margin or more in some states. The rich have capital (stocks, bonds, etc.) and usually only pay tax at the long term capital gains rate 20% .

I don't know… Everyone here seems to just hear Amazon payed very little to no tax at all, or that they personally pay more than that. Now me, I hear start your own entity and your own business so you can immediately start to change your life and start creating profits AND LOSES from new income streams and at the least significantly reduce your tax bill. And be willing to pay people well who are smarter than you, to help you achieve the things and goals you have in life and get you there faster. Maybe my ears just build a different type of wax that absorbs things differently. I don't know, I'm just thinking out loud.

Every tax break that Amazon is using is available to every single business in this country, from the smallest mom-and-pop business to the largest multinational’s. This includes not only deductions for reinvestment into your business, but also the federal tax credits mentioned. Paying taxes is a function of having net income, which is a function of having profits that are not invested into the business. For Amazon to have taxable income upon which it pays taxes, would mean that it is sitting on a pile of cash it is not investing in people or equipment. Would we rather Amazon reinvest in the company, which puts money into the hands of all of its vendors and employees, or would you rather them have net income that they then just distribute out to their owners in the form of dividends?

This is my response to Alexandria Ocasio Cortez's criticism of the NYC Amazon deal that fell apart.

Corporations exist to create value to its stakeholders (customers, shareholders, employees, governments, business partners, etc). Therefore it is pointless to tax them because that directly impedes their ability to create the values it has a mandate to do. Taxation should only happen at the level of the human beings consuming or benefiting from the created value!
In fact, taxes paid by the latter are actually paid directly or indirectly by the corporations in the first place so I don‘t understand why „stupid employees“ keep whining…

this is the prime reason for abolishing the IRS. They always go after little Jenny lemonade stand. While letting hyenas like Bezos get away with murder.

Lets keep in mind many companies don’t pay taxes taxes are for poor not rich look at the orange clown or the owner of face book they find a way to not pay taxes

And bezos proud of it? Imagine average american paying taxes then this so called richest person in the wolrd avoiding tax

People need to Vote for Trump again. Jeff and similar will make more, and the poor will struggle to eat. We've got some smart voters who've been voting for this BS since Reagan.

Its devastating if everyone dosent pay taxes we would be so much greater if corporations play buy the same rules…we should get rid of the puppet politicians that have been bought out👍

After watching this video I realized my lack of self-worth and confidence lays in the promises I make to myself. I always set unattainable goals which, unfulfilled, lead to disappointment and blaming myself of my incompetence. A while ago I started to exercise the gratitude for everything I do, to appreciate every little thing I manage to do. With this new piece of information in my mind, I'm even more aware and oriented towards a reasonable change. Thank you!

I hate jeff Bezos, working people to death, no taxes paid by him or his business, and his polluting fleet of vans, trucks, and planes, and it's a monopoly. I avoid them at all costs.

Just passing the taxes on to the workers granting hirer wages yes but charging more in state income tax on to the workers investing money please!

So America thinks that by cutting the corporate tax right supports who the police, fire, military, hospitals, prisons, Boy when billionaires lie you all jump to that tune!

It really is a very racist practice in general paying taxes has allways been about your country freedom of right to passage and live here now everyone is coming here off some gimmick political machine sing children as the excuse and scape goat to all that there doing using children and teenagers to do it!!!!!!!

How are the colleges getting funded Ohh from all the crazy college administration and the for profit college money hounds collect money from off all the teenagers while still using minority status to get white skinned children in colleges using Black heritage names to approve there college teenagers to not pay for college but cause all this racial injustice because the whites skinned immigrants are the main ones doing the stealing you name it all the immigrants are stealing, and refusing to pay taxes period and yet are all on housing, food stamps with a car in there drive way of a H. U. D. Home off the dime of social security!!!!!!

That why all these white skinned women in the younger generation are going after black guys because they know that racism will eventually get the black teenager locked up so to secure there future get pregnant from a Black guy so the mom can truly be a single parent because of jail time on the black biological father!! Who the mothers claim they do not know!!!!!

When the devil is being the devil all the lies and the corruption catches up to them it does just the level since the beginning of slavery it has allways been a problem for white skinned people to Handel seriously and yeah Jeff Bezos is a immigrant claiming to be a American and yet paying taxes is just not apart of his so called American patriotism right!!!!!!!

Even though they do pay Federal and state taxes what there paying for in the products and selling online just because it's a computer is just redicoulouse on the tax there should be online tax automatic since the company Amazon has put a lot of Business out of Business because the local businesses were corruptible and cheating there ass off still not paying very good wages is the problem!!!!!

Greed kills most greedy as people anyway look at how fat they become food because there gluttony being racially ignorant is the racial greed that needs to be used against there butts!!!!!

Please! These white skinned immigrants have it bad amongst there own treatment of there own people slavery taught all these white people how to treat each other like pure garbage and then come back and fix stuff later please all this climate change is going to bankrupt every last one of there asses!!!!!

How dumb can Jeff Bezos be running out in to space instead of living right here on earth breathing freely from all the human destruction capitalist and racism corporate America the representation that is of today comes from all of them and I mean all of them selling there own children into debt and for what to save there ignorant uneducated ass please the house, and car all being charged by the most racist white skinned coward of all time!!!!!!

Stop needing the cops stop needing the hospitals, stop burning your houses down, stop needing cars, and use public transportation when you all stop paying there message d up bad debts of homes, cars, gas, products that are made Abroad and cheap and start making your own products market yourself and cut down on paying for a home please you cannot afford it any daam way so cute them off!!!!!!

Stop supporting you tube stop supporting television stop supporting the military that cannot ever charge North Korea Dictatorship with any human violations but let's keep the military going because let's face it children not grown up very well we'll there still military and jail for the problems of American children right like a meat grinder grinding and destrying everything in its path!

Just like God is going to and has unleashed his anger on every last one who is a white skinned immigrant your children and wives are the vengeance being given back on these capitalist there children are Dieng because if there selfish greed of a career over there children!!!!!!

When the republican party offered up a flat tax in late 95 and 96 the Dems were against. They claim it would hurt the poor. Both sides came together to make a pork barrel. I don't know how any body can be satisfied or not satisfied with s matter concerning someone else's money.😒 Only in America can you have people fighting over things that don't belong to them.

I don't have a problem with a company paying No Tax as long as they employ a million people because those employees will be paying millions in employment income tax that would not be payed if they didn't have the jobs to start with. People want jobs and the government want Tax money and the employer want to be a millionaire and have a profitable company to stay in business. Unions want to be rich and force worker to strike to increase their bottom line for their stock holders.

Before people GET up in arms over corporate tax, corporations pay taxes on whatever products they make or sale. It doesn't matter if it's 21 percent, or ZERO percent. They simply raise the price of their products. It the way it works. As long as companies play by the RULES it's the way it is. I don't have any use for Jeff, but his company is producing thousands of jobs.

It seems like we should get a more accurate report from CNBC.While the elements of tax deductions were mentioned in the video, they were mischaracterized and belittled. First of all the, tax rate reduction from 35% to 21% had absolutely no effect on Amazon not paying taxes in 2018. Little known fact, 21% times zero is the same as 35% times zero. The reason that Amazon did not have tax liability was a combination of losses from prior years, expensing of new equipment and property that they put in service, and stock based compensation. So they got a deduction for new equipment and property they bought, but guess what, the companies that they bought the equipment and property from had income, and paid taxes. And while Amazon got a deduction for the stock based compensation, guess what again, the employees who receive that compensation paid tax. Amazon is creating billions in economic activity and taxes are being paid by the employees that earn it and the companies that Amazon buys products from. I imagine if we change the equation for taxes in the manner that Elizabeth Warren and Bernie Sanders propose, taxes will probably go up and economic activity, including money in individuals’ pockets will go way down. At some point in the socialist’s taxation utopia, there won’t be a need for CNBC because no one will care about business reporting. Cuba and Venezuela have the kind of taxes that’s socialist like, yet there is no business or stock market or wealth or happiness there.

Just like criminal Trump, and you may wonder how the US got over $22 trillion in debt, but with more and more US government revenue reductions and ever increasing spending for the MIC, but since they don't pay taxes, they have plenty of money for almost limitless and anonymous political investments for more tax cuts and deregulations!
There is a good reason why the Republicans want almost no limit on anonymous political investments. The more money pumped into politics, the less voice the people have, which is what it is really all about!

It's n ot surprising that Jeff Bezos is the richest man in the world, tax breaks and he over charges for their Amazon products!

Republicans love the idea that less government revenues is more revenues, which has been debunked a long time ago, but the Republicans keep giving ever more tax breaks and deregulation to drive up the national debt to over $22 trillion, and it's going to get much worse till the debt is unserviceable, which is the intention! The US is Already paying more on the interest of the debt than the debt it's self and it'd going to go up much, much more! Less is more is just another example of Republican gimmicks!

Am I the only one that read something to the effect that in 2018, the federal government paid out more in social security income than it collected in federal taxes?

How can a big corporation such as Amazon pay zero, zilch, nada in taxes? That’s unfathomable! America is good for big businesses and corporations. Wasn’t the idea of the tax rate being lowered to bring back US companies overseas? Could we just change the laws on offshore American companies to cause them to bring back those jobs to America? Do those American companies care about the welfare of this country or not? Apparently not, it’s about keeping as much of the American dollar in their pockets as American go jobless, homeless and hungry. Shameless.

Tax the companys and they’ll lay off a lot of employees to pay those taxes, cut taxes and company’s will use their cash to replace people with machines

Hey, they're pretty smart and creative. Wtf is the government doing to be beaten by a company that sells consumer goods? What a useless government.

Hell no. Small businesses creating jobs and paying taxes should receive incentives, not MNCs. These large handouts regularly end up in a loss on the state govt side, not creating enough jobs or demand for locally manufactured goods that translates into revenue for the state or benefit to residents. New Yorkers were right to protest the LIC HQ. It would have created massive strain on an already overburdened and aging infrastructure. These businesses don't end up paying enough tax to make up for the damage they create. Close the loopholes, and make the tax system a fair one. LOL. Not happening any time soon…

The argument that Corp taxes hurt company is stupid cause they just make the money here then move to a new country then we lose jobs and any tax rev

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