Thanks to a tax code that favors corporations and the wealthy, Amazon was able to dodge billions of dollars of federal income taxes in 2021, a new report has found.
According to the Institute on Taxation and Economic Policy (ITEP), the tech behemoth reported record profits last year, raking in $35 billion – 75 percent more than they made in 2020, which was also a record year for the company.
Despite these record profits, the company paid a federal income tax rate of 6.1 percent, or $2.1 billion, in 2021. If the company hadn’t benefited from tax breaks and had paid the already low statutory corporate tax rate of 21 percent, it would have paid $7.3 billion in federal tax. This means that the company successfully dodged $5.2 billion in corporate taxes last year.
Since 2018, the company has only paid an average effective tax rate of 5.1 percent. In 2018 and 2019, Amazon’s tax dodging was especially egregious; in 2019, the company paid 1.2 percent in federal income taxes. The year before, the company paid a negative 1.2 percent tax rate, meaning that it received more money from the government than it paid in taxes.
“It has been well documented for decades that Amazon’s strategy for retail dominance rests on two tactics: avoiding taxes and using the savings to finance a slow strangulation of its retail competition,” the authors of the ITEP report wrote. “First at the state and local level, then federally and internationally, Amazon has bullied lawmakers into bending tax laws to its advantage and made that the source of its competitive advantage over small businesses in the retail space.”
In their calculations, the report’s authors took into account tax credits, excess stock option deductions, and other tax breaks. Congress has the power to end these tax breaks as long as lawmakers can summon the political will, they pointed out.
Corporate tax dodging runs rampant among large corporations. Last week, ITEP reported that Netflix also dodged a huge amount of federal income taxes last year. Though it made record profits in 2021 – nearly doubling its profits over 2020 – the company paid only $58 million in taxes, or a 1.1 percent rate. This means that the company dodged over $1 billion in taxes last year.
In response to the report, Sen. Bernie Sanders (I-Vermont) reiterated the progressive call to tax the rich. “Corporate greed is Netflix making a record-breaking $5.1 billion profit, giving its CEO $43 million in total compensation, avoiding over $1 billion in taxes and paying a 1.1 percent effective federal income tax rate – a lower tax rate than a nurse, teacher or truck driver,” he said.
As the authors of the ITEP report noted, Congress can implement simple reforms like the extremely popular corporate minimum tax rate to make it much harder for large corporations to dodge taxes to this degree in the future. The corporate minimum tax would create a minimum tax rate of 15 percent for profits over $1 billion. It would also levy the tax on book profits – the profits that the company reports to shareholders – rather than the deflated profits that the company reports to the government.
Although Democrats were considering including the corporate minimum tax in the Build Back Better Act, the corporate-backed Sen. Joe Manchin (D-West Virginia) has declared that the bill is now dead.
Without tax reforms for corporations, the government will continue to miss out on billions of dollars of revenue each year due to tax dodging. Last year, ITEP found that 20 corporations had paid $0 in federal taxes in 2020, with many companies paying a negative effective tax rate due to tax breaks. Tax dodgers included companies like Nike and FedEx and energy companies like American Electric Power and Duke Energy.
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