Saturday, February 23, 2019

Amazon and Taxes


For John, BLUFIn cases like this it is usually beneficial to dig a little deeper.  Tax policies are usually structured to drive certain behaviors, like corporate investment.  Put another way, taxes are not so much about raising money as they are about shaping human behavior.  Nothing to see here; just move along.




Here is the sub-headline:

There's a reason Amazon as a corporate entity usually escapes income taxes.

From FEE, by Prof Tyler Cowen, 20 February 2019.

Here is the lede plus one:

The main reason Amazon as a corporate entity does not pay much in taxes is because the company so vigorously reinvests its profit.  The resulting expensing provisions lower their tax liabilities, in some cases down to zero or near-zero.

That is, in fact, the kind of incentive our tax system is supposed to create, and does so only imperfectly, noting that many economists have suggested moving to full expensing.

I am thinking reinvestment creates jobs, at least temporarily, as buildings are built and equipment purchased.  And later people are hired to work in those buildings, to operate that machinery.

A little bit later the article makes this point:

Amazon pays plenty in terms of payroll taxes and also state and local taxes.  Nor should you forget the taxes paid by Amazon’s employees on their wages.  Not only is that direct revenue to various levels of government, but the incidence of those taxes falls somewhat on Amazon, which now must pay higher wages to offset the tax burden faced by their employees.
I am glad there are people, like Mr Jeff Bazos, out there creating jobs.

Hat tip to the InstaPundit.

Regards  —  Cliff

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