A year ago, Joe Biden, then the presumptive Democratic nominee for president, was picking a fight with Amazon over how little it paid Uncle Sam. Now Biden is president, and Amazon CEO Jeff Bezos is on a lonely island supporting the White House’s plan — to raise corporate taxes. Hardly any other company leaders have come out in support of Biden’s plan. But it’s a relatively easy plan for Bezos to get behind: His company pays nowhere close to the current 21% corporate tax rate, let alone the 28% rate Biden is pitching.
According to company filings, Amazon’s federal income tax bill came to $1.7 billion in 2020. That doesn’t mean that its actual payments came to that much — but that $1.7 billion tax figure nevertheless came to only about 7% of the pretax income of the $24.2 billion it reported to investors. Thus Amazon only paid about a third of the 21% rate. One of the only other executives to endorse higher corporate tax rates is Lyft co-founder and president John Zimmer. But with Lyft (LYFT) still losing money, his firm won’t be paying any corporate income taxes for years to come.
Amazon (AMZN) isn’t doing anything illegal or improper — or unusual. Few corporations pay 21% of their reported pre-tax earnings in corporate income tax. That’s because there are many ways to reduce the amount of taxable income subject to that tax rate. “They care a lot less what the rate is than they do with their ability to continue to reduce their taxable income,” said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy (ITEP), a nonpartisan think tank. “Of all the things Biden administration might try to push through, raising the corporate tax rate might be the one that hurts them the least.”
And that’s why those who advocate for raising the amount that corporations pay say it’s important that any tax law passed by Congress does more than just change the corporate tax rate. It must increase how much income is subject to taxes versus how much is sheltered from being taxed. “Increasing the tax rate would be a tragically incomplete way of repairing that,” said Gardner. Biden wants to increase the corporate tax rate to pay for his $2 trillion infrastructure legislation. Bezos said recently that it’s the right time for a major infrastructure investment and that Amazon is “supportive of a rise in the corporate tax rate” to help pay for it.