“They care much less about what the rate is than they do with their ability to lower their taxable income,” said Matt Gardner, a senior fellow at the Institute for Taxation and Economic Policy (ITEP), a nonpartisan think tank, said. “Of all the things the Biden government can try to push through, raising the corporate tax rate may be the least detrimental to them.”
And so those who are campaigning for an increase in the amount companies pay say it’s important that any tax law passed by Congress does more than just the tax rate on companies. It should increase how much income is subject to tax, as opposed to how much is protected from tax.
“Raising the tax rate is a tragically incomplete way to fix it,” Gardner said.
ITEP analysis also shows that the average effective corporate tax rate paid by lucrative Fortune 500 businesses was only 11.3% in 2018, the year Trump issued the 21% rule. And Congress’s joint committee on taxes found that U.S. multinational corporations paid, on average, even less than that amount: 7.8%.
“This defeat of Amazon is a little overrun compared to what other companies are doing,” says Martin Sullivan, chief economist of tax analysts, a nonpartisan, nonprofit publisher of news and commentary on tax law. “Other companies are shifting a lot more revenue to overseas tax havens. For me, it’s on the verge of the good guys.”
The ongoing criticism is likely the reason that motivated Bezos’ support for higher rates, Gardner said.
“This indicates that they are not completely deaf to the political situation,” he said.
Amazon defends its tax bill
Amazon’s lower federal tax bill comes as a result of a number of tax concessions, which are not disclosed by the company.
The most important disruption is probably the ability of Amazon to reduce its taxable income immediately by a large portion of its capital expenditure. It probably also got a few breaks for its appointment, depending on how many of its new workers came from disadvantaged backgrounds. It added 500,000 employees worldwide in 2020 when it expanded its network of distribution centers.
And tax cuts for spending on research and development and money spent on green energy projects, Amazon said, have likely helped, too.
The company says the reduction in its tax bill is due to the provisions of tax codes that are good for the country and the economy.
“Our investments have grown the economy by $ 315 billion over the past decade while creating nearly one million U.S. jobs,” the company said in a statement. “U.S. tax laws are designed to encourage exactly what Amazon is doing to move the U.S. economy forward.”
Biden’s plan suggests that some ways in which companies lower their taxable revenue could be reduced, although many of the disruptions that were likely to result in Amazon savings would not be jeopardized.
Under the government’s plans, Amazon’s tax could see the biggest increase due to the proposal to impose a minimum tax of 15% on the amount of money the company reports as pre-tax revenue. It is conceivable that Amazon’s tax bill has more than doubled to $ 3.6 billion. There is also a separate provision to levy a minimum tax on companies’ overseas income.
Experts believe that, regardless of the impact on Amazon, the proposed minimum tax on total income before tax would not be the largest source of additional tax revenue like the other provisions of Biden’s plan.
“The increase in the statutory rate and the closing of loopholes that encourage profit shifting overseas, this is where you have the biggest blow for the money,” said Frank Clemente, executive director of American Tax Justice, a group that advocates for greater corporate taxation. collections.
But Gardner said a minimum tax on reported pre-tax revenue is important because it promotes a sense of fairness and that businesses cannot escape higher taxes by protecting all their revenue.
“It should be obvious that 21% of nothing is almost the same as 28% of nothing,” Gardner said.