Jeff Bezos recently purchased the Warner Estate for $165 million — the highest price ever paid for a home in California. That in itself is hardly newsworthy, since Bezos could easily buy 10 Hollywood estates and it would barely make a dent in his vast fortune. No, what is newsworthy is that the $165 million Bezos shelled out for his new property is more than what Amazon paid in 2019 taxes:
Amazon CEO Jeff Bezos is reportedly paying $165 million for a palatial Beverly Hills mansion and, according to SEC filings, for that price the Amazon founder could have footed the 2019 federal tax bill his company is planning to pay this year, and still have $3 million left over.
How could that be for a company that posted pretax domestic earnings of $13 billion? Giant corporations such as Amazon are able to defer taxes — sometimes indefinitely:
Amazon owes more than $1 billion in federal income taxes for 2019, according to SEC filings submitted last month. But the tech giant so far has only paid $162 million on its 2019 bill, and the company will defer the remaining $914 million it owes in 2019 federal income taxes, the filing notes.
Deferred taxes are a forecast that companies commonly use to predict taxes they will have to pay. There’s “no guarantee” companies ultimately pay that deferred sum, said Matt Gardner, a senior fellow at the Institute on Taxation and Economic Policy, a progressive tax think tank.
Even so, $1 billion doesn’t seem like much for a company that generated more than $280 billion in revenue in 2019. It turns out that — thanks to the Trump’s 2018 giant corporate tax give-away — Amazon’s tax rate is far lower than yours or mine:
But Amazon’s effective federal-tax rate last year was 1.2%, based on how much the company has paid thus far, Gardner said. He arrived at the number by dividing the company’s more than $13 billion in pre-tax domestic income by the $162 million it’s planning to spend on federal income taxes this year. If factoring in deferred taxes, the effective federal tax rate jumps to 8%.
Meanwhile, the US annual budget deficit has mushroomed to over $1 trillion. This is surprising, since my US Senator — Susan Collins of Maine — assured me that the Trump tax cut would generate more tax revenues due to increased economic activity (i.e. The Laffer Curve). Could Susan have been mistaken in her prediction?