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On Tuesday afternoon, Amazon founder and CEO Jeff Bezos shocked the world after publicly supporting President Joe Biden’s infrastructure plan and tax reform.
In a message signed by Bezos himself, the company states: “We support the Biden Administration’s focus on making bold investments in American infrastructure,” while acknowledging that “this investment will require concessions from all sides (…) we’re supportive of a rise in the corporate tax rate.”
Although the statements of the CEO of the world’s largest company took many by surprise, the fact that an emporium like Amazon supports the increase in corporate taxes should not surprise anyone, since this company, unlike hundreds of thousands of much smaller ones, has a great privilege: market power and a lot of capital.
For starters, in the United States, companies like Amazon -which have a team of prestigious lawyers and lobbyists- can take advantage of any loophole in the law to evade paying taxes, and indeed Amazon has done so: during 2017, 2018 and 2019, Amazon paid literally zero dollars in corporate taxes despite its size. While Bezos may wholeheartedly support increased corporate taxes, his company’s practices don’t reflect this.
Why does Amazon support raising corporate tax?
Even if Amazon were willing to pay its fair share of taxes, the online retail emporium, at least on paper, won’t necessarily end up paying the tax increase. Its immense market power allows it to pass these costs on to its customers, suppliers and employees without the tax affecting the cash flow of the world’s most valuable company.
Nearly 100 million Americans have an Amazon prime account, giving us an idea of the enormous size of the audience the retailer serves. By controlling more than 50% of the online retail sales market, Amazon can easily pass on the costs of the tax increase to its customers through a subtle across-the-board price increase on all of its products; one that is small enough not to deter its users from continuing to shop, but large enough and spread across its portfolio to cover the 7% tax increase.
Another alternative the giant has is to freeze wages. Already any wage at Amazon is over $15 an hour, why raise it any higher? In the event that Amazon doesn’t choose to raise prices to the final consumer, it can choose not to raise wages and by not allowing unions, as Bezos’ Democratic Party friends implore, any extra costs will be paid by the hundreds of thousands of workers out of their incomes.
The third alternative is to offer lower prices to their suppliers and manufacturers. What can they do about it? Not sell to Amazon? Deprive themselves of participating in the largest online retail marketplace in the U.S.?
The fourth alternative is to finish taking presence away from the thousands of independent retailers that use Amazon’s platform to boost their sales and absorb their customers. How can they do that? Easy, by ceasing to display their products on their website or by artificially lowering prices to take them out of the competition, as Amazon has done in the past.
The reason Amazon supports the corporate tax increase is simple: they have control of the retail business and they know it. After the pandemic forced closures this control has only tightened as the quarantines killed thousands of traditional retail businesses. Bezos supports the corporate tax increase because it knows it doesn’t have to pay it and that the increase will wipe out much of his competition.
Economist, writer and liberal. With a focus on finance, the war on drugs, history, and geopolitics // Economista, escritor y liberal. Con enfoque en finanzas, guerra contra las drogas, historia y geopolítica