Tax Fax

Amazon paid zero Federal taxes in 2018. This pisses off lots of Americans, myself included. But we need to look at this financial wizardry closer. These null taxes result from two primary reasons: tax loss carry-forwards and deferred taxes.

Now deferred taxes, which Amazon incurred last year, come about because of the difference between cash and accrual accounting ... but Amazon will eventually have to cough up these taxes.

Tax loss carry forwards are a different story. These entries result from decades of negative profits at Amazon which are now being used to offset what small profits it is now generating.

But there is a very interesting plot twist on this tax offset. To wit ... when Amazon incurred these losses, federal tax rates were a lot higher. So, paradoxically enough, using these losses to offset profits causes Amazon to sacrifice some benefit of these losses ... when applied against a lower tax rate. Understand? In other words, Amazon could have been saving lots more actual tax dollars if US federal tax rates, now and in the future, were higher.

Feel better now?