Amazon made an $11.2bn profit in 2018 but paid no federal tax

Amazon has had a bad week but there is some comfort for the tech titan – it will not pay a single cent in income tax on the $11.2bn of profits it made last year.

The online shopping and tech giant scrapped plans to build a second headquarters in New York this week after a backlash over a proposed $3bn in taxpayer subsidies. Local politicians questioned why a company that made $1bn a month in the last three months of 2018 alone should be lured to New York with taxpayers’ cash.

Those critics were given more ammunition this week when the Institute on Taxation and Economic Policy (ITEP) published a report showing Amazon is not paying a single cent in taxes for the second year in a row.

In 2018, Amazon nearly doubled its profits, from $5.6bn to $11.2bn. But far from paying the statutory 21% income tax rate, it reported a $129m federal income tax rebate for the year – a tax rate of -1%.

“The fine print of Amazon’s income tax disclosure shows that this achievement is partly due to various unspecified ‘tax credits’ as well as a tax break for executive stock options,” according to ITEP.

Amazon is not alone. As ITEP pointed out, last week Netflix posted a profit of $845m in 2018, its largest ever profit, but paid no federal or state income tax.

The corporate bonuses come after the Trump administration introduced its Tax Cuts and Jobs Act, which sharply cut federal corporate tax rates and expanded others.

“This is not their first rodeo,” said Matthew Gardner, ITEP senior fellow. “More than any company I have ever seen they have built their company around tax avoidance.”

One central idea of Trump’s tax cuts was to cut corporate tax rates from 35% to 21% but as the tax filings come in it is becoming increasingly clear that many companies are not even paying the lower rate, he said.

“You can’t lay the blame too much on Congress,” said Gardner. “It wasn’t Congress that came up with these ideas. They are the product of a lobbying blitz from these companies. These companies wrote the law in many cases.”