Holiday Season Giving to Jeff Bezos
Monday, 14 December 2015 00:00 By Dean Baker, Truthout | Op-Ed
The public should recognize that Amazon CEO Jeff Bezos' success has come
with a huge helping hand from the taxpayers. (Photo: Dan Farber)
Jeff Bezos, the CEO and founder of Amazon, is routinely touted in the media
as an entrepreneurial genius. That assessment may well be correct. After
all, Amazon has made huge breakthroughs not only in internet marketing, but
also in promoting the spread of e-books, and more recently as a new source
of television shows.
But however brilliant Bezos may be, the public should recognize that his
success has come with a huge helping hand from the taxpayers. He has
received in the neighborhood of $4 billion in subsidies from taxpayers over
the last two decades to help his business grow.
If you missed that line item in the budget, it's probably because the media
have mostly chosen not to give it much attention. The basic point is a
simple one: The brick and mortar retailers with whom Amazon competes are
required to collect state and local sales taxes on the products they sell.
For most of its existence, Amazon was exempted from this requirement in most
of the states it did business.
This amounts to a massive subsidy to Amazon at the expense of both big
chains and tiny family operated business. For example, in a state like New
York, where combined state and local sales taxes average over 8 percent,
Amazon could charge a price that was 1 percent below its brick and mortar
competition, and still have an additional profit of 7 percent on everything
it sold. That is a huge deal in an industry where profits are often just 2-3
percent of revenue.
Alternatively, Amazon could pass the most of the savings onto consumers in
order to build market share. This appears to be the route that Amazon has
pursued, as it has been a marginally profitable company through most of its
existence, even as it built itself into one of the world's largest
retailers.
We calculated how much Amazon's has saved over its existence by not having
to collect sales taxes in most states for most of the 20 years since it was
founded. While an increasing number of states do now require Amazon to
collect the sales tax, we calculated the cumulative savings to the company
as more than $20 billion in 2015 dollars. With Jeff Bezos owning a 20
percent stake in the company, his personal share would be roughly $4
billion.
This is real money by almost any standard. There are many people who get
very upset about families getting Temporary Assistance to Needy Families
(TANF) benefits. Mr. Bezos' special treatment on sales tax would be
equivalent to 10 million monthly TANF checks. Food stamps also get many
people angry. Bezos' $4 billion is equivalent to more than 31 million months
of the average food stamp benefit.
And just to be clear, the sales tax exemption enjoyed by Amazon is not some
nitpicky point. The vast majority of economists across the political
spectrum would agree that Amazon should have to collect the same sales tax
as its brick and mortar competitors. There is zero logic in saying that
customers have to pay a 5 percent tax on their purchases of books, clothes,
or anything else, unless they buy them from a retailer like Amazon who does
not have a store in the state.
This practice was effectively having the stores that hired people in the
community subsidize Amazon and other internet sellers who did not. That's a
good way to put stores out of business and support the growth of internet
retailers. It's also a way to make relatively lower income people subsidize
the purchases of higher income people, since low income people are less
likely to buy over the web. Many lower income households do not have easy
access to the internet and/or credit cards. For these reasons, they are less
likely to be able to take advantage of no sales tax shopping than higher
income people.
In many ways, Jeff Bezos could be a poster boy for the modern US economy.
Unlike some of his fellow billionaires who made their money on Wall Street
scams, Bezos can point to developing a service that is of considerable value
to tens of millions of households. People appreciate the convenience of
being able to quickly purchase a large variety of items on Amazon.
At the same time, he also benefited enormously from a set of rules that make
no economic sense and are clearly unfair to traditional retailers. To get
rich in today's economy, it helps to have a good business plan, but it helps
even more to have political connections that give a real competitive edge.
Jeff Bezos clearly has both.
Copyright, Truthout. May not be reprinted without permission.
DEAN BAKER
Dean Baker is a macroeconomist and co-director of the Center for Economic
and Policy Research in Washington, DC. He previously worked as a senior
economist at the Economic Policy Institute and an assistant professor at
Bucknell University. He is a regular Truthout columnist and a member of
Truthout's Board of Advisers.
RELATED STORIES
Amazon, Domino's and Big Brother: Drones Flying the Not-So-Friendly
Surveillance Skies
By John W Whitehead, The Rutherford Institute | Op-Ed
Amazon.com Drones Raise Red Flags Regarding Privacy Rights
By Maxwell Abbott, PR Watch | News Analysis
Amazon-CIA $600 Million Deal Facing Scrutiny: "What's the CIA Doing on
Amazon's Cloud?"
By Marcy Wheeler, Norman Solomon, Institute for Public Accuracy | Report
________________________________________
Show Comments
Hide Comments
<a href="http://truthout.disqus.com/?url=ref";>View the discussion
thread.</a>
Error! Hyperlink reference not valid.
Holiday Season Giving to Jeff Bezos
Monday, 14 December 2015 00:00 By Dean Baker, Truthout | Op-Ed
. font size Error! Hyperlink reference not valid. Error! Hyperlink
reference not valid.Error! Hyperlink reference not valid. Error! Hyperlink
reference not valid.
. The public should recognize that Amazon CEO Jeff Bezos' success has
come with a huge helping hand from the taxpayers. (Photo: Dan Farber)
. Jeff Bezos, the CEO and founder of Amazon, is routinely touted in
the media as an entrepreneurial genius. That assessment may well be correct.
After all, Amazon has made huge breakthroughs not only in internet
marketing, but also in promoting the spread of e-books, and more recently as
a new source of television shows.
But however brilliant Bezos may be, the public should recognize that his
success has come with a huge helping hand from the taxpayers. He has
received in the neighborhood of $4 billion in subsidies from taxpayers over
the last two decades to help his business grow.
If you missed that line item in the budget, it's probably because the media
have mostly chosen not to give it much attention. The basic point is a
simple one: The brick and mortar retailers with whom Amazon competes are
required to collect state and local sales taxes on the products they sell.
For most of its existence, Amazon was exempted from this requirement in most
of the states it did business.
This amounts to a massive subsidy to Amazon at the expense of both big
chains and tiny family operated business. For example, in a state like New
York, where combined state and local sales taxes average over 8 percent,
Amazon could charge a price that was 1 percent below its brick and mortar
competition, and still have an additional profit of 7 percent on everything
it sold. That is a huge deal in an industry where profits are often just 2-3
percent of revenue.
Alternatively, Amazon could pass the most of the savings onto consumers in
order to build market share. This appears to be the route that Amazon has
pursued, as it has been a marginally profitable company through most of its
existence, even as it built itself into one of the world's largest
retailers.
We calculated how much Amazon's has saved over its existence by not having
to collect sales taxes in most states for most of the 20 years since it was
founded. While an increasing number of states do now require Amazon to
collect the sales tax, we calculated the cumulative savings to the company
as more than $20 billion in 2015 dollars. With Jeff Bezos owning a 20
percent stake in the company, his personal share would be roughly $4
billion.
This is real money by almost any standard. There are many people who get
very upset about families getting Temporary Assistance to Needy Families
(TANF) benefits. Mr. Bezos' special treatment on sales tax would be
equivalent to 10 million monthly TANF checks. Food stamps also get many
people angry. Bezos' $4 billion is equivalent to more than 31 million months
of the average food stamp benefit.
And just to be clear, the sales tax exemption enjoyed by Amazon is not some
nitpicky point. The vast majority of economists across the political
spectrum would agree that Amazon should have to collect the same sales tax
as its brick and mortar competitors. There is zero logic in saying that
customers have to pay a 5 percent tax on their purchases of books, clothes,
or anything else, unless they buy them from a retailer like Amazon who does
not have a store in the state.
This practice was effectively having the stores that hired people in the
community subsidize Amazon and other internet sellers who did not. That's a
good way to put stores out of business and support the growth of internet
retailers. It's also a way to make relatively lower income people subsidize
the purchases of higher income people, since low income people are less
likely to buy over the web. Many lower income households do not have easy
access to the internet and/or credit cards. For these reasons, they are less
likely to be able to take advantage of no sales tax shopping than higher
income people.
In many ways, Jeff Bezos could be a poster boy for the modern US economy.
Unlike some of his fellow billionaires who made their money on Wall Street
scams, Bezos can point to developing a service that is of considerable value
to tens of millions of households. People appreciate the convenience of
being able to quickly purchase a large variety of items on Amazon.
At the same time, he also benefited enormously from a set of rules that make
no economic sense and are clearly unfair to traditional retailers. To get
rich in today's economy, it helps to have a good business plan, but it helps
even more to have political connections that give a real competitive edge.
Jeff Bezos clearly has both.
Copyright, Truthout. May not be reprinted without permission.
Dean Baker
Dean Baker is a macroeconomist and co-director of the Center for Economic
and Policy Research in Washington, DC. He previously worked as a senior
economist at the Economic Policy Institute and an assistant professor at
Bucknell University. He is a regular Truthout columnist and a member of
Truthout's Board of Advisers.
Related Stories
Amazon, Domino's and Big Brother: Drones Flying the Not-So-Friendly
Surveillance Skies
By John W Whitehead, The Rutherford Institute | Op-EdAmazon.com Drones Raise
Red Flags Regarding Privacy Rights
By Maxwell Abbott, PR Watch | News AnalysisAmazon-CIA $600 Million Deal
Facing Scrutiny: "What's the CIA Doing on Amazon's Cloud?"
By Marcy Wheeler, Norman Solomon, Institute for Public Accuracy | Report
Show Comments
