Jeff Bezos’s endorsement of President Biden’s newly unveiled infrastructure plan turned more than a few heads this past week. The $2 trillion plan is set to upgrade the country’s infrastructure – a term that the Biden Administration is claiming encompasses everything from digital broadband access to senior care facilities. Bezos’s support, however, is a surprise because of Biden’s proposed method of funding the legislation – a hike on the very federal corporate tax rate that was just lowered in the Trump Administration.
For a corporation the size of Amazon, the proposed increase of the federal corporate tax rate from 24 to 28 percent could result in billions of increased tax expenditures. Nonetheless, Bezos spelled out on Amazon’s website his statement of support: “We support the Biden Administration’s focus on making bold investments in American infrastructure.” Then, as if he didn’t make his support explicit enough, Bezos later added “we’re supportive of a rise in the corporate tax rate.” Although on the surface these statements elicit notions of sacrifice and patriotism, in reality the proposed plan will result in an array of financial benefits that will far outweigh any increased tax payments Amazon will have to make to the federal government.
Biden’s infrastructure plan can essentially be separated into three broad categories, each containing about $600 billion in spending: transportation; buildings and utilities; jobs and innovation.
The first category of transportation will result in widespread investment in the nation’s public transit system and provide a swath of new government incentives for the adoption of electric vehicles, but Amazon will be more interested in other investments. The plan calls for a revitalization of the nation’s roads, bridges, railways, airports and ports to an extent that hasn’t been seen in decades. This infrastructure will do wonders for Amazon’s bottom line as the firm looks to expand its shipping infrastructure, bypassing traditional carriers FedEx and UPS. The EV benefits will act as cost cutter for Amazon, as well. Amazon’s conversion of their fleet of delivery vehicles to Rivian EVs was widely reported, and that investment will more than pay off with the various government incentives the Biden Administration hopes to implement.
The second category of buildings and utilities will also function as a major boon for Amazon’s financials with the Administration including broadband and internet in the category – a notion drawing fierce criticism from Republicans claiming it as overreach. The vast investments Biden hopes to make in expanding broadband access is a natural accelerant to Amazon’s business with not only their core retail functions benefitting, but also their ever-expanding cloud services business being a beneficiary. Previously disconnected individuals in rural America will have drastic increases in their participation in the digital economy – a market where Amazon has never shied away from asserting its dominance.
Biden’s last category of jobs and innovation will arguably garner the least return for Amazon. However, it’s worth mentioning that the legislation would initiate a major return of an ideology long considered taboo in American policy circles: industrial policy. Industrial policy is a concerted effort by a government to direct development and growth of part of the economy, often focusing on the manufacturing sector. Ironically, the last major proponent of industrial policy of the scale of Biden’s infrastructure plan was President Trump, with regards to his rhetoric on the coal industry. The incentives and government directives proposed by the Biden plan would ensure a level of government influence over industrial growth that potentially hasn’t been seen since FDR’s New Deal, and there is no doubt that a company like Amazon, with its army of lobbyists, won’t be able to glean significant benefit from it.
In addition to the myriad of aforementioned financial benefits Amazon is due from the Biden Administration’s plan, it’s also worth mentioning Amazon’s previous track record with regard to corporate tax payments. For the fiscal year 2020, Amazon paid roughly $1.84 billion in federal taxes on a profit of $20.2 billion, making their effective tax rate just 9.1%. Going further back in their history, the company had an effective tax rate of just 1.2% in fiscal year 2019, and even received a tax refund of $129 million in fiscal year 2018. Taking this history into account, it’s clear that a 4% hike will be no more than a drop in the bucket for Amazon.
Although the major Republican opposition to the plan in a Congress with a narrow Democratic majority makes it unclear whether the legislation will pass in its existing form, the role of Jeff Bezos and Amazon in the future of American government and politics has never been clearer with this statement of support. Just as Bezos signaled to the world with his purchase of the Washington Post and his $23 million D.C. mansion, he is a political heavyweight, not to be ignored by the political establishment. His recent resignation as CEO and new role as Executive Chair of the company are only further evidence. Jeff Bezos has already amassed a fortune of the likes history has never seen, but he’s set his eyes on a new goal – influence.