Earlier this week Donald Trump criticized Amazon chief Jeff Bezos for allegedly using his purchase of the Washington Post as a tax dodge. Trump’s claim that Bezos is using the Post’s losses to reduce Amazon’s profit is clearly wrong since the newspaper is owned by Bezos, not by Amazon. But by making this claim, Trump does draw attention to the fact that Amazon pays a low effective corporate tax rate and has dodged $1 billion in taxes thanks to various loopholes. In fact, Amazon has often incorporated tax avoidance strategies into its business plan.
For example, it’s well documented that Amazon’s growth as a retail giant was fueled by the company’s ability to avoid collecting sales taxes on its retail sales. Not collecting sales tax gave the company an immediate advantage over its brick-and-mortar competitors. For years, the company fought tooth and nail against sensible legislative efforts to put the company on a level playing field with mom and pop retailers. Yet, thanks to hard fought reforms in the states, this will be the first holiday season when Amazon will be collecting sales taxes in a majority of states.
Amazon has been equally adept at avoiding the corporate income tax. A 2014 Citizens for Tax Justice and Institute on Taxation and Economic Policy report found that Amazon paid just a 9.3 percent effective federal income tax rate over a five-year period between 2008 and 2012. In other words, the company found ways to avoid paying taxes on almost three-quarters of its U.S. profits during this period. The same report found that Amazon reduced its tax bills by $1 billion through an arcane tax dodge generated by lavish executive stock options—more than any Fortune 500 corporation other than Google, Facebook, ExxonMobil and J.P. Morgan.
Donald Trump has shown little evidence that he’s concerned about making our tax system more sustainable. But he’s likely correct about one thing: Amazon would not be where it is today absent the company’s long-term pattern of aggressively avoiding taxes at the federal, state and local levels.