Before I say anything, I want to make it very clear that I am opposed to most forms of taxation, including sales tax. There is absolutely no good reason for a state, or a federal government, to take a portion of each transaction between a producer and a consumer. Sales, and use taxes, as this post will demonstrate, are very difficult to enforce evenly. This increases the burden for law-abiding citizens and business who are stuck paying, while others, through loopholes or black market transactions, pay nothing. Sales taxes are also inherently regressive and positively impact government bureaucrats and citizens that receive services “for free” (public parks) at the expense of the poor.
It is a well-known fact that Amazon.com has skirted sales tax in many states for the better part of two decades, reaping a very significant advantage over its competitors. The Amazon sales tax “wars” have been chronicled in many places, but a few examples are here, Amazon Battles States Over Sales Tax, here New Year Rings in Sales Tax for Amazon Shoppers in Three States and here Which States Make You Pay an Amazon Sales Tax. I could go back further, but what’s the point? The tax noose has been tightening, but that does not change the fact that not taxing Amazon, but taxing its competitors, for over two decades amounted to corporate welfare plain and simple. (This is, by the way, my problem with how governments have handled the über situation. There should never have been a taxi-cab, or any other type of transportation, license or “medallion” requirement in the first place. But, when über came on the scene, you either had to eliminate all licensing requirements, or impose licensing, fines, penalties and/or censured über from your jurisdiction (for not having a license). This would have ensured an even playing field moving forward.)
Corporate welfare is, almost always, not really welfare. Welfare is a grant, money paid by government (or not-for-profit) to a recipient (usually for a specific purpose) that does not need to be re-paid. Corporate welfare is most often a subsidy, which usually takes the form of a tax break (like not having to pay sales tax) and the money saved does not have to be used for a specific purpose. So, while its “brick and mortar” competitors have had to collect on average 5%, or more, for sales tax (adding 5%, or more, to the cost of the product), Amazon.com, for the better part of 20 years, skated their way to growth, in revenues at least, on the backs of their burdened competition. And, as sales-tax-breaks run dry, it appears there is another donkey to ride; the
United States Postal Service (USPS) taxpayer.
I happened to catch this headline from the Wall Street Journal recently:
It turns out to be a dramatic “success story”. You see, the government mail, package and delivery service, went from a $1.96 billion loss a year ago, to a $586 million loss this most recent fiscal year. E-commerce revenues were higher, “making a good chunk of cash”, but compensation costs were “uncontrollable”. I’m not sure how others define “making a good chunk of cash”, but in my mind losing over half of a billion dollars does not qualify. The USPS has hired new workers to exclusively handle the new Amazon.com account (and other Sunday delivery, though most is Amazon related) through an agreement with the controlling union. Grandfathered USPS workers maintain their generous pay and benefit packages (responsible for the staggering losses) for delivering crap that ends up in a trash can, while the Amazon-dedicated employees make more, shall we say, “market wages”, for working like a private sector employee. This is now common practice for governments (and is tantamount to age discrimination), to protect members based on seniority instead of restructuring to bring the entire operation to, at least, break-even (not that the government should be delivering mail in the first place).
Overall, this is not a viable strategy. It is different from say an income tax business like H&R Block, who derives a vast majority of their revenues from January through April of each year, to offset losses the rest of the year. In order to survive, H&R Block MUST BE PROFITABLE when revenues and expenses are netted for the ENTIRE YEAR. USPS cannot claim victory when the profits (and, I am not conceding this claim of profitability on Amazon related activity even as they are currently accounting for it, not that it matters) from Sunday do not offset the losses from Monday through Saturday. The USPS should, and would, simply not exist at all, because if you allocated costs properly, and ultimately priced to break-even or profitability, their competition would provide the service at a lower price. And, before anyone tells me USPS is really profitable, and that is unfair that they have to accrue their liabilities, that is simply not true. No company could possibly survive under nearly any government pay structure, and that includes USPS.
So, in case you missed that, the USPS is pricing their services at a loss, providing a direct subsidy to everyone that uses their services, including their biggest corporate account, Amazon.com.
Let’s start putting this together. You may have seen:
And, you might be asking, what does gold have to do with Amazon.com? Let’s just say it goes to “valuation”. Why, according to the author, is gold a “Pet Rock”?
Because gold, unlike stocks, bonds, real estate and other financial assets, generates no income, valuing it is all but impossible. “It’s intrinsically worthless or intrinsically priceless,” says Paul Brodsky, a former hedge-fund manager who now is a strategist at Macro Allocation, an investment-research and consulting firm in New York. “You can build a financial model to value it, but every input is going to be your imagination.”
Hmmm… and how much income (dividends) has Amazon.com paid to its owners in the entire history of the company?
“…never provided a dividend…” …ZERO!!!
What was that again? “generates no income” = “Pet Rock”
A government subsidized, Pet Rock, welfare recipient, with a valuation of over $245 billion. If anything is based on “imagination”, surely, it is this.