Is Amazon “fleecing the taxpayers”?

Is Amazon “fleecing the taxpayers”?

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In a recent Financial Post column, Lawrence Solomon accused Amazon for “fleecing the taxpayers” through its lobbying for tax breaks and other corporate welfare from government and thus driving bricks-and-mortar competitors out of business, which has led to tens of thousands job losses.

The $3 billion in tax breaks the company was promised by New York (I don’t know whether both by the city and the state governments) to build second headquarters there drew so much criticism that Amazon decided to abandon the plan. One of the most vocal critics of Amazon’s NYC plan and the tax breaks was the Democratic congresswoman and self-declared socialist Alexandria Ocasio-Cortez, whom Solomon praised for having done service to free enterprise.

Solomon seems to have missed the fact that it is not Amazon that is fleecing the taxpayers but the government. Government collects taxes from citizens and decides how to “re-distribute” them. Government, sanctioned by voters, has created the current mixed economy system, where it meddles in the economy and business by creating policies, regulations, and various programs, such as corporate welfare schemes.

 Is it immoral of companies to lobby governments for tax breaks?

As Terence Corcoran writes in an excellent Financial Post editorial, the government meddling in the economy forces corporations to hire lobbyists. Corporations need lobbyists to protect themselves in order to compete in a system where the government, not the free markets, rule the economy.

Consider the example of Microsoft. Bill Gates initially resisted lobbying the government in any way and ignored the advice to invest in “a man in Washington,” which left Microsoft vulnerable against government coercion. In the 1990s, the U.S. government went after Microsoft, suing it for the “crime” of bundling (offering for free) its internet browser with its Windows operating system. The government action was in part triggered by aggressive lobbying by competing browser companies (such as Netscape).

Bill Gates caved in, and Microsoft now spends millions of dollars (reportedly, $8.5 million in 2017 and increasing every year) on lobbying the government.

So how are large corporations, such as Amazon and Microsoft, to operate morally in the mixed economy system where government meddling in the economy is continually increasing?

The moral choice of action is to advocate free markets and much a smaller government, as that would be in the long-term self-interest of the corporations (their shareholders). Free markets would also be consistent with the requirements of human flourishing and lead to win-win outcomes for all.

In a free market system—capitalism—where government performs its only proper role of protecting individual rights against the initiation of physical force, competition spurs innovation and better, cheaper products and services. Companies profit, and those most successful at innovation profit the most. Everyone else also benefits, including those companies that did not succeed in a particular competition or industry. Nobody is getting “fleeced”.

Microsoft was trying to compete and innovate as in a free market system. It was very successful at it and also benefited millions of people and businesses with its products. But in a mixed economy, too much success goes against the principle of equality, prompting the government to step in to “level the playing field.”

Given that we don’t have free market capitalism but a mixed economy, is it immoral of companies to lobby governments for tax breaks or protection against government intrusion?

Such lobbying is ethical—as long as companies do not become government cronies. For example, if Amazon were to lobby government for a coercive monopoly (which bans competition) and then jack up its prices, it would be a government crony that would exploit customers based on government force against competition. That would be “fleecing.”  Lobbying the government for tax breaks that benefit, not only Amazon shareholders but its customers and employees and other businesses that emerge and thrive thanks to wealth creation by Amazon, is not “fleecing.”

It’s true that some bricks-and-mortar stores are not able to compete with Amazon, but that is not due to Amazon alone, but to online shopping in general, made possible by technology which enhances human flourishing. Besides brick-and-mortar retail, that technology has disrupted other industries, such as taxi (monopolies) and hotel accommodations. Jobs are lost in these industries, but new—and new types of—jobs are created in other industries—if only government keeps its hands off, stops fleecing us, and lets markets be free.

Leaders of large corporations, such as Jeff Bezos of Amazon, could facilitate that by allocating part of their lobbying budgets to shrinking the government and by publicly advocating free markets—on the condition that free speech without government penalty is still possible.

Photo credit: Max Pixel

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2 Responses

  1. Keep in mind that Amazon exists because ‘bricks and mortar’ stores were not providing the books that customers wanted. Bezos saw a need and filled it, just as others have done (like A.G. Gaston a century ago).

    Retail stores tended to stock what the owner liked – which is fine but don’t complain when someone else provides more. For example, Bolen Books lobbied against Amazon but could not get a book in a year of supposedly trying – Amazon had it on the customer’s doorstep in ten days. And Bolen is not a full-line bookstore, it’s weak on philosophy and science. Here and there stores were smarter, for example one small chain in the Vancouver BC area had a reputation for really trying to get books.

    (One thing the chains and Amazon may have done was organize arrangements with publishers for payment, whereas small stores had difficulty with small purchases (that was before services like PayPal IIRC). Side note – Amazon is now in the payments business, ordering an item from a large department store chain for pickup at a store I was offered a choice of credit card or Amazon for payment.)

    Publishers were probably part of the problem, that’s a hidebound industry.

  2. And I caution not to believe that bookstores are gone – there are chains such as Barnes & Noble and Chapters/Indigo, and well-run independent ones such as Munroe’s in Victoria, and even Bolen Books.

    I interacted several times with the owner of an independent bookstore, learning that she was on top of what was selling and watched her inventory level. (I delivered books for a charity person who learned what the store wanted, sometimes the owner would tell me that a book was worthwhile but she didn’t want to add to inventory at that time, encouraging us to bring it back later. She recognized she had different types of customers so ensured she had books in their areas of interest – ranging from new families to history buffs, local and tourists. Her store was organized and comfortable. She was a ‘book person’ but also a wise business person and a leader.

    In contrast a very knowledgeable book person’s store was a mess, she had too many books. Eventually she wised up and stuck to consulting.

    Amusing story:
    At an overdone event to honour BC authors of books, former journalist, economist, and politician Pat Carney told the audience that renowned Vancouver bookseller Bill Duthie would not be in the room if he were there – he’d be out in the hall selling books.

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Jaana Woiceshyn teaches business ethics and competitive strategy at the Haskayne School of Business, University of Calgary, Canada.

She has lectured and conducted seminars on business ethics to undergraduate, MBA and Executive MBA students, and to various corporate audiences for over 20 years both in Canada and abroad. Before earning her Ph.D. from the Wharton School of Business, University of Pennsylvania, she helped turn around a small business in Finland and worked for a consulting firm in Canada.

Jaana’s research on technological change and innovation, value creation by business, executive decision-making, and business ethics has been published in various academic and professional journals and books. “How to Be Profitable and Moral” is her first solo-authored book.

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