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Comment by mikekij | Hacker News Reader

This article gets two big things wrong:

1) Amazon's lack of profits appears to be due to reinvestment back into the business, not because the margins are non-existent. If the margins weren't there, there would be no money to invest in R&D.

2) The author never comments on the issue of double taxing corporate profits. Is it really the spirit of the tax code that $1 in profits earned by a business should really yield $0.48 to the federal government? The best way to address the author's concern is to put the effective corporate tax rate (35% corp income + 20% dividend) more in line with capital gains rates.

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Isn't your first complaint exactly described in the article?

>3. You build a bigger and bigger business.

Amazon's retail business is very low-margin. Most of the profit they do make now is coming from AWS. Their valuation right now comes from investor expectations that they will eventually run every other retailer out of business and then change monopoly rent with much fatter margins, rather than on the margins they have now.

Interesting proposition. Anything I can read on this further?

Is it really the spirit of the tax code that $1 in profits earned by a business should really yield $0.48 to the federal government?

In my view, the answer is yes. At least at the macro level, there are no unintended consequences in the tax code. Double taxation has been widely known to anybody who has influenced the development of our tax code, for decades.

With that said, is there potentially a better way to collect $0.48 on every $1 earned in profits? Should it be $0.18, or $0.88 instead? Those questions are certainly worthy of debate.

> In my view, the answer is yes. At least at the macro level, there are no unintended consequences in the tax code. Double taxation has been widely known to anybody who has influenced the development of our tax code, for decades.

He's not really asking if that tax rate is intentional. His real question is doesn't it seem unfair that a business is taxes for 48 cents on every dollar?

In that case, I think the answer depends on whether you favor lower taxes, or higher. I also wonder if it would make sense for business taxes to be progressive, like income taxes.

> Is it really the spirit of the tax code that $1 in profits earned by a business should really yield $0.48 to the federal government?

But it's profits and not revenues. It's the government that defines what those profits are with their tax deductions, etc. So I think it's pretty fair.

A big hint is up North in Canada where the corporate tax rate is lower: corporations aren't magically more profitable. Canadian dividend recipients even get a 50% deduction on dividend income to account for the corporate income tax already paid. Yet you don't see American dividend investors flocking to Canadian equities do you?

There's gross margins to fund R&D, but if all that money is spent, isn't net margin zero?

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