Jeff Bezos’ Tax Scam: Why Billionaires Want Their Workers to Stop Paying Taxes

The hard-right fantasy behind Bezos’ “no income tax” pitch, and who really profits from it…

The fourth richest man in the world, Jeff Bezos, told CNBC yesterday that he doesn’t think people making $70,000 a year should pay a penny in income taxes. For him, that’s a threefer.

First, it gets millions of Americans on the “we shouldn’t ever pay any income taxes at all” train that’s been rolling for billionaires ever since Reagan first gutted our tax code, leading to an explosion of the morbidly rich.

Second, it gets those same average, tax-paying voters on board with Bezos’ second claim, that America’s debt problem isn’t because we’re taxing too little but because we’re “spending too much.”

If we just got rid of — or privatized/profitized — all those pesky “socialist” programs like Medicaid, food stamps, free public highways, fire and police departments, Social Security, food and drug regulation and inspection, air traffic control and TSA, housing subsidies, Pell grants, free public schools, etc., then even billionaires could safely live tax-free.

Third, it means that Bezos will be able to reduce his own labor costs, because the marketplace in which pay rates exist are always exclusively reacting to “after tax” dollars.

Here’s how it works: If Bezos is paying an Amazon programmer $70,000 a year and that programmer then pays $12,000 a year in income taxes (his example, only for “a nurse in Queens”), their after-tax take-home pay is $58,000. That $58K is what they’re actually living on, and Bezos knows it.

So, if their income tax payment goes away, Bezos can drop their pay from $70K to $58K and they won’t notice any change at all in their lifestyle. And Bezos gets to keep the difference.

But there are even more fundamental problems with Jeff’s little tax scam. Back in 1904, Supreme Court Justice Oliver Wendell Homes Jr famously said, “Taxes are the price we pay for a civilized society.” He was right, and it works in two dimensions.

The main one is that taxes represent the money government must collect to cover the cost of the services its citizens have demanded of their elected representatives. With the exception of emergencies like the Civil War and World War II, the money coming into government and the money spent out should pretty much be in balance. And, with the exception of the period since 1981, they historically have been.

When Ronald Reagan first put into place the GOP’s infamous “Two Santas” strategy of running up the debt during Republican presidencies and squealing about the national debt to block legislation during Democratic presidencies, he broke with an understanding and tradition that dated back to George Washington’s presidency.

Reagan tripled what was left of our WWII national debt, which Truman, Eisenhower, Kennedy, LBJ, Nixon, Ford, and Carter had all paid down to a mere $800 billion by 1981. He deficit-spent like crazy, producing an illusion of good times because of the stimulus of all that purchasing, and left us a $2.4 trillion national debt when he handed the reigns of government over to GHW Bush.

While both Democratic Presidents Clinton and Obama tried to go along with the GOP and balance or near-balance budgets during their presidencies, the Two Santas spending of GW Bush and Trump has exploded our national debt to $39 trillion, about the same as the sum of all economic activity in the country (our GDP).

As I noted a few weeks ago, if we weren’t paying a trillion dollars a year on that debt, we could have a national healthcare system and free college education right now.

But keeping us from having nice things — from healthcare to education to housing to an electrified grid — is one of the main goals of the GOP’s Two Santas deficit-spending program.

Each of those programs has to be paid for with tax dollars, and morbidly rich people who are obsessed with making more, more, more want them all killed off.

“We can’t afford it because of the national debt!” is their favorite mantra. “Democrats must shoot their Santa of Social Security and other programs in the face by ‘cutting spending’ before we can talk about taxes!”

The simple reality is that income taxes are largely irrelevant to the lives of working class people. If they got a big tax cut, as noted earlier, their employers would simply reduce their pay to make up for it, or at least freeze it until inflation caught up. If their taxes go up, on the other hand, pressure falls on employers to raise gross (before-tax) pay enough to keep take-home pay where it had been.

Tax increases on working class people, in other words, lead to pay increases, while tax cuts on working class people inevitably lead to pay freezes or cuts, as the history of every tax increase since 1913 and every tax cut since Reagan’s first in 1981 proves.

On the other hand, the rules are completely different for the morbidly rich. If they pay less in taxes, they keep more money for themselves because they’re generally the ones determining how much they take out of their businesses or trust funds, not some employer. When taxes go up, they have less to throw into their money bins.

Which brings up the second and really most important dimension of taxation: it’s supposed to incentivize behaviors society wants and discourage behaviors that harm the rest of us.

When we wanted people to buy cars to increase the mobility of Americans and jump-start the car industry after WWII, we made the interest on car loans tax-deductible. Ditto for house purchases. When the auto industry matured and there was no longer a reason to encourage new car purchases, we did away with that tax deduction.

The things people call “loopholes,” in other words, should be carefully designed to encourage behaviors we want, and historically have been.

We want companies to do research and design to develop new products and make our economy vibrant, so we offer R&D tax deductions. We don’t want companies “making money” by manipulating their own stock prices, so we attach a huge penalty to companies buying back their own stock (or we did until Reagan legalized this form of stock price manipulation in 1983).

And tax rates should be high enough to discourage the kind of hoarding and other antisocial behavior we don’t want rich people engaging in. Prior to Reagan shattering our tax system, people at the top of the economic pyramid generally weren’t in a bizarre competition to amass and display conspicuous levels of wealth.

Certainly, there were dynastic families and people who had fancy houses in the Hamptons, but by and large people with control over their own income (the CEO class) maxxed out their annual take-home around $2 or $3 million because above that the 74-90% tax rate began to bite. The Hearst Castle was the exception that proved the rule; most of the “wealthy” lived in nice suburbs like Beverly Hills and Long Island.

Republicans have been playing cynical tax games with the American public ever since Jude Wanniski invented his Two Santas strategy for the GOP back in the 1970s, and our media generally plays along both to keep in good Republican graces and also because so few people (including reporters) actually understand taxes and taxation theory.

There’s a popular internet meme where an American asks a European, “How can you be happy when you pay so much in taxes?”

The European replies by calmly listing everything those taxes pay for — free health care, free college, inexpensive childcare, quality public transit, a strong social safety net — and then says, “You have to pay a billionaire and his markup for all of those things; we get them for free.”

Similarly, years ago I was up late one night watching, as I recall, Bloomberg News on a hotel TV in Asia. The American host was interviewing a very wealthy German businessman at a conference in Singapore.

Amidst questions about the business climate and the conference, the host asked the German businessman what tax rate he was “suffering under” in his home country. As I recall, the businessman said, “A bit over 60 percent, when everything is included.”

“How can you handle that?” asked the host, incredulous.

The German shrugged his shoulders and moved the conversation to another topic.

A few minutes later, the American reporter, still all wound up by the tax question, again asked the businessman how he could possibly live in a country with such a high tax rate on very wealthy and successful people. Again, the German deferred and changed the subject.

The reporter went for a third try. “Why don’t you lead a revolt against those high taxes?” he asked, his tone implying the businessman was badly in need of some good old American rebellion-making.

The German businessman paused for a long moment and then leaned forward, putting his elbows on his knees, his clasped hands in front of him pointing at the reporter as if in prayer.

He stared at the man for another long moment and then, in the tone of voice an adult uses to correct a spoiled child, said simply, “I don’t want to be a rich man in a poor country.”

There are a few wealthy Americans, like Tom Steyer, who understand this. But the billionaires and foreign oligarchs who fund the Republican Party and right-wing media think it’s perfectly fine to rip the financial and political guts out of their own nation and turn its people against each other if it lets them keep a few extra bucks.

And Jeff Bezos is just the most recent to publicly try to run this scam on us.

Louise’s Daily Song: “Jeff Bezos’ Tax Scam”

Comments on the Wednesday Daily Take:

“People Have Got to Know Whether or Not Their President Is a Crook…”

The Nixon comparison cuts deeper than it might appear on first read. Nixon lied about being a crook... but the lie required him to acknowledge that being a crook would disqualify him. That accountability premise is what’s completely gone now. The current posture isn’t “I’m not a crook.” It’s “so what if I am.” That’s not a difference of degree. It’s a different theory of power entirely... and it’s the one worth debating here.
~ Rxan Smith

What if we all followed the leader and stopped paying taxes?
~ Sophie Demas

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