Breitbart Business Digest: Manchin’s Tax Hike Does Not Touch Amazon’s Biggest Tax Break

(J. Scott Applewhite/AP Photo, David Ryder/Getty Images)
J. Scott Applewhite/AP Photo, David Ryder/Getty Images

Amazon is not sweating the corporate tax hike in the Joe Manchin-approved climate spending bill.

The deceptively named Inflation Reduction Act would impose an alternative minimum tax on companies with over $1 billion in financial profits. It levies a 15 percent tax on financial account income, the kind that gets reported to investors in quarterly and annual company filings.

Amazon’s tax bills were part of the inspiration for a minimum tax. The company faced no federal corporate income tax liability in 2017 and 2018. In the years since, it has had an effective tax rate that is just a fraction of the 21 percent rate put in place by the Trump administration’s tax reforms. According to the calculations of Matthew Gardner of the Institute on Taxation and Economic Policy, over the past four years Amazon’s effective aggregate tax rate was just 5.1 percent.

Amazon founder Jeff Bezos (Phil McCarten/UPI)

Last year, President Joe Biden singled out Amazon’s ability to avoid paying more in taxes, saying it was “just wrong” that a company so profitable could pay so little. Sen. Elizabeth Warren (D-MA) has made Amazon her personal tax piñata, frequently saying the company should be required to pay much more in taxes. When Sens. Warren, Ron Wyden (D-OR), and Angus King (I-ME) proposed a similar 15 percent minimum tax last year, they specifically said they were targeting Amazon.

The day Sen. Joe Manchin (D-WV) announced he had reached a deal with Majority Leader Chuck Schumer (D-NY) to raise taxes and hike spending on climate change pork, Amazon’s shares were trading around $121. On Wednesday, they closed above $134, a ten percent gain in less than a week. Amazon reported earnings that beat Wall Street’s expectations during that week, which explains the jump. But it does not seem like investors are worried that Amazon may soon face a tax bill three times larger than in recent years.

Sen. Joe Manchin (D-WV) speaks to reporters about the expansive agreement he reached with Senate Majority Leader Chuck Schumer (D-NY) in Washington on Aug. 1, 2022. (AP Photo/J. Scott Applewhite)

There’s good reason for that. While the alternate minimum tax would prevent companies from using deductions for capital investments or stock-based compensation, it continues to allow them to use tax credits, Daniel Bunn of the Tax Foundation told us. In fact, the bill includes hundreds of billions of dollars worth of new tax credits aimed at fostering green technology adoption. And Amazon plays in beast mode when it comes to using tax credits to reduce its tax bill.

Jeff Bezo’s retail giant said in its annual report that tax credits reduced the taxes it would have otherwise owed by $1.1 billion. The company has said that most of those tax credits are federal research and development credits, although it does not give much detail in its annual reports. The Manchin-Schumer tax bill would not touch this. Amazon will lose the benefit of the write-off for stock-based compensation, but the company will most likely at least partially offset that by using the green tech tax credits. The end result could be no change in Amazon’s tax rate.

It’s possible that Amazon’s tax rate could even fall if it aggressively cashes in on the climate change tax credits.

Pelosi in Taiwan

What is House Speaker Nancy Pelosi doing in Taiwan? This is one of the mysteries that investors were grappling with on Tuesday. While we certainly should not let the Communist regime in China dictate which of our politicians are allowed to visit Taiwan, it’s not clear what the purpose was of Pelosi being the first Speaker of the House in 25 years to set foot on the island. We admire the all-to-rare display of backbone by a U.S. official even if the motivation is unclear. What does Madam Speaker hope her visit will accomplish?

House Speaker Nancy Pelosi landing at Songshan Airport in Taipei, Taiwan, on August 2, 2022. (Taiwanese Foreign Ministry via Getty Images)

House Speaker Nancy Pelosi, center, poses for photos after arriving in Taipei, Taiwan, on Aug. 2, 2022. (Taiwan Ministry of Foreign Affairs via AP)

China has threatened “grave consequences” in reaction to Pelosi’s visit. The choice of those words is not accidental. They were an echo of a threat delivered by the U.S. to China nearly 30 years ago.

Here’s the Washington Post‘s description of the meeting and the threat:

On Thursday, March 7, 1996, in an elegant dining room overlooking the Potomac River, Defense Secretary William J. Perry delivered a threat — about as blunt as they come in contemporary diplomacy — to go to war.

Hours before, U.S. Air Force RC-135 reconnaissance craft and the cruiser USS Bunker Hill had monitored three Chinese M-9 ballistic missiles as they were rapid-fired from China’s Huanan mountains toward Taiwan. They splashed down in the shipping lanes adjacent to Taiwan’s two principal seaports: first Kaohsiung in the south, then Chilung in the north, then south again to Kaohsiung.

Liu Huaqiu, a senior Chinese national security official, found a grim-faced Perry waiting for him when he arrived at a scheduled dinner that evening in the State Department’s eighth-floor Madison Room. In what one participant called “a well-rehearsed minuet,” Perry notified Liu that there would be “grave consequences” should Chinese weapons strike Taiwan — words not spoken to China since the countries established diplomatic ties, and universally understood as code for a military response. For emphasis, Secretary of State Warren Christopher and National Security Adviser Anthony Lake repeated the formula in turn.

China has not forgotten the “grave consequences” threat. By using those words, China is asserting that it is in the position today that the U.S. was in 30 years ago. No one knows exactly what the consequences will be, but the threat was enough to unsettle global markets on Tuesday.


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