PolitiFact Wins the “Inception” Award

I’m back again with my fifth look at PolitiFact claims that President Trump is a “pants-on-fire” liar. Again I’m tackling a Twitter statement by President Trump:

“Amazon has a “no-tax monopoly.”
— PolitiFact National on Wednesday, July 26th, 2017

Here is the entire tweet: “Is Fake News Washington Post being used as a lobbyist weapon against Congress to keep Politicians from looking into Amazon no-tax monopoly?”

Disclosure: I believe Amazon provides customers amazing convenience. I just wish three things:

  1. They treated their employees better.
  2. They paid their fair share of the taxes.
  3. They weren’t hurting society by wiping out hundreds-of-thousands of retail jobs through an apparently legal but highly questionable tactic.

My Opinion

I couldn’t help but notice that PolitiFact tweaked President Trump’s words just a little bit. They had him saying that Amazon “has a no-tax monopoly,” when, in fact, the word “has” never appears in the original tweet. Perhaps I’m being a bit too nit-picky here. Perhaps not.

President Trump’s original tweet was a little ambiguous – was he saying that Amazon has a no-tax monopoly or was he saying that Congress should investigate whether Amazon has a no-tax monopoly? In any case, by inserting the word “has” into their headline, it is clear what PolitiFact wanted President Trump to say. No more ambiguity. Thank you PolitiFact for clearing that up.

And now the runway was cleared for PolitiFact’s take-off against President Trump.

But let’s play along with PolitiFact, and let’s pretend President Trump’s tweet really did say, “Amazon has a no-tax monopoly,” because it’s tempting when you put it that way to agree with PolitiFact. After all, Amazon does pay some taxes and is not, technically speaking, a monopoly. But then I thought to myself that the phrase ‘no-tax monopoly’ actually is a pretty good way of describing Amazon. At least it’s more accurate than saying ‘benevolent, patriotic, benefactor of humanity.’ Or even more accurate than saying ‘normal American company just doing its thing,’ which is what PolitiFact would have us believe.

In analyzing messages, PolitiFact encourages readers to look past the literal meaning of the words and to address the underlying message.

So what was the ‘underlying message in President Trump’s tweet? I think everyone knows what it is except PolitiFact. Trump’s message clearly is that, while nobody likes paying taxes, Amazon stretches that position way too far. In fact, Amazon is one of a handful of big companies that truly takes advantage of the complicated U.S. and international tax laws to avoid paying its fair share of taxes. Plus, while Amazon might not fit the classic definition of a monopoly, who is kidding whom: Amazon is causing massive job losses in retail not simply because of its superior technology, but by pursuing a fundamentally unfair business model. Monopoly or not that practice deserves to be looked at.

Does Amazon pay taxes?

Of course Amazon pays taxes. Everyone knows that including President Trump. But Amazon fits into that very special league of U.S. multi-national companies that have lobbied and lawyered their way into paying a ridiculously low amount of taxes. To Amazon, paying taxes is a game. They are on one side, and the U.S. and other international tax agencies are on the other. If Amazon with its horde of in-house and contracted tax attorneys wins, this raises the tax burden on the rest of us. It’s not fair and President Trump is right to call it out.

Here are a few articles that make the point:

  1. How Amazon Saved Billions in Taxes
  2. Revealed: How Project Goldcrest helped Amazon avoid huge sums in tax
  3. Since ’08 Walmart Paid 46x more income tax than Amazon
  4. Amazon is Ordered to Pay Nearly $300 million by EU over ‘Illegal Tax Advantage
  5. Google Responds to the EU Fine with a “What about Amazon?”   (Ok, technically this article was about Google, but I thought it proved my point that EVERYONE knows that Amazon is the poster child for tax evasion, including Google.)
  6. Amazon paid just £15m in tax on European revenues of £19.5bn

So, yes, Amazon pays taxes, and, yes, there is no shame in only paying what you legally owe, but Amazon pushes this philosophy to the extreme. If the entire country acted like Amazon, the U.S. tax code would be thousands of pages longer and still incapable of plugging all the loopholes and gray areas people were trying to exploit.

Is Amazon a Monopoly?

In its article, PolitiFact quoted an anti-trust expert who stated that Amazon did not fit the legal definition of a monopoly. I believe him. But I also believe that definition might be out-of-date in the internet age. Here are five articles taken off the first page of a Google search:

  1. Stores Are Closing at a Record Rate as Amazon Chews Up Retailers (Bloomberg)
  2. Is Amazon Killing Small Businesses (Forbes)
  3. What Retail Stores Are Closing Most Locations Due to Amazon? (Money)
  4. Amazon is Going to Kill More American Jobs Than China Did (MarketWatch)
  5. Amazon is Killing these Seven Companies (Business Insider)

All of these articles point to the fact that Amazon is killing hundreds of thousands of jobs in America. You might think that Amazon is succeeding simply because it is providing a better service, and therefore its success is to be praised. But if you thought that you would be wrong. Yes, Amazon, does a lot of things right. No question about that, but, in my opinion, they are building their business based on two highly unfair tactics.

First, Amazon gets a lot of its business from people who stroll through local retail stores, check out the products there and then buy them at a cheaper price on Amazon. Is that fair? Of course not. But, you might say, that’s not Amazon’s fault. Well, it is. Customers buy from Amazon instead of the local store because Amazon’s prices are lower. Thanks to the retail stores doing its job for them, Amazon doesn’t have to pay for a salesperson or for store rent, and that saves money. But that’s not enough for Amazon. It also uses every trick in the book to pay far lower taxes than its retail competition. And all this added together allows Amazon to undercut its competitors’ prices.

Since the days of the Phoenicians, companies have needed to make a profit in order to stay in business. But Amazon has found an ingenious way of getting around that heretofore inviolable rule. Amazon deliberately keeps its profits small in order to: A) not pay taxes, which helps it to B) keep its pricing below that of the brick and mortar stores it is putting out of business.

Normally, neither the market nor investors would tolerate such a low-profit strategy. First, investors wouldn’t invest in a company that made such small profits for its size and didn’t even pay dividends on its stock. And, second, a company that didn’t make a profit simply couldn’t/wouldn’t stay in business. Yes, a company could undercut the competition’s prices for a short time, but eventually they would run out of money.

So, what makes Amazon so different? Why are its investors so tolerant? I don’t know of another company in America where the investors have been so patient. Amazon doesn’t even pay a dividend to stockholders. The answer is that everyone knows, including President Trump, including me, and including everyone I’ve ever talked to that had half a brain, and, I suspect, including PolitiFact, that Amazon will only keep its low-profit strategy long enough to wipe out the brick and mortar retailers and then it’s going to sock-it-to its customers. And that is exactly what President Trump meant when he called them a monopoly. Amazon is teeing itself up to be a monopoly. What should the U.S. government do? – wait until all the retail jobs are gone before it does anything about it?

Amazon and Sales Tax

PolitiFact defended calling President Trump a liar because, didn’t he know, Amazon pays sales tax. I’m not making this up. That really was one of PolitiFact’s big arguments. This is what it wrote:

“Nonetheless, Trump is wrong to say they’ve avoided tax collectors altogether.

At the state level, Amazon, which launched online in 1995, long resisted charging a sales tax. But by 2012, it was collecting and paying sales tax in California, Texas and Pennsylvania, and elsewhere.

Today, the company collects taxes in all states where state sales taxes exist, plus Washington, D.C. (all states except Alaska, Delaware, Montana, New Hampshire and Oregon collect sales tax). Henchman noted that taxes apply to all of Amazon’s own sales, but not the large percentage of sales by other sellers using the Amazon platform…

While Amazon takes advantage of tax breaks and loopholes, it pays federal corporate tax, and charges sales taxes in 46 U.S. jurisdictions.”

I love the way, in the second paragraph above, PolitiFact gives Amazon credit for collecting AND paying sales tax. Note to PolitiFact: Amazon collects sales tax; it doesn’t pay sales tax. The people who buy the products pay the sales tax.

Added Bonus question: Guess which company is the biggest corporate lobbyist in Washington?

Yes, you are right. It’s Amazon. From a Fox Business article:

“According to the New York Times, Amazon has increased its lobbying staff to 83 members this year compared to 60 members last year, making it one of the biggest corporate lobbying shops in town. To top it off, the company is also on its way to surpassing its previous high for lobbying spending last year, which was $11.3 million.

“The paper reported that Amazon has already spent $6.2 million during the first two quarters of this year, far surpassing companies like Exxon (XOM) and Walmart (WMT), which spent $3.6 million during the same period.” Amazon is now biggest corporate lobbyist 

My Conclusion: I’m starting to see a pattern here. PolitiFact’s main goal is to make President Trump look like an idiot. Whatever it takes. If they have to add words to what he said, they’ll do that. If they have to ridiculously misconstrue what he said, they’ll do that. If they have to skip over what he actually said, they’ll do that. If they have to defend the indefensible, that’s ok too. Slightly changing what he said is also fair game. In the case of President Trump’s Amazon tweet, they also chose to ignore the obvious underlying truth of his message.

For this blatant missing of President Trump’s underlying message, I award PolitiFact the “Inception” award, named after the intriguing 2010 Leonardo DiCaprio movie that was filled with underlying messages.

In my next post, I will look at PolitiFact for the sixth time. President Trump tweeted that CNN’s ratings were way down. PolitiFact calls that a ridiculous lie. We shall see.

“CNN’s ratings are “way down.”
— PolitiFact National on Monday, July 3rd, 2017


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