Amazon’s boss Jeff Bezos recently came up in the news for having made charitable donations worth 98.5 million to multiple different organizations, all of which work towards eliminating homelessness.
Despite the charitable gesture, there has been widespread condemnation of this move by a lot of politicians, including U.K. Labour party leader Jeremy Corbyn, who has demanded that Jeff Bezos instead “just pay your taxes,” likely a reference to the fact that Amazon paid a total of $0 in federal taxes for 2018 despite reporting profits of more than $11 billion before taxes for that year.
While statements such as the one made by Mr Corbyn have gained a lot of popular support with people claiming how Amazon’s tax liability would be enough to wipe out homelessness in the US, they couldn’t be more wrong.
As per the US federal government, the guesstimated revenue generated in 2020 will be $3.6 trillion. Even if we consider that Amazon makes profits and does not structure its investments or donations and pays its expected tax burden, none of the US’s problems would be solved. That is because the problems present are not because billionaires don’t pay much tax or are structuring their investments in a manner to reduce their tax burden. The problems are present because the institution of Government itself is inherently incompetent and has no incentive to solve such problems.
Think about it, if a Government couldn’t solve some problems with approximately 3 trillion, you think they can do it with 3.1 trillion? From 2016 to 2018, as per data, homelessness in the US has gone up from 549,928 to 552,830, despite the US Government having approximately 2 billion USD allocated for tackling homelessness in the FY 2017. The allocated Federal budget for tackling homelessness has gone up by 100 million USD each year from FY 2016.
And why would Legislators use the tax money to solve problems when they can build walls, detention centres, and statues, buy legislators, go on World tours, and use the money to win elections again. It is easier for politicians to win elections by utilizing tax money to offer freebies than to actually solve structural problems.
I am not saying that private charity will always, independently, solve all problems, but private charities are always more effective than giving money to the Government and hoping they use it effectively. The Government has never used tax money effectively in history. Hoping they will suddenly do now is betting on the dead horse in the race.
At this juncture, it is also important to reiterate that what Amazon does in terms of tax is not illegal. It does not indulge in tax evasion, but only structures its investments in such a manner that coupled with its charitable donations; that its tax obligation is zero. This is something all of us do at a much smaller scale. In fact, in the words of United States Supreme Court Judge, Justice Learned Hand, “anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes. Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands.” (Gregory v. Helvering 69 F.2d 809 – 1935).
At the end of the day, we must decide, whether we really want people to give up their money to a Government which has historically failed to solve problems, or directly donate the money to organizations which work to solve those specific problems.
The opinions expressed in this essay are those of the authors. They do not purport to reflect the opinions or views of CCS.