Amazon paid no US income taxes for 2017 | Hacker News Reader

Amazon paid no US income taxes for 2017

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77 pointsmkeeter31 comments

Let's say Amazon is about to make $1B in profits. Instead, they go on a hiring spree, and quickly pay out $1B in salary. Ha ha, they say, we have a profit of $0, so we don't get taxed!

But that's good. The employees all made lots of money (and will be taxed on it, often at a higher rate than the corporation would have paid!)

So run the same scenario again, but this time say "stock options" instead of salary.

so what happens when you pay with options? they pay corp tax which ends up less?

The employees who get stock options, is the assumption here. Which of the warehouse runners have equity from Amazon?

If they spend it on their HQ2, let say it is $2B, do they wipe of the $1 Profits this year, ( Paid no tax ), and Net Operating Loss of $1B, which get deducted next year. Assuming they make the same $1B profits next year, that is No Tax again right?

One of the problem I see is that many companies buy Asset like property asset to avoid taxes.

Theres an important distinction in deferring taxes versus avoiding taxes. Every time they buy a peice of property there’s taxes on the sale. Every year there’s property taxes (very high in WA), then finally there’s a sale and guess what?

Sorry it was a hypothetical question, didnt know there is property tax in US.

I haven't looked into Amazon's finances extensively, but I bet this is at least partly due to Net Operating Loss. In US tax law net operating loss means that you can deduct losses for prior years from this year's earnings. The funny thing about this is that by losing money you actually add an asset to your balance sheet (deferred tax assets). Since Amazon has lost a lot of money in the past that probably helped with their 2017 taxes. Another interesting thing about this is with the new tax law cutting the corporate tax rate to 21%, many companies had to take a charge against earnings in order to write down the value of the deferred tax assets. If you lost $1M last year, you had $350,000 in deferred tax assets that got written down to $210,000 meaning your company technically lost $140,000, even though you got a tax cut. Accounting is truly amazing.

I wonder if journalists will ever tire of writing disingenuous articles like this.

The uninitiated in business will understand this as another company contributing nothing to the tax base, but they’re intentionally leaving out the other side of the equation.

The money deducted from employees exercising option grants doesn’t go into a black hole. It simply shifts the tax burden to the employee.

The real story is money never escapes the tax man. The burden may shift, but Amazon is creating wealth and the recipients of that wealth are paying taxes.

If you're saying that the real headline should be "Amazon shifts 100% of its tax burden to its employees," then I think you'd still have a story that would make some readers angry.

This happens any time a company’s pays its employees. The only difference here is that the payment is in equity instead of cash. It’s really not notable.

This isn't exactly new, though. Incidence of corporate taxes - not just Amazon - is already well-understood to primarily fall on labor.

https://www.kansascityfed.org/Publicat/RegionalRWP/RRWP07-01...

https://www.treasury.gov/resource-center/tax-policy/tax-anal...

I want to believe in this hypothesis, because the case for land taxes has long been rejected due to the perception that they unfairly penalise 'mom and pop'. If corporate taxes do end up simply being a tax on labour, then taxes that don't have the same potential for manipulation can be put in their place.

However, two PDFs alone isn't sufficient proof for me. Has a broad meta-study of both sides of the argument been done?

The article states that the options expense of $917 million is one of the deductions, that would only account for ~16% of their 2017 earnings ($5.6 billion) and something like ⅓ of that in taxes, so not anywhere near 100% of their taxes are involved.

Do you think allowing companies to treat compensation as an expense is a bad thing? The employees will be taxed on the value they receive by exercising the options and will generally be in higher brackets, so the big impact of the exercises is that the employees end up with something like $600 million (the government gets a big chunk either way).

It’s outrageous.

Possibly there is a case that corps should pay zero income tax and workers should bear the entire burden, but I’ve never heard a convincing argument. This, corps create wealth argument, and CNBC corporatist babble is pretty unconvincing.

Given inherent advantages of capital over labor, and the fact corps enjoy special privlidges provided by the US Govt, why should their fair share of the burden be paid by workers and their grandchildren’s future of US $20T debt interest payments?

I can’t tell if that’s sarcasm or someone baited a line with this garbage and you just swallowed it whole.

Would it make you happier if corporations paid their 35% tax rate before paying their employees? That would leave 35% less money to pay them with.

The irony of that is most employees pay less than the corporate rate, so they would get less!

You’re proposing workers get paid less just so the corporations directly pay taxes.

That’s insane. Your own policies would hurt the very workers you purport to aid.

Its not like you pay your employees OR pay your taxes. Nor cut the workforce unless you get zero taxes.

Tax increase can slow growth but because there’s less spending, but the big tech cos are stockpiling their profits anyway.

I’m no socialist by any means, but anyone who thinks 0% taxes on 700 billion mega-co is fair.

Unless those people are Amazon shareholders, it the worst case of Stockholm syndrome anyone’s ever seen!

And US corps never paid 35%. They paid on average 12-19%.

https://www.cbo.gov/publication/52419#section3 http://money.cnn.com/2013/07/01/news/economy/corporate-tax-r...

Ok, you wholly own and operate a C Corp. To keep it simple, it only has two employees, you and Jack.

Your business has negligible expenses and has revenues of 150k this year.

From that, you pay yourself 100k to run the business and Jack gets paid 40k.

Congrats. You made 10k of operating income. What are your options?

1- Take the income as profit, pay tax on it @ 35% and retain the earnings left over.

2- Do the above, but issue a dividend to yourself for $7.5k, and pay 20% tax on that income on your personal return leaving only 6K.

3- Bonus the money to Jack. It’s tax deductible for the business, so now your EVIL corporation pays $0 in taxes! Jack gets a boost and pays almost no taxes on the 10K because of his income level.

I never said you pay taxes or employees.

Either pay more in taxes and pay employees less OR pay less in taxes and pay employees more.

Correction: you could do both by losing money every year. I’d hate to see your company’s financials though.

Effective tax rates are meaningless as a sign of total tax burden and can mean multiple things.

I wonder if journalists will ever tire of writing disingenuous articles like this.

Judging from a couple centuries of mass media, the answer is no.

Is the title inaccurate or no?

There’s lots of perfectly accurate things you can say that are still disingenuous. “@tabeth didn’t beat up a homeless person today” for example.

What exactly is disingenuous about that?

It's the classic "When did you stop beating your wife?" example. The denial of nonexistent impropriety can itself be construed in a manner that paints a target in a negative light.

In the above example, one might conclude that perhaps you make a habit of assaulting homeless people, and today was notable because you didn't.

I see your analysis as disingenuous. The company itself avoided paying taxes through various known mechanisms. Amazon did not simply shift the liability to the employees.

One big point in the article was the option grants worth almost 1B. They fail to mention that the recipients of that 1B pay income tax on it.

The article stating that it’s a non-cash expense is meant fool the uneducated to think it’s a free lunch, but like depreciation it’s a very real expense.

Are you saying the 1B should have been taxed, then the remaining be distributed to employees and taxed again?

“Corporations are people too my friend.”

So the employees being separate people are not the corporation, and their tax situation is not the corporation’s.

Can’t have it both ways, or rather, shouldn’t.

This is a pedantic point. The source of the wealth employees are paying taxes on comes from the corporation.

Amazon either retains the earning (doesn’t grant options) and pays income tax on the retained earnings OR grants the options and the grantee pays the income tax on that amount.

What both ways are you talking about?

The 1B dollars got taxed. There was no free lunch.

To expound a little: the same scenario applies to pure salary. If Amazon really wants to avoid taxes it can increase salary until its profits are 0.

As you're pointing out: this makes the ledger '0' in one spot, but increases it at the same rate at another spot. It's not a tax dodge, it's tax rearrangement.

> One big point in the article was the option grants worth almost 1B.

No. It was the source of a deduction. I don't even think you understand what the article says.

From the article:

> $5.6 billion in income in 2017. The Seattle-based online retailer will end up paying out roughly $769 million in taxes for the year, but $724 million of that will be in foreign taxes. > For example, Amazon took out a $917 million tax deduction on stock options exercised by current or former employees.

Just the e-commerce (not counting AWS or any of the other markets) was 60.5 billion U.S. dollars in the 4th quarter of 2017 alone. So it would be smarter to figure out how they came to 5.6 billion. The FIRST 5.6 billion they made, they paid no taxes on. Meaning, they had deductions (for some market, since every amazon vertical makes more than that) which allowed Amazon to make 5.6 billion tax free.

Pedantic would be saying it wasn't "nothing" or pointing out that there was a bunch of money they did get taxed on. I stand corrected, you're not being disingenuous. You're just willfully ignorant.

You are confusing earnings and revenues. Amazon had revenues for its retail business of $60bn. But, in order to get that revenue, they spent a lot of money, maybe even more than that. The IRS doesn’t tax revenue, only profits - and Amazon’s profit last year was $5.6bn. And it seems like they may have paid $0 to the IRS in taxes, although they paid quite a bit to foreign governments, which is deductible.

Ugh, seriously kid, I’m not sure I can argue with someone who doesn’t understand the difference between net sales (your 60B in 4Q17) and operating income.

It must all seem like a vast capitalist plot to you and no one can tell you different.

> It must all seem like a vast capitalist plot to you and no one can tell you different.

Just because people are ignorant doesn't mean there isn't a vast capitalist plot out there ;)

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