
Some voters are sick of companies like Amazon paying no corporate tax - Cbasedlifeform
https://www.nytimes.com/2019/04/29/us/politics/democrats-taxes-2020.html
======
seunosewa
The article is reluctant to mention the reason why they got those tax rebates,
and focuses on the way people feel about it. This seems like bad journalism.

According to CNBC, “Amazon's low tax bill mainly stemmed from the Republican
tax cuts of 2017, carryforward losses from years when the company was not
profitable, tax credits for massive investments in R&D and stock-based
employee compensation.” [https://www.cnbc.com/amp/2019/04/03/why-amazon-paid-
no-feder...](https://www.cnbc.com/amp/2019/04/03/why-amazon-paid-no-federal-
income-tax.html)

These are the actual things we should be talking about.

~~~
chii
> carryforward losses from years when the company was not profitable

yes, this definitely should be talked about. Why can't people's income be
carried forward like this as well?

If i made a lot of money one year, why can't i claim away taxes from years
that i didn't make income (such that my tax bracket is lower)?

~~~
namdnay
Not making money is not the same as making losses. You can carry forwards
losses you've made on investments.

~~~
lugg
> Not making money is not the same as making losses.

I have rent and bills to pay regardless of whether I'm making money, that is
the definition of making a loss.

~~~
jerf
"I have rent and bills to pay regardless of whether I'm making money, that is
the definition of making a loss."

That is not a loss. That is an exchange of value; you pay $100 for your
heating bill and receive $100 of heating.

A _loss_ is when you have some value, and it disappears, and you have no
compensating value. Buying a stock at $100 and selling it at $50 is a
transaction in which you have less money at the end than you had at the
beginning, _and_ where you also had no compensating value exchange

Normal taxpayers do have rights to do things like carry forward losses in many
circumstances. Business do get to be not taxed on _expenses_ , but there are
conditions on that. You can tell there are conditions on that because you
can't just form an LLC and declare all your expenses to be losses, because you
won't meet the conditions for your expenses to be losses. Note that that is
the source of the problem, "form an LLC" is something you can totally do very
easily, it's the failure for your personal expenses to qualify that is the
problem.

While it might be emotionally satisfying to tax businesses on expenses, it's
not hard to think about it a bit and realize why letting taxpayers deduct all
their expenses, or trying to tax businesses on their expenses even when they
didn't make a profit, are both not great ideas. (Think about the incentives
created. Taxpayers don't need any more incentives to spend all their money on
"expenses" as it is, if you've seen the credit card debt statistics.)

~~~
chii
A company paying a cost of $50 to produce widgets for 1 year (and don't sell
any that year), then selling all the widgets on the 2nd year for a profit of
$100, can claim that they made a loss of $50 in the previous year, and
therefore only have $50 that's taxable.

A person who works for 1 year for $100 income, then stops working the 2nd year
(and live off their income from the 1st year), must pay their taxes at the
$100 rate. If they are allowed the same 'carry forward' as a corp, they should
pay at the tax rate of $50 for both years, rather than at $100 for the first
year, and $0 at the 2nd year. And yet, this isn't allowed for a person. Of
course, you could claim that the gov't can't tell that the first $100 is
supposed to be 'averaged out' in the future. So would the situation be any
different if you lived off savings for the first year, and replenished them in
the 2nd year? I don't think this is any different.

~~~
cascom
Sorry that is not how it works - basic tenets of accounting (matching revenues
and costs) those widgets would sit on the balance sheet and no loss would be
recognized in year 1 and just profit in year 2

~~~
will_brown
>those widgets would sit on the balance sheet and no loss would be recognized
in year 1 and just profit in year 2

Unless of course the company manufacturing the widgets (A) sells them to a
wholly owned subsidiary (B) for a loss...then A can take the deduction.

~~~
cascom
Who would then make an even bigger profit, for no tax savings

~~~
will_brown
you do know that this is a well known tax avoidance strategy right? The
profits would be later used to offset the losses carried forward by the
parent.

Are you an accountant/CPA or attorney?

~~~
cascom
Perhaps you could pencil out this well known tax avoidance strategy (unless
you are really talking about time value of money, jurisdictional arbitrage, or
some dodgy maneuver that wouldn’t stand up to an audit)

~~~
will_brown
I take it you are neither accountant/CPA nor attorney who regularly deals with
these tax matters.

In lieu of penciling you a tax treatise, you may Google “wholly owned
subsidiary tax strategies“. While there are no shortage of tax benefits,
inevitably one of the elementary examples you find towards the top will be
segregation of manufacturing and sales entities. Unfortunately you likely will
not find much on more nuanced situations for example Wholly owned IC-Discs or
LOB for wholly owned foreign entities (in many instances those situations can
result in 0% US withholding and tax rates)

------
bedhead
The intellectual dishonesty of this from allegedly smart people continues to
astound me. Amazon has little-to-no taxes mainly because they have such low
taxable income in the first place because they spend so much in R&D and other
things. They’re actually creating jobs and new businesses rather than showing
massive profits and paying a ton in taxes. I have no doubt they take advantage
of perfectly legal tax code items like accelerated depreciation, just like
millions of other companies. At the end of the day, people of a certain
mindset just want to take other peoples’ money and the more of it they have
they more desperately people believe they don’t deserve to have it.

~~~
boudin
Can you prove that all the other businesses that didn't survive, either online
or shops weren't has much jobs than the one Amazon provide?

Also, all the taxes that they don't pay needs to be paid by others. For each
optimizations done by those companies, it's as much money that needs to be
paid by others as each country runs on a budget that is mainly based on taxes.
Them not paying taxes as a direct impact on taxes that needs to be paid by the
one who pay taxes as well as the quality of service and infrastructure of a
country. Infrastructure they uses a lot by the way, like roads to deliver
their goods for example.

~~~
formercoder
It’s hard to compare to other businesses because amazon cannot capitalize R&D.
If they spend $1bn on software dev and Tesla spends the same amount on a
factory, Amazon’s ebitda is down $1bn and Tesla’s is only down ~$100M.

~~~
fjsolwmv
[https://www.thetaxadviser.com/issues/2016/may/deductibility-...](https://www.thetaxadviser.com/issues/2016/may/deductibility-
of-some-computer-software-development-and-implementation-costs.html)

Says software is capitalized over 3-5yrs. The difference is that software dev
costs usually grow smoothly year over year but gigafactory launches are spiky

------
notacoward
> carryforward losses from years when the company was not profitable

The idea of carrying forward losses _in general_ is sound, but I'm beginning
to wonder if there should be an exception. If the loss is intentional, using
investment instead of profit to drive growth, I'm not so sure those losses
deserve to be carried forward. Probably an unpopular opinion here on HN, but I
think denying reductions in those cases would be beneficial not only in terms
of tax revenue from the larger companies but also in terms of reducing the VC-
fueled ""unicorn or bust" mentality among the smaller ones.

~~~
tomohawk
Agree that these companies are using the tax code to write off losses that
they are intentionally incurring in order to achieve a lower cost point than
their (profitable) competitors. This is a very predatory practice that should
be ended. Companies should compete in the marketplace. Having tax payers foot
the bill for some companies disruption gambit makes no sense.

~~~
icebraining
Any new company, including a mom&pop restaurant or whatever, will have startup
costs that established companies do not (e.g. buying equipment, training
people, etc). How do you propose to distinguish those from these "predatory"
losses? Or should those losses not be carried over either?

~~~
notacoward
That's a really good question, and - contrary to HN tradition - I'm not even
going to pretend I have a complete answer. Some cases are easy, for example a
lot of non-tech startups are funded by loans rather than equity exchanges.
Other cases are surely harder, but I think clear lines can and should be
drawn.

The key IMO is that the company should be paying tax _somewhere_ along the
line. Right now VC is a double gift - it provides funds to grow, and the
corresponding expenditures magically turn into "losses" that erase future tax.
Besides its effect on government revenue, it also gives VC-funded companies an
unfair advantage (as though they didn't have enough) over competitors who are
being taxed more for having the audacity to grow organically.

~~~
icebraining
The effects on government revenue seem more complex than that. For example, if
a customer of a startup spends $8 instead of $12 thanks to VC subsidization,
those $4 remaining in their pocket will be spent somewhere else, and the IRS
will get to tax _that_ expense too.

------
netcan
Taxing _profits_ (as opposed to revenue, value add, capital gains..) is the
ultimate quixotic temptation for politicians.

On paper, it is a fantastic tax. Google, Apple, FB, Amazon... all the new
economy winners are very _profit_ able, 20% - 30% margins & fast growth are
_expected_ (and priced into market caps).

They're so profitable that money is just piling up, atm. They can't usefully
invest it all. This means you can tax their profits without affecting the real
economy. There's nothing google is doing that it couldn't do if they had to
pay $10bn (25%-30%) as a tax on profits.

OTOH, unprofitable companies (eg Tesla), would have trouble paying extra
taxes. It'd need to come out of investments in production capacity, R&D, etc.
They wouldn't have to pay.

Corporate income tax is just a sensible idea, on the face of it. Unprofitable?
Don't pay. Profitable? Pay. Minimum economic disruption.

But in practice... across many times and places... it's proved very hard to
make a corporate tax scheme work.

Tax policy complexity. Accounting complexity. Multiple jurisdictions. The
looping cascade of company ownership, partial ownership, contractual
relationships, making up the legal "structure" of a google or amazon.

It all adds up to a reality wherein politicans cannot make a law that says 25%
tax.. and have that mean something similar to what it sounds like.

This is a pill very few politicans or voters can swallow. Of course we can!
We're legislators. We make laws. We have police, and tax authorities. Google
finance said google made $40.42bn. The rate is 25%. Gives us $10.1bn.

Empirically, they generally can't. Changing things to enable corporate tax
would require _massive_ , difficult legal/bureaucratic reforms. You would need
to consider insanely difficult changes, like heavy handed restrictions on a
company's ability to own other companies, and the types of legal entities that
can own legal entities. You'd need new accounting standards. The bureaucratic
guts of the economic machine.

~~~
300bps
_We make laws. We have police, and tax authorities. Google finance said google
made $40.42bn. The rate is 25%. Gives us $10.1bn._

Your post is very insightful. The only thing I’d add is that when you have a
$10 billion tax bill that you can afford to pay $5 billion to attorneys and
accountants to avoid it.

That’s the crux of the problem to me. No matter what scheme the government can
come up with to tax it, the numbers are so large that it is in the company’s
interest and ability to find loopholes. That’s why we end up with
sophisticated shell companies shuffling money around in tax havens that are
perfectly legal but don’t make sense outside of tax avoidance schemes.

~~~
netcan
_when you have a $10 billion tax bill that you can afford to pay $5 billion to
attorneys and accountants to avoid it._

I personally think this is overstated as a root cause. Giant corporations have
the same lawyer budget to spend avoiding payroll taxes or GSTs/VATs, but it
doesn't make that kind of difference. That's because salaries, sales and value
adds are, in practical terms, objective truths. The law & accounting standards
define them, locate them to a jurisdiction and that definition is defensible.
A transaction either is or isn't a salary, or a sale.

Profit otoh, is subjective. Expenses can be expressed as investments, retained
earnings can be expressed as growth. Most importantly, profit doesn't have an
objective location.

------
bdibs
Voters are sick of it because of a general misunderstanding of corporate
taxes, and sensationalized headlines are just making it worse.

~~~
rocgf
I must admit that my knowledge is lacking in this area. Can someone offer a
high-level explanation to one of the people who don't understand corporate
taxes in the US?

As far as my understanding goes, the bulk of taxes are paid on profit (to be
more precise, operating income), and not revenue. As far as I understand, big
companies do everything possible to make it seem like they are not profitable
from an accounting perspective. As an example, this might mean that they'd pay
some subsidiary in Ireland, where corporation taxes are smaller. What am I
missing?

~~~
TomMarius
You're missing that Amazon is reinvesting, not hiding profit.

~~~
Beldin
"Margrethe Vestager, the EU commissioner in charge of competition, said
Luxembourg’s “illegal tax advantages to Amazon” had allowed almost three-
quarters of the company’s profits to go untaxed, allowing it to pay four times
less tax than local rivals."

[https://www.theguardian.com/technology/2017/oct/04/amazon-
eu...](https://www.theguardian.com/technology/2017/oct/04/amazon-eu-tax-irish-
government-apple)

~~~
TomMarius
That is in EU, we're talking about the USA corporation.

~~~
notacoward
The fact that they're not so neatly distinguishable is very much at the heart
of the problem. One of the main ways companies avoid tax is by making it
appear that their revenue, profits, and (to a lesser extent) costs are
somewhere other than where they really are. Amazon in the US is very much
aware of the tax implications of hiring or locating assets in the EU, whether
legitimately or as a pure dodge, and depends on the difference.

------
apta
Surprised to see a headline from the NYT that uses weasel words ("some
voters"? well some voters are also uneducated, so what?), which even Wikipedia
has rules against. That being said, why does it matter if Amazon is not paying
taxes itself if it is creating many jobs, with a good percentage of them being
high paying, and who end up paying income taxes anyway? Not to mention taxes
that Amazon pays for those employees to begin with.

------
grenoire
Really have to start taxing over revenues. It's long due.

~~~
seunosewa
They do. Sales tax.

~~~
hmate9
One could argue that the consumers are the ones paying this too. Sales tax is
almost always passed onto the consumer in the form of raised prices.

~~~
kgwgk
One could argue that consumers are the ones paying every tax.

~~~
cies
Sure. But what is taxed does steer society. Imagine only taxing on pollution
(so not on wages/sales/home ownership).

Currently we tax on wages/ sales/ home ownership and not on Amazon an little
on pollution. Look around to see the result.

~~~
kgwgk
I don't get your point. Are you suggesting that Amazon alone should pay a tax
on revenue (steering business to its competitors and reducing consumption
slightly), that every company should pay a tax on revenue (steering business
from more expensive and less vertically-integreated competitors to Amazon, but
reducing overall consumption) or something else entirely?

~~~
cies
Im saying all tax is paid by consumers in the end. But what is being taxed is
still interesting.

I'm suggesting Amazon is currently doing what it does because of taxation law.
It simply complies/optimizes. Profit taxed? Dont make profit. Pollution free,
dont worry about pollution.

------
caprese
> One of the benefits of taxation is taking it and using it for the collective
> good

Which is true no matter if the tax rate is 1% or 75%

> He could be taxed at 99.9 percent and still have millions left over

I realize this is hyperbole but do realize that no 99.9% tax would be complied
with

> tax on every dollar over $100 million in profits they earn anywhere in the
> world

oh the American hubris, so lost in the goal of catering to their constituents
that they think this institution has a valid claim on assets, and income. Lets
take a cut of everyone's productivity IN A MORE FAIR WAY _crowd cheers_.

But alas, the US rule of law makes it secure for you to do business and these
corporations benefit from this society and use its services - but thats also
true whether the tax is 1% of 75%, so it isn't really an argument

> article shows graphs about tax rebates

Article doesn't talk about how the corporations used tax rebates at all. It
talks about the outcome of paying no tax, talks about all these proposals, and
none of the proposals talk about tax rebates. Even the most ambitious proposal
here would probably not effect how these corporations operate. Are people - I
dare say - stupid? Is this a mass reading comprehension issue?

It is interesting that people who can simply read can play tax games like this
for another 100 years before anyone catches on.

------
ex_ex_nihilo
Amazon paid no _income_ tax. Amazon paid a shitton in taxes, and will continue
to do so.

It is probably the case that profitable companies pay too little in tax, but
articles like this are misleading as hell.

------
achenatx
subchapter S (and other pass through) corporations pay no corporate income tax
at all. this is the majority of small businesses.

Corporations ultimately distribute their profits to actual people. Those
people will pay tax on that income.

It isnt automatically obvious that corporations should pay any taxes on income
(or revenue) until it is distributed to actual people (shareholders and
employees). We tax the profit of larger corporations because we can and
because we need the tax dollars, not because there is some moral imperative to
do it.

------
acslater00
It doesn’t matter if corporations pay taxes because the money just flows to
people who own equity in or work for those corporations, and they pay taxes.

~~~
crispyambulance
It would be OK if corporations didn't pay taxes.

BUT there's more to the story.

Not only do they not pay taxes, they also enjoy absurd political power through
lobbyists and through being able to pump huge sums of money into politics
thanks to the Citizen's United decision.

There is simply too much power in the hands of the corporations. I mean,
Amazon literally had dozens of city governments falling over themselves to
give up enormous tax goodies and red carpet roll out all for the weak promise
of 50000 jobs and an HQ2.

------
movax
Am I to believe Bezos and his investors will simply take the hit of paying
taxes, or will that expense get passed to consumers?

~~~
lmm
Smaller companies pay their taxes and set their prices at a level where they
can afford that. If Amazon are forced to compete fairly on
efficiency/quality/... rather than on tax avoidance, that's a good thing for
customers in the long run (and of course collecting tax to be spent on public
services is good for citizens immediately).

~~~
movax
That makes sense, thank you.

------
GeekyBear
We means test access to the social safety net programs for the poor.

We can means test access to tax loopholes as well.

------
Quarrelsome
High revenue low profit is good. Surely Apple are a better target?

------
gigatexal
This comes up all the time. The issue is not the companies. The issue is the
loopholes that their highly paid tax accountants are taking advantage of.
Change the law not attack the company for acting in the best interest of its
shareholders.

~~~
jyounker
And how did we end up with those loopholes?

~~~
gigatexal
Repeat after me: elected officials are our representatives. If you don’t like
them either by how they vote or the bribes I mean donations they receive then
make your voice known by getting involved, voting, or donating to causes and
people you do support.

A flat tax is an idea. It has come up from time to time and failed. There are
lobbyists on both sides and both are evil in their own ways.

In the end the elected officials pass laws. Companies pay tax under those
laws. The laws have loopholes and those same companies use them.

The. Companies. Are. Not. To. Blame. For. Saving. On. Their. Taxes. Legally.
Even if it is a bit unethical while being profitable.

------
mikojan
> some

I'd call that a success.

------
juskrey
To be fair, why companies should be paying tax at all? Companies are taking
all the risk, employees aren't.

------
tim333
>the list of those paying zero roughly doubled last year as a result of
provisions in President Trump’s 2017 tax bill

The gripes seem to largely a political issue which I guess is down to the
voters as to who they vote in.

------
glerk
> Colin Robertson wonders why he pays federal taxes on the $18,000 a year he
> makes cleaning carpets, while the tech giant Amazon got a tax rebate.

Who cares about what Colin Robertson thinks?

~~~
jdhn
There's also no way that he doesn't get a massive refund at the end of the
year based on his salary.

~~~
ex_ex_nihilo
Yes, if he's married filing jointly the standard deduction is $24k. Meaning he
pays zero taxes. If he's unmarried his standard deduction is still most of his
salary (~$12k), and the remaining amount would fall into the 10% tax bracket.
But he would qualify for tax credits with income that low. Also very likely
social services and safety nets. His effective income tax rate should be
negative.

Reading these comments, it's apparent most people have no idea how this shit
works. I thought here of all places, I wouldn't see people falling into the "I
don't understand how progressive tax brackets work" trap.

