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Former Vice President Biden’s criticism is odd, because the Obama administration vocally supported several of the tax credits and deductions used by Amazon as they rightly saw these tax provisions as a way to encourage investment in the economy -- and in American workers.
The research and development (R&D) credit, which allows companies to quickly recover the cost of expenditures for research and experimentation, was supported by President Obama in several of his budget proposals. Not only did he support it – he advocated for making it permanent and expanding it.
This was not an unusual position – the R&D credit has bipartisan support – it was first created under President Ronald Reagan and was routinely extended and then made permanent by Congress. The U.S. is also far from an outlier in incentivizing R&D – 23 countries in the Organisation for Economic Development provide a research and development credit.
Amazon also utilized full business expensing, which allows companies to deduct the cost of new equipment purchased. In the words of the Obama White House, expensing allows businesses “to expand or hire new workers right now, and provides a strong incentive to increase investment now, creating even more jobs.”
Amazon also deducted losses from previous years -- as they should -- and for stock compensation granted to employees. (As noted by Bloomberg, the stock compensation deduction may leave the government better off because the income is taxed at a higher rate.)
It is also important to note that Biden’s criticism is missing key context. As Amazon tweeted in reply, it has paid all the taxes it was legally required to ($2.6 billion since 2016).
In fact, Amazon is not paying zero taxes – the company owes $322 million in state taxes and paid the government the 6.2 percent Social Security and 1.45 percent Medicare payroll taxes for its more than 200,000 employees.
But Biden’s criticism of Amazon is firmly in line with the far left of his party. He has repeatedly called to repeal the Tax Cuts and Jobs Act, which would increase taxes on American families and businesses. He is also not the first Democratic presidential candidate to criticize Amazon, or businesses in general.
Self-avowed socialist Bernie Sanders has repeatedly argued that Amazon doesn’t pay its “fair share” of taxes. He has also proposed numerous tax increases on businesses, as has 2020 hopeful Elizabeth Warren who has introduced a new, trillion-dollar tax hike specifically aimed at denying the business deductions taken by Amazon and many other companies.
While these candidates say they want businesses to pay dramatically higher taxes, this will ultimately harm workers and the economy.
The U.S. currently has a very healthy 3.6 percent unemployment rate--- the lowest rate since 1969 – and it has been below 4 percent for 15 consecutive months. Meanwhile, nominal average wages have grown by at or above 3 percent for the past 10 months. An average of 196,000 jobs have been created each month over the past year.
Clearly, the tax policies that the Democrats continue to criticize are working.
While it may be politically popular with their base to criticize companies that are paying "zero" or low taxes, Joe Biden and others on the left are completely missing the point. They are ignoring the fact that the tax code has been designed on a bipartisan basis to incentivize investment and that businesses are successfully using these provisions to the benefit of workers and the economy.
Alex Hendrie is director of tax policy at Americans for Tax Reform, a free market advocacy organization dedicated to lower taxes and limited government.